In a bid to tackle gender inequality, the Government has unveiled new plans under which large employers will have to publish details of the gender pay gap in their organisation. But will mandatory gender pay gap reporting help to reduce the gender wage gap? How does female participation in the UK labour market compare to the Danish experience? Lewis Silkin discuss.
Under new plans published by the Government, large employers will have to publish details of the gender pay gap in their organisation, including information about bonuses paid to staff. Draft legislation is expected in the early part of 2016 and it is likely to come into force before the end of the year.
Gender pay gap reporting: a muddled policy history
This policy has something of a muddled history. With the flurry of press releases and statements over recent months, you’d be forgiven for thinking that this is something the Tories have been trying to enact for a long time.
In fact, gender pay gap reporting for large employers began as a Labour policy when Harriet Harman secured a power for the Secretary of State to issue regulations requiring this in the Equality Act 2010 (specifically, in section 78). This section was never enacted by the Coalition Government which came into power in 2010, with the dominant Tories preferring gender pay gap reporting to be mandatory only for those employers that lost equal pay claims in the employment tribunal, combined with a voluntary reporting scheme aimed at encouraging employers to publish their details. Both policies were of little impact. Relatively few equal pay claims ever result in a judgment against an employer (between 2008/09 and 2012/13, there were just two judgments in which the employer lost). As for voluntary reporting, only five employers decided this was worthwhile.
Perhaps this is why, impatient for change, the new Conservative Government has changed tack and is looking to make good on plans to enact section 78.
Whatever the reason, Prime Minister David Cameron announced proudly that the measure would be implemented in 2016, claiming that it would “cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up” before adding in his Conservative Party conference speech that he is “…a dad of two daughters – opportunity won’t mean anything to them if they grow up in a country where they get paid less because of their gender rather than how good they are at their work”.
Women in the labour market
Female participation in the labour market has been rising for years. In 1971, 37% of the labour market was made of women. During the 70s and 80s the rate rose quickly. During the 90s and 00s the rate of increase continued, although at a slower rate. Today, around 46% of the labour market is female.
According to Government claims, equalising women’s position in the labour market could add almost £600 billion to the UK economy, clearing a third of the national debt.
The overall UK gender pay gap is 19.2%. This is calculated by compiling averages of the total pay of all women and all men and seeing what the difference is. Obviously, this is a very broad figure which doesn’t take into account the fact that part-time workers are more likely to be women. When you restrict the figures to just full-time workers, the gap is just 9.4%. This is because part-time work tends to be more common amongst women, and so their total earnings are lower because they work fewer hours.
When you drill down even further and look at the gender pay gap for different age groups, the disparity disappears completely: there is effectively no gender pay gap for full-time men and women aged between 22 and 39.
The graph above shows the most recent data on the full-time gender pay gap by age. Part of the reason for the graph above looking the way it does may be that mothers find it easier to work full-time again when their children are attending school full-time; by then, many are in their 40s. But they would have potentially missed out on years of extra experience, making it harder for them to compete for more senior, better paid jobs with their similarly aged male counterparts.
This shows that the gender pay gap problem is a complex one.
A trailblazing gender equality policy? Or legislative folly?
We used the Ius Laboris international alliance to survey affiliate and member firms. We asked whether employers are required to publish their gender pay gap. The results are below.
The results are clear. Gender pay gap reporting is not a common policy internationally.
Given this, there are two possible conclusions that could be drawn about the Government’s plans. Either the UK is a gender equality trailblazer, being one of the first to embark on a bold new idea. Or, the UK is about to embark on a policy that the other jurisdictions have considered, but think little of.
Either is plausible but, arguably, the former is more likely.
Although plans to enact such laws on a national level are few and far between amongst the respondents to our survey, there are calls for regulation on an EU level. A recent resolution of the European Parliament urged the Commission to table legislation closing the pay gap. A proposal that is substantively the same as the UK plan was passed by 344 votes to 156 in the European Parliament.
The Danish experience
Denmark is one country that has adopted this policy. Since 2007, employers have been required to publish their gender pay gap.
The latest official statistics suggest that the legislation may have had an impact, albeit a very slight one: in 2014 the gap was 12.7 % in the public sector and 15.3 % in the private sector. In 2009, the gap was 15.6% in both sectors.
Danish employers’ organisations argue that the primary reason behind the continued gender pay gap is the fact that generally women take longer maternity/parental leave. Because women are often the primary caretaker in the family, this means that they are less flexible in the workplace and this impacts upon their pay compared to their male colleagues. Another factor may be that, according to a report from 2013 from the Danish Ministry of Employment, only 25-30% of the employers are in fact complying with requirement to publish their gender pay gap.
Despite the somewhat muted impact, Yvonne Frederiksen, an employment partner at Danish firm Norrbom Vinding, has experienced an impact on employers. Speaking to us, she said:
“During the last couple of years, we’ve seen an increase in the number of claims for equal pay being raised in the workplaces. This is particularly marked in more unionised environments where the employee is part of an organisation which is supporting them.”
Role of the state: can regulation eliminate the gender pay gap?
The Government’s gender pay reporting policy is essentially just naming and shaming. It’s trying to embarrass employers into action, without intervening too much or imposing burdensome regulation.
We’ve written before about the role of the state in the labour market, and how Government seems to want only to nudge businesses into the direction they’d like, but go no further than that. The gender pay gap reporting plan is just another example of evolutionary change rather than radical overhaul.
And if there is one area of employment law that is arguably in dire need of radical overhaul, equal pay is it.
Equal pay is an incredibly complicated area. What should be a simple concept – people doing similarly valuable work should receive similarly valuable remuneration – is legally very complex, operating by way of implying an equality clause into every employment contract, rather than an assessment of difference in treatment.
Equal pay was the first Governmental foray into discrimination law, thanks to the Dagenham ladies. But no discrimination law since then has looked anything like the Equal Pay Act. Pay-based gender discrimination falls within the complex equal pay regime – requiring an analysis of the value of work, determination of the source of the contractual terms and assessment of any material factors (and whether the factor itself is influenced by sex) – whilst pay-based race, age or disability discrimination is covered by the usual (and much simpler) discrimination rules. There’s no difference in the law that applies. Because of the complexity of the equal pay regime, an employer’s costs of defending a claim are usually very high, with cases lasting many years. Moreover, many employees simply can’t sustain the cost of legal representation.
But even if equal pay laws were completely overhauled and replaced with a clearer, simpler regime, the gender pay gap would likely still persist. The reasons for the existence of gender pay disparity are multitudinous, requiring a mix of policies in a range of different areas – not just employment law. The cause of the gender pay gap is not because of sexists in HR departments hiring two people for the same job and deciding to pay the man more.
A big factor in the equal pay gap must be the fact that women are saddled with being the baby carriers amongst the human race. Women have to take time out the workplace to have children; men don’t.
And, related to that, women tend to also be left holding the baby (literally). Women are much more likely than men to work part-time, having an impact upon their earnings and, inevitably, their career progression. The graph above shows the massive pay disparity that exists for those aged 40+. Men need to pick up their share of the childcare, encourage partners back to work, and better embrace part-time working. They’ll have happier daughters and more caring sons as a result.
Whilst child-raising may hinder women’s progression to the higher paying, senior roles, there is another factor. Fewer women enter the higher paying industries to begin with. High paying sectors like finance, engineering and technology are disproportionately male, whilst low paying sectors like education, caring and the civil service are disproportionately female.
Conclusion: lies, damned lies and statistics
Anne Francke, Chief Executive of CMI, calls the gender reporting measure “a great leap forward in achieving equality at work”, though warns that companies will need to commit to changes in data management, recruitment, and company culture. Mandatory pay reporting will put pressure on companies to be proactive about resolving or explaining pay inequality.
In the short term, companies may face some employee relations problems by making gender pay gap data public. Employers may face reputational damage as the media will report on those companies with the highest pay discrepancies. PR agencies will get more work as figures will be chopped and spliced and turned into explainable and media friendly statistics.
As the quote popularised by Mark Twain goes: “There are three kinds of lies: lies, damned lies, and statistics”.
By Tom Heys and Sean Illing, Lewis Silkin LLP
UPDATE: the draft gender pay gap reporting regulations were published on 12 February 2016.
Do you think the gender pay reporting policy will reduce the gender pay gap? Does it go too far? Or not far enough? Do you have any views to share? Do so using the comments box below.
For more original opinion pieces like this, subscribe to our monthly spam-free future of work newsletter.