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The Impact of the Gender Pay Gap Regulations

“The forms that inequality takes are numerous – from sexual harassment, limited career progression and lack of opportunity in work, through to differences in pay between men and women in work. This latter inequality relating to differences in pay has caught the attention of UK policy-makers and business leaders alike, becoming an emotive signal of a continued lack of gender parity in the UK.” - CIPD
Wednesday, 17 April 2019
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How significant is the gender pay gap?

The simple answer is, very.

Big four accountancy firm PwC states that closing the pay gap would boost overall earnings for women by an astonishing £80 billion, this equals an average pay increase of £5,500 per annum for each working female in the UK.

Although these figures may seem shocking to some, it really is not surprising when you consider that the pay gap is estimated at 16.5% for full time employees.

It is also worth noting that a large proportion of working women in the UK (40%) work part-time, which reflects the barriers to full-time work that most women experience at some point in their lives. Of course the most common of these is the issue of child care. An average of 68% of a family’s second full-time income goes towards child care, so it comes as no surprise that many women decide against returning to full-time employment after maternity leave.

The Gender pay gap regulations

The recent introduction of the gender pay gap reporting (April 2017), which is compulsory to UK organisations with over 250 employees, is intended to nudge employer behaviour.

Organisations with a higher pay gap will of course risk suffering a serious dent to their reputation which is expected kickstart important conversations within the company regarding the reasons for the gap existing and what they can do to reduce it.

And as corporate responsibility is becoming ever-more important in business and customers are becoming more aware of the ethical decisions made by the companies they buy from, there is a pressure for organisations to close the gender pay gap for the sake of their brand.

The recently introduced regulations require businesses to report their gender pay gap transparently on a publicly available platform, encouraging businesses to explain why a pay gap exists and their plans for ensuring it is closed.

The results are in. What are organisations saying about their gender pay gaps in 2018?

Of the 311 organisations who reported that they had a pay gap, the three most common causes of the gap were:

• Occupational or industry segregation, such as male-dominated sector or jobs (45%)
• Part-time working pay and progression penalty (31%)
• Unconscious bias among leaders and line managers (27%)

This is what the organisations are saying but what does the research say about the factors behind pay disparity between men and women?

In the UK, the gender pay gap is calculated by comparing the average hourly pay and bonuses of various groups of workers and have been shown to be caused by several factors.

The most significant of these is the occupation group of an individual, which accounts for 23% of the difference in pay. Second most influential are differences in working pattern, for example full-time and part-time work, accounting for 9% of the difference in hourly pay.

Although often cited as a key factor, age was found to have limited negative effect. 
It is worth mentioning here that the gender pay gap is not the same as equal pay.

The latter refers to men and women being paid the same wage for the same work. Failure to comply with this has been illegal since the introduction of the 1970 Equal Pay Act.  The gender pay gap on the other hand is more complex and is determined by a number of internal and external influences.

External factors

The size of an employer’s gender pay gap can be influenced by such external factors as the availability of child and/or elder care, the quality of school careers advice, how certain jobs are perceived by society, the proportions of male and female apprentices in the supply chain, and the age of employees.

Internal Factors

F
actors such as the structure and implementation of pay and bonus systems, the provision of flexible working opportunities, and the language used in job adverts can influence the magnitude of pay gaps for organisations.

Now, perhaps the most important question to consider, are the new regulations working?

This is a tricky one. It is difficult to fully understand the benefit of pay gap reporting is
having as it has only recently been introduced. However, research from PwC isn’t particularly promising.

Based on the figure that only 8% of respondents have made changes as a result of the gender pay gap reporting, they estimate it will take approximately 24 years to close the gender pay gap completely.

CIPD figures aren’t much better. The figure below shows the expected change in gender pay gap in 2019, with a shocking 47% of organisations expecting no change, 3% expecting the gap to worsen and 24% sitting on the fence. That leaves just over a quarter of organisations expecting there to be a positive change this year.

On the bright side, it is clear that some changes are being made, but 24 years (i.e. half of the average person’s working life) is a long time for women to be paid 16.5% less than men.

What do you think needs changing? Let us know what you think and follow us on social media for more insights and advice to help you better manage your business’ most valuable asset, its people.

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References

Data collection, conducted by YouGov, was undertaken over a five-week period in January and February 2019. The total sample size was 731. The figures in this report are unweighted.                                             
PWC. (2019) PwC women in work index 2019. Available at: www.pwc.co.uk/services/ economics-policy/insights/women-in-work-index.html [Accessed 18 March 2019].                                                       
Not just a number: lessons from the first year of gender pay gap reporting – CIPD April 2019 Report
 
Thoughts from the team at Holgate HR on the latest report on the gender pay gap. 
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