Crunching the data: recommendations for widening and deepening future gender pay gap reporting

Last month the House of Commons' Business, Energy and Industrial Strategy (BEIS) Committee published a report on gender pay gap reporting which is now a requirement for organisations with 250 employees or more.

Crunching the figures, it found that the national median gender pay gap is 18% in favour of men, gaps of 40% or more were not uncommon in some sectors and 78% of all reporting organisations had a pay gap in favour of men. Analysis by the BEIS Committee found that 1,377 employers (13% of the total) have gender pay gaps in favour of men of over 30%. Its recommendations include:

• Widening the net of organisations required to publish gender pay gap data to those with over 50 employees (from the current 250). Currently only around half of the UK workforce is likely to be covered by the present reporting requirements and the Committee recognises there is evidence that the pay gap is higher in smaller businesses.
• Making narratives to explain any gender pay gap mandatory (rather than voluntary). Businesses should also provide an action plan for closing the gap, against which they must report progress each year.
• Altering the reporting requirements to include partner remuneration and to work with the Equalities and Human Rights Commission (EHRC), business groups and other stakeholders to improve the quality of the guidance on how to calculate the figures.
• Ensuring that the government clarifies the legal sanctions available to the EHRC to pursue those failing to comply with their reporting obligations. The Committee states there should be no excuse for failure to submit accurate figures by the deadline and organisations should expect to receive a fine for not doing so.
• The government reviewing the gender pay gap reporting requirements with a view to aligning them with other business reporting requirements from next year.
• The government consulting upon introducing requirements to collect and report pay gap data in respect of disability and ethnicity and, subject to this consultation, introduce this requirement in time for publication in 2020. This is echoed by a recent report and recommendations on "Measuring and reporting on disability and ethnicity pay gaps" by the EHRC.

Timing of proposed changes

The Committee's preference is for the necessary amendments to be made in one go, and to apply to reports due to be published by April 2019.

It recognises that lowering of the threshold to organisations with 50 employees and the data on ethnicity and disability, which need more time to implement but to do this by April 2020.

Amending the gender pay gap regulations (Regulations)

The Committee recommends that when the Regulations are amended:

• The requirement for information on salary quartiles is changed to deciles so there is a more detailed analysis
• Both part-time and full-time gender pay gap statistics are required to be published. Organisations would then have to explain any substantial discrepancies, and begin to address them
• Publication of bonus figures by gender will force organisations to look carefully at their policies on bonuses. In addition, the way in which bonus calculations are made should be altered so that it is on a pro-rata basis and that this change is accompanied by the publication of clear guidance on the method of calculation.

Tackling the gender pay gap

Recommendations include external and internal changes. Sector representative bodies should work with their members and other stakeholders, such as the Chartered Institute of Professional Development and the trade unions, to develop and publicise ambitious and stretching long term targets for reducing gender pay gaps.

Internally, company boards should introduce Key Performance Indicators for reducing and eliminating their pay gaps. Remuneration committees, in reporting on pay policy, should explain how this commitment to reducing the pay gap is being reflected in their decisions.

The Committee also recommends that businesses and organisations in the public and voluntary sectors should make it standard practice to include a tangible commitment to diversity in any tendering exercise or other provision of services.

On a corporate level they would like the Financial Reporting Council’s proposals for a revised Stewardship Code to include reference to ensuring that gender diversity is properly reflected throughout the company, notably at board level. The Committee also supports the provisions in the new Corporate Governance Code to improve reporting obligations on actions taken to increase diversity in the management pipeline. They would also urge the Financial Reporting Council to monitor the quality of reporting on gender diversity and the pay gap in annual reports and to press for improvements where necessary.

The Government Equalities Office (GEO) which revealed that all 10,000 employers in scope of the published guidance on actions to close the gender pay gap at the same time as BEIS. Effective actions which they say have been tested in real world settings and found to have a positive impact include multiple women in shortlists for recruitment and promotions, using skill-based assessment tasks in recruitment, using structured interviews for recruitment and promotions, encouraging salary negotiation by showing salary ranges, introducing transparency to promotion, pay and reward processes and appointing diversity managers and/or diversity task forces

Next steps

The Committee welcomed the overall full compliance by employers, despite teething problems around the clarity of reporting requirements and the accuracy and timeliness of the data provided. However in order for this to continue it recommends that the government publish and maintain a definitive list of all organisations that fall within the scope of the Gender Pay Gap Regulations. Most importantly the government should work with relevant stakeholders so that it can better help to underpin the main purpose of the policy: incentivising businesses and other organisations to address their gender pay gaps.