Avoid getting walloped by gender pay gap reporting

Although fundamentally well intentioned, the Government’s requirement for employers of more than 250 employees to start reporting staff pay in 2017 could have an unfair impact on the reputation of many employers.

Employers will be expected to publish on their website and submit to a Government auditor something along the following lines:

                                                            Men                 Women           Difference

Mean average pay                              £                      £                                  %

Median pay                                         £                      £                                  %

Top quartile pay                                  %                     %                                 %

Second quartile pay                            %                     %                                 %

Third quartile pay                               %                     %                                 %

Bottom quartile pay                           %                     %                                 %

Mean bonus                                        £                      £                                  %

People who receive a bonus               £                      £                                  %

The intention is that the % difference between men and women is shrunk from 9.4% to less that 5% for full time workers (based on median hourly earnings). For example, in 2015 the median gross pay for full-time male employees was £29,934, compared with £24,202 for women according to the Office of National Statistics.

What can employers do?

Employers could take one of two main stances to ensure their reporting looks fair.  Let’s take two theoretical employers:

Employer A offers genuinely fair pay, flexible working hours and are a ‘family friendly’ employer. However, their figures could unintentionally be skewed by:

  1. Female employees taking maternity leave – as maternity pay is included in the calculations
  2. Female employees working part time – this will place them in the lower quartile pay groups
  3. Having a policy where workers who travel for work are paid a higher salary to reflect their commitment – as these people are more often men or those lacking family commitments, this could skew mean pay calculations

Employer B looks at ways to fiddle the figures to look fair rather than address actual pay gaps. The action they take over the next 12 months is:

  1. Outsource the roles filled by lower paid female workers from the workforce – outsourced roles are excluded from reporting
  2. Reduce the contracted hours of roles generally filled by male workers but pay more overtime – overtime pay is not included in reporting
  3. For their highest paid roles generally filled by male workers, offer more salary sacrifice benefits rather than bonus payments such as ‘bonus pension contributions’ – only pay minus salary sacrifice payments need to be reported so this form of bonus will be excluded from reporting

No justifications or explanations are needed in the Government’s reporting requirements to explain legitimate differences in pay.  Therefore, any employer wants to avoid being Employer A whose reputation is unfairly lambasted by the Government’s blunt reporting requirements and many HR professionals might feel ethically challenged by implementing the changes demanded at Employer B.

Given the above, it is unclear that the legislation and subsequent league tables will genuinely create a more fairly paid workforce.  Such activities could involve ensuring:

  1. Recruitment, performance and promotion criteria focus on capability and contribution rather than bias towards any demographic group
  2. A consistent process for pay reviews rather than waiting for individuals to ask for a rise (something men are apparently more inclined to do than women)
  3. Part-time or flexible working roles can be offered at any level of the organisation to avoid a pay ceiling for those with significant commitments outside work