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Comment: Don't let talent fall through the gender pay gap

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Comment: Don't let talent fall through the gender pay gap

By 5 April this year, any privately held company with 250 or more employees was required to submit its gender pay gap data to the government. 84% left it to the last four weeks of a 12-month reporting window, perhaps worried about the implications.

It is a topic that has generated a significant amount of interest in the media, and large corporations UK-wide. However, confusion and scepticism has developed around what it is, and why it is necessary.

Over the past six months the issue of the gender pay gap has been sensationalised by the media and confused with equal pay. The Equal Pay Act (1970) prohibits any less favourable treatment between men and women in terms of pay and conditions of employment.

It was superseded by the Equality Act 2010, which gives women (and men) a right to equal pay for equal work.

 The gender pay gap is not about equal pay. It is about exposing the fact many organisations do not have gender balance in middle management and above.

It is about highlighting barriers to career progression, particularly for women, and encouraging leadership to consider whether or not they are doing all they can to provide equal career opportunities.

Now most of the data has been collated (some companies did not report), we know 85% of organisations have a gap in favour of men. The data suggests female representation drops off considerably past middle management, with males dominating senior positions.

This is shown in the pay quartile statistics, where women represent more than 53% of the lower to upper-middle pay bands, but only make up 39% of the highest earners. Most of us instinctively know this and further evidence can be found in the Office National Statistics’ annual survey of hourly earnings since 2011.

Under scrutiny

With this data already available, why introduce gender pay gap reporting? One of the main objectives of the 2017 legislation was to place the onus firmly on individual organisations to prepare and publish their data, explain why their gap exists and how they plan to address it. 

By requiring organisations to publish this data on their own websites, and on the government’s portal, management know they are open to scrutiny from stakeholders. This includes current employees, prospective employees, customers and increasingly investors. Media interest has been intense.

Investors are also paying attention. Legal & General has announced it will vote against the chairs of FTSE 350 companies at annual meetings in 2018 if their boards are not at least 25% female. The Investment Association has written to 35 FTSE 350 companies asking them to explain their poor female representation at leadership level.

Pension funds have also recognised that diversity of thought and experience reduces risk and boosts performance. Research by Credit Suisse in 2016 (Gender 3000: Progress in the Boardroom) found diversity improves corporate returns by 3.5%.

Mistaken methodology

But some think the legislation is flawed. Julian Jessop from free-market think tank the Institute of Economic Affairs (IEA), believes the legislation is not even fit for purpose. He said the biggest issue was data in almost every case seems to show evidence of unfairness in pay. 

IEA news editor Kate Andrews said the gender pay gap methodology was ‘crude’ and rendered the results ‘meaningless’. She said it failed to distinguish between full-time and part-time workers, excluded details on comparable work being undertaken by men and women and that some data was missing.  

The reporting methodology may be flawed, but is a first step. The government is easing organisations into a reporting process that will over time evolve to include data that provides a more accurate assessment of performance. Ethnicity, disability and social mobility may also be added.

Some leadership teams may find the reporting requirements uncomfortable. But they must respond to the challenge and create transparent, fair organisations that are attractive to work in, invest in and buy from.

Innes Miller is director of Scydonia and acting chief commercial officer of Staffmetrix.

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