The deadline for gender pay gap reporting is approaching - are UK businesses fulfilling their obligations?

The deadline for reporting gender pay gap data - 4 April 2018 - is fast approaching and industry observers have expressed concern that, with less than three months to go, 90% of UK businesses are yet to return their findings. The regulations, which came into effect on the 5 April 2017, apply to the 9,000 employers in the UK with over 250 employees: as of 31 January 2018, only 700 had submitted their reports.

Despite the response rate, reports already returned by UK employers do show a number of patterns emerging across the business landscape. To interpret the raw data however, it’s important to understand the mechanics, and motivations, behind it.

What is the gender pay gap?

The reporting regulations, introduced last April, are aimed at documenting the pay inequality, in the UK, between male and female employees - a disparity known as the ‘gender pay gap’. Although it forms part of a global trend, broadly speaking, women in the UK collectively miss out on around £140 billion per year - when compared to the average earnings of their male counterparts. In closer detail, average individual female earnings are £29,891, while average individual male earnings stand at £39,003.

The disparity varies across regions, cities, and by sector. More than just a straightforward ‘sex discrimination’ issue, numerous causes for the pay gap have been reported - and the new regulations form part of an effort to both understand the problem, and address it.

How does gender pay reporting work?

The gender pay gap reporting regulations require a ‘snapshot’ of employee wages and salaries - calculated according to certain gender metrics. Employers have 12 months to deliver their reports from the initial April 2017 introduction date. The calculation metrics are as follows:

  • Average gender pay as a mean
  • Average gender pay as a median
  • Average bonus gender pay as a mean
  • Average bonus gender pay as a median
  • Proportion of male recipients of bonus pay, and proportion of female recipients of bonus pay
  • Proportion of male and female employees divided into 4 groups, and ordered from lowest to highest pay

The regulation includes specific definitions for ‘ordinary pay’ and ‘bonus pay’, and how to perform the relevant calculations. Also included are guidelines for collecting the data, and who to count as ‘employees’. With the report completed, employers must publish the findings on both their own website, and on a dedicated government website.

With the publication of their report, companies may choose to publish an accompanying narrative which explains the figures - and any disparity between men and women’s pay. The explanation can detail the challenges the business has faced in addressing the pay gap, which might include, for example, higher male representation in senior roles - and the consequently higher bonus payments to male employees.

The narrative explanations are also an opportunity for employers to talk about how they intend to close the gap. Businesses with an under-representation of women might opt to run a recruitment campaign targeting specific entry-level roles - with the long-term intention of growing their skilled female employee population at senior levels. Employers who have experienced success in closing their gender pay gap can include that fact in the narrative explanation.

The results so far…

The emergent data returned by employers so far has revealed trends about the UK’s gender pay. The ONS has already returned initial analysis and insight - specific trends include:

  • Around 5.4% of reporting employers have a gender pay gap of over 30%, while 11.2% of employers have a gap of over 25%.
  • The gender pay gap entirely favours men in full-time roles - but occupations with the smallest gender pay gap have much more equal representation of male and female employees.
  • In full-time roles, the gender pay gap increases from age 40, reaching a peak between ages 50-59.
  • Male employees are, on average, better represented in senior roles, while larger numbers of women are employed in lower-paid, customer-facing, retail and admin roles.
  • Senior male employees are paid 4 times more than males in elementary roles, while senior females earn only 3.5 times more than females in elementary roles.
  • Greater numbers of males are studying for, and targeting, specific careers - translating to more men employed in those careers in senior roles.
  • In 2017, pay growth for female employees was lower than male employees. Pay growth also stops at an earlier age for females than it does for males.

The future of pay gap reporting

As UK employers continue to get to grips with the administration and logistics of pay gap reporting, proposals are being considered to strengthen the legislation going forward - not least a response to the uncertainty over what the consequences for non-compliance are.

While the government has opted for a soft approach to any level of practical enforcement, publication of the reports will ensure that media organisations can easily draw attention to the employers who are failing to tackle, or neglecting, the problem. Beyond negative media attention, steps under consideration by government authorities include the introduction of a certification process for employers who achieve an acceptable standard of pay equality, and scaled penalties for those who don’t - ranging from an ‘informal resolution’ process, to investigations, and fines.

The gender pay gap remains a complicated issue - and the scope and detail of the new reporting regulations reflect the challenge faced by businesses not just in the UK, but across the world. As further legislative action takes shape in the UK, employers will be required to continue playing their part - and helping to build on the progress already made in addressing the problem.

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