Mind the (gender pay) gap?

April 2022 will mark the 5-year anniversary of the introduction of the Gender Pay Gap Reporting Regulations in the UK – but, 5 years on, is it time for reform?

Pause for thought?

Built into the regulations is an obligation to review their impact at this stage, which includes an assessment as to whether they have achieved their objective. There is no doubt the introduction of the gender pay gap reporting requirements was well intended – but there has been much criticism since their introduction – in particular, that the crude pay gap calculation method does not lend itself to addressing whether or not there is a pay discrimination (i.e. equal pay) issue within an organisation.

A true reflection?

A gender pay gap is not necessarily evidence of discriminatory pay practices. It is possible for an organisation to publish favourable gender pay gap data but have discriminatory pay practices running rife. Conversely, a large gender pay gap is not necessarily indicative of pay discrimination either.

Equal pay is about ensuring those doing the same or similar work are paid equally. A gender pay gap is about measuring the average woman’s hourly rate in a workplace against the average man’s hourly rate, without accounting for the fact they may be doing very different job roles. A gender pay gap would only reveal an equal pay issue in a workplace if all men and women had the exact same workplace characteristics, such as job role, performance, experience and so on.

A new backdrop

When the regulations were introduced, no one could predict a few years down the line employers would be faced with the covid-19 pandemic.

During the pandemic, it was evident the effects were more keenly felt by more vulnerable parts of the workforce, which in turn accentuated issues like the gender, disability and ethnicity pay gaps. During the pandemic – and just two weeks before the annual 4 April 2020 deadline for private sector businesses to publish their gender pay gap statistics – the UK government announced, because of the covid-19 pandemic, there would be no mandatory requirement to report gender pay gap data in 2020. Many businesses opted out when the legal requirement was lifted. In 2021, the reporting deadline was pushed back from April 2021 to October 2021.

The result of the pandemic means there is now a 2-year period during which compliance with the regulations was interrupted. This, in turn, means the effectiveness of the regulations cannot be meaningfully reviewed without consistent, reliable and comparable data.

The 2021 results showed the gender pay gap had reduced (i.e. improved) slightly. However, furloughed workers who were earning less than their full pay during the pandemic were excluded from the reporting requirements – and more women were furloughed than men. This is likely to have skewed the data, as many lower paid women have been excluded, such the 2021 positive data trend is unlikely to be sustained in future reporting years.

What does this mean in practice?

Although not mandatory in the UK, employers should try to accompany their published results with an action plan, setting out measures and a timescale to address any unequal pay practices moving forward. This approach is already commonplace in other countries, such as France and Spain. Inadequate representation of females at the more senior levels within an organisation is very often the key driver to a larger gender pay gap – which may be partly due to a retention problem. Increased flexibility in the workplace for both men and women can help to address this issue. It will also help to move away from outdated stereotypes many men have had to deal with in the workplace for years. The gender pay gap is not just a female problem. For example, men should have greater paternity leave periods than the statutory 2-week period – and should be supported rather than stigmitised if they request to work flexibly or part-time. It is only when society embraces change and moves away from historical gender stereotypes that workplaces will hopefully do the same – with or without legislation.

The response to the covid-19 pandemic has shown employers can adapt and offer remote and flexible-working arrangements, which may support both men and women in a manner that promotes greater equality across their working practices. If handled well, these measures could have a positive impact by reducing the gender pay gap going forward.

Daniella McGuigan is a partner with Ogletree Deakins International LLP: ogletreedeakins.com