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What has Happened to Gender Pay Gap Reporting?

Since gender pay gap reporting became mandatory for large employers in 2017, the average GPG for full time employees has marginally reduced year on year from 18.4% to an estimated 15.5% in 2020.  However, with 8.8 million employees on furlough in April 2020 as businesses responded to the COVID-19 pandemic, the statistics for 2020/21 may tell a slightly different picture.  Last week, for example, the Pension Protection Fund (PPF) reported that its gender pay gap had widened to 15.7%, up from 13.4% the previous year. Whilst the PPF acknowledged that the gender pay gap had increased, they argued that this was in part due to their successful efforts to recruit more women into junior roles, as part of their strategy to grow their “female talent pipeline”. Whilst disappointing in the short term, the PPF pointed out that this result was not unexpected.

The results published by the PPF in their Diversity Pay Gap report, which also included data on their ethnicity pay gap for the first time, provide interesting reading and do at least allow the public to consider and form a view as to the merits of the arguments advanced. The real pity is that we are unlikely to get the opportunity to review many reports of this nature over the coming weeks, as was expected, following the recent government announcement that the deadline for reporting has been extended for six months from 5 April 2021 (for private employers) will be postponed until 5 October 2021.

Mandatory pay gap reporting was first introduced in 2017, requiring any organisation with 250 or more “employees” to publish their gender pay gap data in six different ways and a written statement on their own website and the government’s gender pay gap service website. At the time of its introduction, observers speculated that this requirement could do more to progress pay parity in five years than legislation had managed to achieve in almost half a century, since the introduction of the Equal Pay Act in 1970.  In 2017, almost 90% of women worked for companies that paid them less than male colleagues.  The data revealed the UK’s best and worst performing employers in the private and public sectors, as well as the best and worst sectors.  In 9 out of 17 sectors men earned more than 10% on average compared to women.   In the worst sectors, construction, financial & insurance services, and education, male staff earned on average between 20 and 23% more respectively than women.  Banks in particular fell under intense scrutiny with pay differentials as high as 43.5% for certain employers.

Initial reports published by 5 April 2018 continued to generate significant media attention, shining a spotlight on an issue that employers had previously shied away from. Many employers were proactive in publishing the data, committing to reaching certain targets, undertaking equal pay reviews and some smaller employers, anticipating growth in the near future, voluntarily disclosed their data.

In 2019, observers were eager to see whether the impact of these actions would be reflected in the reporting figures.  There was a slightly different approach to previous years, in that employers delayed publishing their data until the last minute, which was cynically seen as seeking to reduce any reputational risks open discussion of specific data could cause one employer by burying it in the flood of late disclosures.  While there was no significant improvement reported in April 2018 for average gender pay gap for full time employees, not all of the steps employers committed in year 1 will reap immediate change.  The audit did shed light on a myriad of reasons for the gender pay gap.  There is a social element caused by education systems influencing gender “norms” around female education and career choices, channelling women into lower paid / lower skilled rolls.   Employers and education establishments have embraced positive action here to effect change by focusing on women in STEM, as well as other initiatives.

Interestingly, the gender pay gap is neutral for full time employees under 40, recognising the need to tackle the “motherhood penalty”, which can impact women irrespective of whether they actually do take time for child rearing purposes.  It is caused where women find it hard to continue their chosen career path because of the need to work flexibly and often closer to home in order to manage childcare with work.

Overwhelmingly, it is the presence of more senior men than women that has caused the gender pay gap in many organisations.  In correctly assessing their own data, there have been some good news stories.  EasyJet, for example, recognised that women comprised just 6% of pilot population and responded with setting a target that one fifth of its new pilots by 2020 would be women.  Although the pandemic may drastically halt easyJet’s progress here, it had already increased its female new recruits by 50% by 2018, which changed this statistic from 6% to 13%.

Other countries worldwide report on their gender pay gap.  While the UK was approximately 3% above average, it was being outshone by fellow European countries such as France (where the government confidently promised to close its gender pay gap in just three years), Greece, Italy and Sweden.

In light of the significant momentum which this initiative had generated, it was all the more disappointing that the government chose to suspend the requirement for companies to publish their gender pay gap reporting data in 2020. Although suspension was in response to the pandemic, the Government announcement was made so close to the reporting deadline (just weeks before publication was due), that the majority of work had already undoubtedly been undertaken by many employers.   The data could have provided an important benchmark in measuring the disproportionate effects COVID-19 has had on women in the workplace.  The disparate impact of COVID-19 is already well documented;  more women than men were furloughed and have undertaken more the additional caring responsibilities, as well as the fact that a large proportion of employees in the heavily affected service sector are female.  The failures of the Self-Employed Income Support Scheme were also highlighted in a legal challenge brought against the Government by the charity Pregnant Then Screwed, claiming indirect sex discrimination. The organisation had argued that women who had taken maternity leave got less money as a result of how the self-employment scheme was calculated, although they were, ultimately, unsuccessful in a judgment they referred to as “fundamentally flawed.”

Renewed commitment to narrowing the gender pay gap will be required.   The government’s pause on gender pay gap reporting is demonstrative of the issue slipping down the agenda.  However, one positive change to working practices that could result in fewer women suffering the so-called maternity penalty, is the greater degree of flexibility offered to women (and carers alike) from combining home and office working.   Rather than have to look for a role closer to home to cut the daily commute or a more junior role that could be undertaken on a part time basis, this could give rise to a very positive change and enable the pipeline of women in senior or leadership positions to grow.

Until that change is embedded however, the immediate impact of the pandemic on the gender pay gap may be more detrimental and unfortunately long lasting with more women, at all levels, disproportionately impacted by restructuring and leaving the workplace.  Tackling gender bias and finding ways to address career choices at all stages will need to stay high on the employers agenda.  Clear and early gender pay reporting will be a key step.

If you are an employer and would like to discuss the impact and implications of gender pay gap reporting on your business, you have any other questions arising from this alert, or for specific legal advice on particular circumstances, please contact our Partner Emma Bartlett who specialises in employment and partnership issues for multinational employers, senior executives, partnerships and partners.