Do you know the difference between a gender pay gap and a pay equality issue? Most people don’t.
In 2018, many articles on gender pay gap reporting appeared in the popular press. However, a YouGov survey found that only 1 in 3 people understood what we mean by a “gender pay gap”.
Pay equality was first established in law via the Equal Pay Act of 1970 and superseded by the Equality Act 2010. It ensures that neither men or women are treated unfavourably in terms of pay and conditions for doing effectively the same role. Doing so has been illegal for decades.
So what is a gender pay gap and where does it come from?
The gender pay gap is the average difference in pay between the overall female and male populations. This is across all the various job roles within your organisation. The regulations requiring businesses to produce a gender pay gap report came into force in April, 2017, although this only applies to employers with 250 or more workers.
Unfortunately, many media articles have combined examples of pay equality issues with their reporting on gender pay gap issues. For example, consider this article from the BBC.
In that article, we have references to gender pay gap reporting at the BBC, showing an overall difference in average pay between the male and female workforce. But we also have references to individual pay equality cases. For example, Carrie Gracie being paid less than male peers of equivalent experience and seniority doing effectively the same job.
Although the BBC does refer to Ms Gracie’s case as a pay equality issue, combining discussion of both issues together has probably contributed to the confusion.
Let's look a little closer at the details that arise with gender pay gap issues vs. pay equality issues.
Some may argue that these two issues are related. After all, if you’re paying women less than men for doing the same job, then surely that’s going to contribute to the gender pay gap? Therefore, isn’t it legitimate to link these issues together?
No. The gender pay gap refers to the mean difference in pay between male and female populations not including unlawful pay equality issues (which shouldn’t exist anyway).
In other words, even if you took those unlawful issues out of the equation, there could still be a gender pay gap. This gap commonly arises from across-the-board differences in seniority levels and career progression between the genders.
For example, senior leadership roles typically command higher salaries. If women are under-represented in senior leadership positions, then this will mean that the higher salaries earned by the majority of male senior leaders will increase the average salary of the male population.
Some also argue that even men doing the same job are not all paid the same. For example, in a team of software engineers, you could have two male engineers on the same grade and doing the same role but on different salaries.
Yes, that’s true. But that’s okay if differences in pay arise from differences in performance, achievement, skill-set, experience and so on.
It only becomes a pay equality issue if the difference between pay cannot be explained except by a difference in gender (or possibly any other protected characteristic, e.g. ethnicity).
This also depends on how the pay scales are structured at the employer. In many private sector companies, there are a relatively small number of job grades each of which has a salary range associated with it. Under this model, individuals can be on the same grade (or job code) with different salaries. Provided they are below the range maximum, they can get a pay rise without being promoted to the next grade.
Another approach, more common in the public sector, is to have a larger number of pay grades each of which has a defined salary. This has the advantage of everyone being on equal pay for a given grade. However, salary increases are tied to promotions to the next grade.
In practice, there may be many variations of these approaches as well as location-specific factors (e.g. a London cost-of-living uplift) depending upon the employer’s own pay policies.
Another argument raised against the gender pay gap is that its affected by variables outside the employer’s control. For example, differences in hours worked (e.g. part time choices, parental leave, etc.), job experience, education and the occupations chosen.
We do have to consider these variables. But we also have to consider why these variables have the influence that they do!
In the book Gender Inequality at Work (Jacobs, 1995), one suggested hypothesis is that jobs are broadly segregated into ‘higher tech’ (mostly male) and ‘higher touch’ (mostly female) occupations.
Note: by ‘tech’, they’re not referring solely to I.T. related occupations but more generally to analytical-technical roles as opposed to more human-interactive roles
Even if this is true, one must ask why it should be true. Perhaps it’s an artefact of historical social conditioning. In some countries, there have been long standing stereotypes for male and female professions. For example, which of these occupations have male or female stereotypes in your location?
It varies by country and culture. In the UK, you don’t have to go back very far to find prevailing social stereotypes where, say, nurses were assumed to be female and doctors assumed to be male. Some might say that many of these prejudicial stereotypes still exist today.
These attitudes carry over into the workplace and so I would argue that this does make it relevant to employers. What are you doing to dissolve gender stereotypes in your organisation?
Leaving employment to raise and care for children is another possible factor in a gender pay gap. Studies suggest that women taking time out from their professions for maternity and ongoing child care suffer a salary detriment known as the motherhood penalty.
The UK Government has attempted to address this, at least in part, by introducing Shared Parental Leave. This in effect means that the maternity pay and leave arrangements can be shared between the parents. The idea being that this allows more flexibility between them and less emphasis on the mother having to be the one taking lengthy breaks from work.
Unfortunately, few couples have taken advantage of this facility. Partly because the scheme is pretty confusing and hard to digest. Also, because men tend to have higher salaries (ironically the very problem we’re trying to address), it’s uneconomical for male parents to share the parental leave on the lower rates of pay.
Clearly we have some way to go in this area. As the government tries to promote this arrangement and people become more familiar with it, we do expect this to become more popular with workers in future – especially if the gender pay gap starts to close!
Following a review on Race in the Workplace by Baroness McGregor-Smith, the UK Government has launched a consultation into whether organisations should have to report on mean pay differences between workers from different ethnic backgrounds. This consultation runs from 11th October 2018 to 11th January 2019.
Although the McGregor-Smith review recommended a reporting threshold of 50+ employees, currently the government is proposing to follow the gender pay gap reporting threshold of 250 or more.
Employers could face some significant practical difficulties with implementing such a report. Many employers do gather demographic information about people, for example when they first start working for the business. However, there’s no legal obligation to provide this information. Therefore, ensuring you have a useful data set could be tricky.
Also, how should the pay gap data be reported?
Trying to mirror gender pay gap reporting by comparing the average pay of white employees against all ethnic minority employees would be problematic. It rolls up all the minorities in one, which risks masking any significant differences between them. Also, if minorities are badly under-represented with only one or two in very senior positions, their ‘average’ would look favourable but would hide the overall lack of representation.
And how about people who identify as mixed race, or those who don’t feel they fit into the existing list of ‘ethnic origins’ categories, but don’t identify as ‘white’ either?
Another approach may be to report by pay bands or quartiles. This is based on how many white vs ethnic minority workers appear in each level of pay within the organisation. But we also have to consider age, gender and location differences here too.
This is an important metric to explore, but we predict that producing meaningful reports based on statistically significant data will prove to be quite a headache.
The reporting threshold of 250 or more workers is intended to avoid putting too much of a compliance burden on small business. To be honest, we’ve met a few small business leaders who gladly switch off as soon as they hear that.
While we don’t think that threshold will change in the near future, it’s not beyond the realms of possibility that it will drop to 150 or 100…or possibly lower in the longer term as reporting practices become more polished and familiar.
If your small business grows into a larger enterprise that crosses the threshold, you will regret having an institutionalised pay gap in your workforce that you now need to somehow fix.
Finally, small businesses shouldn’t be a potential haven for unfair pay practices. Growing public awareness over both pay gaps and pay equality will make these harder to sustain, as workers become less tolerant of perceived inequities.
Our advice is to ensure you implement progressive pay policies based on sound and robust performance management. As long as you’re making demonstrably rational decisions, you’ll be on a good foundation.
