The results of the first round of gender pay gap reporting, and government plans to require companies to publish executive pay ratios, mean organisations need to think again about D&I
It’s been a landmark year for pay transparency in the UK, as public-sector organisations and private companies with more than 250 employees were required to publicly report on their gender pay gaps for the first time. Many left it to the last minute, with analysis from People Management magazine suggesting that just 15% of employers published their data in the 11 months leading up to April’s deadline, more than 1,500 releasing their reports in the final 24 hours, and a further 1,500 organisations failing to publish their pay gaps in time. Nearly four-fifths (78%) of those organisations who reported their pay gaps on time paid men more than women.
Organisations should be mindful of the likely impact of the figures – and any supporting narratives published alongside the data – on both prospective candidates and existing employees, both male and female. Research by Golin, published in November 2017, found that more than three-quarters (77%) of UK business professionals believe organisations will lose staff because of gender pay gap figures, and 73% said the worst offenders would find it harder to recruit new staff.
“I think [pay reporting] is going to push the whole transparency agenda forward, both in a corporate governance sense and in an HR management sense, and I think that’s good,” says Duncan Brown, head of HR consultancy at the Institute for Employment Studies. “The transition will be hard, until people get used to it. But most of the evidence [suggests] that openness builds trust and builds engagement, and in the longer term that’s going to lead to better motivation and management.”
“Whenever you have a particular focus on a particular group, there’s always a risk that you stop thinking about true inclusion and diversity”
While HR and senior leaders can expect gender pay gaps to be high on their agendas this year, the issue will become more pressing in 2019 if the next round of reporting doesn’t show significant progress, says Brown. “What are organisations going to do next year when the gaps haven’t narrowed? I think there’s going to be much more of a spotlight on the initiatives that do actually encourage change. So far HR has been doing the softly, softly stuff – like unconscious bias training – and I think it’s going to have to try something else.”
Global HR consultant Rita Trehan says the new government requirement presents HR with an opportunity to make a real step forward on inclusion. “I really hope this is our opportunity to show what HR can do; to not just see it as a reporting exercise but to say, ‘this is our opportunity to help articulate what the root causes of these things are’ – so it’s not a tick-box exercise, but it helps to drive the business forward. But I’m worried. So far, many organisations are giving the [data] summary, but aren’t addressing or answering the questions: ‘So what?’ Why?’”
But organisations should be careful not to become too fixated on the gender-related data, says David D’Souza, membership director at the CIPD. “In some organisations there will be real problems that are entrenched and need dealing with while, in others, actually it could be a distraction from broader diversity and inclusion issues that they aren’t yet required to report on.”
“Nearly four-fifths of organisations who reported their gender pay gaps by the April 2018 deadline paid men more than women”
Data from a 2017 report by the Equalities and Human Rights Commission (EHRC) showed that while the UK gender pay gap is 18.1%, there are also ethnic minority and disability pay gaps of 5.7% and 13.6% respectively. Men with depression or anxiety have a pay gap of 30%, while women with mental health problems earn 10% less than those without such problems. Only a small number of organisations publicly report such gaps; accountancy giant PwC, for example, published its black, Asian and minority ethnic (BAME) pay gap in September 2017.
“Whenever you have a particular focus on a particular group, there’s always a risk that you stop thinking about true inclusion and diversity – of perspectives and voices – and start looking at targets that don’t necessarily increase that diversity and inclusion of voices, experiences and perspectives,” says Lucy Adams, CEO of Disruptive HR and former HR director at the BBC. “I’ve worked in organisations where the gender, ethnicity and disability statistics were actually pretty good, but there was a level of homogeneity in the leadership team in terms of background and education.”
“Disability is always the one that I find ends up suffering the most, when one [facet of diversity] is more prominent than another,” says Perry Timms, founder of PTHR. Given that 83% of people with disabilities aren’t born with them, but acquire them at some point during their life time, “and the fact that we are living and working for longer, it’s something that we can’t afford to put at the bottom of the queue. No way. One facet of inclusivity and diversity isn’t more important than another; we’ve got to look at this as a whole.”
It’s likely that pay will continue to be a hot topic throughout the rest of 2018 and beyond into 2019. In April this year, the Department for Business, Energy and Industrial Strategy (BEIS) confirmed in that it still intends to bring in new rules requiring companies to report on their executive pay ratios.
Just the following month, Lloyds Banking Group became the latest in a growing list of firms to face face a shareholder rebellion over executive pay, after it was revealed its chief executive, António Horta Osório, earned 95 times more per year than an average employee.
This article is an extract from CIPHR’s free white paper, From evidence to automation: eight trends that’ll shape the HR profession in 2018. Download it here.