Elaine McIlroy: Firms must act to close gender pay gap

Companies will soon have to publish a snapshot of their gender pay gap. Picture: Joe Giddens/PA Wire

Many thought that would be the fix, but as it turns out, it wasn’t the case. Forty-plus years since that legislation came into effect, it is surprising to many that there is such a gulf in average pay between men and women. The announcement this week from the Chartered Management Institute that suggests that the Scottish gender pay gap is the widest in the UK – a gap of almost £11,000 less on average, or 29.2 per cent – is disappointing to say the least.

Some of the pay gap is attributable to differences in pay for men and women doing the same job – and surprising as that may seem, those examples of women working alongside men doing the same job for less pay do still exist – especially in organisations that do not have transparent pay structures. In a sense those cases are the starkest – but the simplest to fix.

However, a far greater element of the gap in average pay is attributable to factors such as the fact that women’s careers tend to progress at a slower pace. In addition, their overall career progression tends to be truncated with a significantly lower proportion of women being promoted into senior management positions which are higher paid. The evidence for this does not need to be found in a detailed study – it is clear in many organisations by having a look around the boardroom or any senior management meeting.

A report by the Institute for Fiscal Studies this week provided further evidence of the link between having a child and an enhanced gap in pay – with the average pay gap growing to 33 per cent in the 12 years after having a child. This is often linked to women returning to work part time following the birth of a child.

Gender salary gap widens for 12 years after first child born

However, even although the factors behind the pay gap are complex, progress can still be made. The persistence of a significant pay gap, changing attitudes and political pressure will continue to be the driving force behind legal reform, compelling businesses to make changes. And that change is coming soon. Businesses must act now on the gender pay gap to minimise legal risk and reputational damage.

New legislation will require larger employers to publish a snapshot of their gender pay gap as at April 2017. This will highlight the overall average pay gap and the numbers of women and men who fall into various pay bands or “quartiles”. There will also be comparisons of bonuses by gender. These figures must be reported by early 2018. Although a gap in pay does not always mean that the gap is unlawful, there will be a great deal of scrutiny on employers to explain any gap and what they are doing about it.

It is inevitable that more reporting and scrutiny in this area will lead to more equal pay litigation – and disgruntlement amongst the workforce unless any gaps can be explained.

Employers can be proactive in this difficult area, performing audits now in order to be ahead of the curve. This will enable them to identify any discrepancies or risk areas and to start to address these before reporting becomes mandatory.

Practical steps might include increasing objectivity in bonus decision-making, for example by basing decisions on measurable performance indicators. Where there is significant discretion involved, good record-keeping and analysis of overall bonus results by gender will become more important than ever.

Even though the legislation is aimed at bigger employers, equality is good for business. And, where big business goes, the rest are sure to be required to follow – so businesses of all sizes can start to analyse their gap.

Theresa May’s speech following her appointment to Prime Minister put it simply: “If you’re a woman, you will earn less than a man.” Surely that has to change.

• Elaine McIlroy is a partner specialising in employment law at Weightmans (Scotland) LLP

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