Due to become law on 1 October, the legislation is aimed at righting entrenched pay and bonus differentials between the sexes and addressing gender imbalance at senior management levels. Research by the Institute for Fiscal Studies shows average difference in pay is currently 18 per cent. This gap widens markedly after women have children, peaking at 33 per cent 12 years after the first child is born, and that amongst mid-level and highly educated employees the pay gap is 28 per cent, the same as it was 20 years ago. In some sectors the gap is 40 per cent or more.
By April those affected by the Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 will be expected to have started identifying and calculating pay gap results and by April 2018 to publish those results for public consumption and comparison.
While there are no punitive penalties for those businesses which do not report, the government is using name and shame tactics to bring businesses in to line and to reverse decades of wages imbalance between the sexes and under-representation of women in senior management. However, some of our largest companies have voluntarily published reports detailing the pay and bonus gaps and pattern of female representation within their organisations.
Taking this approach provides a means of comparison to be drawn with competitors and it can improve an organisation’s ability to retain talent, attract the brightest operators, and improve relationships and reputation with clients.
Regardless of the size of a business, steps can be taken to ensure businesses have their house in order. For example, conducting an equal pay review involves a legally privileged audit of a company’s pay and bonus structures and gender representation patterns.
A review helps businesses in gathering data, deciding on their reporting strategy and developing their gender equality plans to enhance female participation and career progression and more robust and transparent pay practices. It also allows businesses to consider whether they wish to publish information in advance of the mandatory reporting regime and/or give time to plan for management of any potential adverse publicity.
There is a growing recognition within industry that equal pay, diversity and inclusion can no longer be seen as just “aspirational”. As a high priority of government, and increasingly a determinative factor when potential employees decide which company they wish to work for, businesses have to get much better in improving diversity and inclusion.
• Susanna Donaldson is a senior associate at law firm Pinsent Masons