Mandatory gender pay gap (GPG) reporting was introduced in 2017 with the aim of narrowing and eventually eliminating the pay differential between men and women. At first glance the reporting regime appears to have had a limited but positive impact, with the gender pay gap among full-time employees dropping from 9.1 percent in 2017 to 7.9 percent in 2021, and from 18.4 percent to 15.4 percent for all employees over the same period.
But did the regulations make a difference? Figures produced by the Office of National Statistics (ONS) show the gender pay gap fell by almost a quarter for full-time employees between 2011 and 2021. Reviewing all ONS figures over the past decade suggests the gender pay gap was already in decline when the reporting regime was introduced in 2017, and that any positive change directly driven by the GPG regulations has been statistically modest so far.
Complexities of pay reporting
Why has GPG reporting not achieved more? Partly this is because the framework is a blunt tool for a complex issue. It does not take account of full- and part-time working arrangements, or of differences in occupation, grade and location. Neither does it factor in family structures, caring responsibilities, education, career aspirations and social mobility, or personal choices employees make in their employment and pay packages.
Despite these issues, GPG reporting has successfully drawn attention to the importance of narrowing the gender pay gap. Corporate leaders have starting taking the issue more seriously, with employers across the board taking steps to report on and address their situations. The result is that the gender pay gap has fallen in most sectors since the regulations were introduced.
We’re seeing the most progressive businesses take a couple of steps further than the GPG regulations require.
Firstly, they are taking the opportunity to see their GPG reporting as a valuable tool, scrutinising their data and using it to inform decisions about pay structures and broader diversity and inclusion matters.
These employers typically use enhanced GPG analysis and reporting to delve into their pay to identify the underlying causes of gaps so they can plan how to address them. Some have gone further and prepared voluntary additional pay gap reporting in relation to ethnicity, disability and social mobility.
Secondly, they are publishing their GPG action plan giving a strong signal that they are keen to demonstrate their commitment to closing their gender pay gap and supporting their reputation as a fair and ethical employer.
But publishing alone is not enough. Employers whose narratives evolve over the years tend to be those who are most serious about addressing their gender pay gap and who integrate their GPG reports into broader reviews on diversity and inclusion.
A combination of data analysis and high level evaluation and monitoring is a good gauge of genuine intent. Companies with buy-in from senior leaders in the organisation typically draw up plans which drill down into specific actions, with activities embedded into existing working practices and a systematic approach to diagnosing the causes of the gender pay gap within the organisation.
Few consequences of inaction
At the other end of the scale are employers who have done the bare minimum GPG reporting as they know they face minimal consequences for non-compliance. The GPG regulations do not contain any enforcement mechanism and do not include any sanctions for failure to comply with the reporting obligations or publishing inaccurate or misleading reports.
The “unlimited fines and convictions” threatened by the Equality and Human Rights Commission, which is responsible for enforcing the reporting rules, have failed to materialise. No companies have been fined, despite hundreds failing to accurately file their GPG figures on time. Enforcement to date has focused simply on whether or not a report has been published rather than considering the quality and validity of the figures reported and assessing any plans for action.
Impact of the pandemic
Against this background, enthusiasm and focus for reporting appear to be waning. By January 2022 only 1,346 employers have reported GPG figures for the 2021-22 reporting period, while 10,000 employers reported for 2020-21.
As the UK economy starts to recover employers should consider the impact GPG reporting might have on their workforce. Companies currently face a highly competitive human resources landscape in which attention to pay practices and action to narrow their gender pay gaps could give them the edge in recruiting and retaining employees.
Meanwhile a number of factors have led to a widening of the UK’s gender pay gap. Excluding furloughed staff from GPG report data and reductions in allowances reducing certain employees’ earnings skewed the data for 2020 and 2021. As the economy grows in 2022, pay inflation within the core business, particularly in male senior and operational positions, is helping widen the gender pay gap.