Closing the gap

1st March 2019

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Mandatory gender pay gap reporting is an important step, says David Burrows – but plenty more can be done to make pay equal

David Cameron is in danger of having his legacy as prime minister reduced to one word: Brexit. That's hardly fair – he presided over plenty of other failures, too. This is the man who promised the “greenest government ever“ but (reportedly) ended up demanding policymakers “cut the green crap“. The longer he stays in his cabin, the better.

However, there is one policy we should thank him for. “Today I'm announcing a really big move,“ he wrote in an article for The Times in July 2015. “We will make every single company with 250 employees or more publish the gap between average female earnings and average male earnings.“

It was a bold move, not least because it put him in direct conflict with business. The Confederation of British Industry (CBI) claimed the reports could be misleading, nothing but box ticking and compliance when “what we really need is cultural change“. But the CBI has been forced to change its tune since mandatory reporting of gender pay gaps got the green light. Many businesses are embracing the changes with open arms. “We found initial signs of quite startling success,“ says Lesley Rankin, a researcher at the Institute for Public Policy Research (IPPR).

The results of a small poll (32 large businesses, plus 17 focus groups) published by IPPR in November revealed that 81% supported the new reporting rules, while 75% had calculated their gender pay gap for the first time. Critically, 81% have considered or taken further measures (gender-balanced shortlists and changing the wording in adverts, for instance) to reduce inequalities. There was also that rarity in new regulations – 100% compliance. Every one of the 10,528 employers (public and private) within the scope of the new regulations published their gender pay gap figures on the government's website.

“The hope is that mandatory reporting on gender pay has given businesses the kick up the backside that voluntary reporting didn't“

Of course, this is not 'job done'. Women in the UK are paid a fraction under 18% less per hour than men on average – which is higher than most advanced countries, according to IPPR. What's more, at the current rate of progress, that gap won't close entirely until 2072. Indeed, there is a long-held argument in sustainability reporting that emphasis is weighted too heavily towards transparency, rather than action. Still, the hope is that mandatory reporting on gender pay has given businesses the initial kick up the backside that voluntary reporting didn't, and that the gap will shrink more quickly as businesses act. With comparable data available to one and all, few will want to be seen as laggards (the official gender pay reporting website had half a million views in March-April 2018).

Righting wrongs

This success (so far) story means there is an appetite for shining the spotlight on other 'protected characteristics', including ethnicity and disability, and even the ratio between CEOs and their staff. The concept of a 'fair pay report', as IPPR has put it, would be radical, but support is snowballing.

Caroline Waters, deputy chair at the Equality and Human Rights Commission (EHRC), has called for the level of scrutiny and focused action there is on gender to be applied to opportunities for disabled and ethnic minority staff in the workplace. And last year, the House of Commons Business, Energy and Industrial Strategy Committee recommended the government consult on pay gap reporting requirements in respect of disability and ethnicity, and introduce them by 2020.

Is that realistic? It's fair to say it won't be easy. When it comes to gender, people are generally happy to disclose whether they are female or male, and there is a huge dataset with which to work. Widen the net to ethnicity and disability, and disclosure can present new challenges: will the figures show prejudice and racism in our society?

How to report the figures is another headache. Len Shackleton from right-wing think tank the Institute of Economic Affairs has described ethnicity pay gap reporting as a 'Pandora's Box', given that there are “over 100 ethnicities“ in the UK. “Forcing businesses to report on pay will result in meaningless statistics because the numbers for particular ethnicities within one firm are likely to be statistically insignificant,“ he told the Daily Mail. Still, the policy path already seems to have been laid, with a consultation having just closed on proposals to roll out mandatory reporting for ethnicity pay gaps. This is part of Theresa May's promise to end the “burning injustices“ in society. Too often, the prime minister said, ethnic minority employees feel “they're hitting a brick wall“ when it comes to career progression. The government wants to force businesses to open up, and so it should – the pay gaps are large and the levels of public disclosure are small (see 'Able but not willing').

In terms of gaps, the one between CEO and average worker always tends to attract headlines: the Equality Trust's pay tracker shows that CEOs in the UK's top 100 companies pocket an average of £5.3m per year each – 386 times the national living wage.

That kind of data has increased investor activism and prompted the government to act. “We understand the anger of workers and shareholders when bosses' pay is out of step with company performance,“ said business secretary Greg Clark last June, as he announced regulations that will require listed companies to annually publish and justify pay difference between chief executives and their staff. The regulations – which came into force on 1 January 2019 and will bring the first statutory disclosures next year – will “improve transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone“, said Clark.


The forgotten workers

Unless you are disabled, it seems. Disabled workers in the UK earn £1.50 less than their peers for every hour worked, according to the TUC, putting the disability pay gap at 15% or £2,730 a year – the highest since the government began publishing comparable data in 2012-13. Disabled women suffer the most: the combined effect of the gender and disability pay gaps results in them earning around 22% (or £3.40 per hour) less than their non-disabled male peers. “We're routinely given fewer responsibilities at work and turned down for promotion, or refused the job in the first place,“ writes Guardian columnist Frances Ryan.

Judging by the government's recently-published response to the House of Commons Business, Energy and Industrial Strategy Committee, disability pay gap reporting is further away. There is a new framework for voluntary reporting on mental health and disability for large employers, which encourages employers to (a) report the percentage of individuals who consider themselves to be disabled or have a long-term physical or mental health condition, and (b) provide a narrative setting out what steps they are taking that are aimed at recruiting and retaining people who have a disability.

The government also wants to create a culture that enables staff to disclose any disability or mental health issue without fear of it impacting their career. There are pockets of activity that are proving successful (see 'Showtime for Channel 4') but unless disability, like ethnicity and executive pay, is brought into the suite of mandatory pay gap reporting rules, progress is likely to be slow. “Forcing companies to disclose their gender pay gap has been like pulling back the curtain,“ noted Ryan. “For the first time, we're seeing the real picture behind the often-secretive world of pay... but disability hasn't been mentioned at all.“

Able but not willing

Businesses will often push back on mandatory reporting, but the voluntary approach clearly wasn't working. The Think, Act, Report initiative, launched in 2015, sought to encourage employers voluntarily to report on pay gaps. Nearly 300 firms signed up, but only seven published their gap. A recent EHRC survey found that 77% of employers said ensuring workforce diversity is a priority, but fewer than half collect data on whether employees are disabled or not (44%), or on ethnicity. And only 3% actually analyse the data to explore differences in pay. Compare that to the impact mandatory reporting of gender pay gaps has had. IFF research in 2014 found that only 29% of businesses that weren't already publishing pay data were keen to do so externally. By December 2018, a separate survey of 250 firms conducted by CBI, found that 93% were actively tackling their gender pay gap – a leap of 31 percentage points on the same point the year before.

Showtime for Channel 4

Channel 4's Tell Us campaign in 2016 encouraged staff to share diversity data, particularly around disability. At the heart of this was a series of This Is Me videos, where disabled staff and their managers shared their stories – many for the first time. Within two weeks, 90% of employees had uploaded their diversity data and the percentage sharing a disability increased from 3% to 11% (the 2020 target was 6%). Disability “makes us more innovative, more creative and ultimately more commercially successful“, said chief marketing officer Dan Brooke in an interview with Management Today.

David Burrows is a freelance journalist

Image credit: iStock


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