The Gender Pay Gap - What You Need To Know

Cover image from Telegraph.co.uk.

We recently held a free breakfast seminar for our clients in conjunction with the leading law firm Gordon’s on the importance of planning for the pending new legislation on Gender Pay in the UK.

Out of 145 countries the UK comes in 18th place in terms of gender equality. However, in regards to wages, we are all the way down in 62nd place – despite the fact that gender discrimination has been illegal for 46 years. This has not gone unnoticed, and in July 2015 the Prime Minister declared the need to “publish the gap”, as well as his attempt to close the gender pay gap in a generation.

What will this mean?

From April 2016, all companies with 250 employees or more (which could potentially affect over 10 million people in the UK) will legally have to publish the difference in male and female salaries - including their bonuses - on their company website.  It will be a criminal offence not to comply (incurring a weighty fine of up to £5,000). There is speculation that companies will have around 6 months to publish the gap.

Until April, we still do not know exactly what the proposal will be, or the full extent of the details you will have to report. However, what we do know is that it will have a significant impact on your business, and that being proactive and preparing now will only be advantageous.

It's also worth bearing in mind that the gap does not necessarily mean that there has been discrimination – different jobs have different salaries. The issue arises when there is a difference in pay for “like work”, the same role that requires the same level of experience and expertise; hence there hasn’t been equal treatment.

How will it affect my business?

If your organisation has over 250 employees you will legally have to publish the gap, on your website, potentially in annual reports; somewhere it is easily accessible and anyone, both internal and external, can view.

Although overall the proposal will benefit employees and businesses, there are still considerable risks if the gap is a significant one and one that you cannot explain. There could be reputational risks for your company and there is potential for your brand to be tarnished as a discriminatory employer.

The gap could also affect performance. Your employees could lose trust in the business if they believed that your business was transparent and the results show otherwise. And of course, employees are unlikely to be passionate about working hard for an organisation they don't have confidence in. Issues raised around the gap could lead to conflict within teams and between management, which will inevitably lead to a difficultly to retain people. You would not want to stay with a business if you thought you were being unfairly treated, and there are published figures on your website to evidence this.

There are also commercial risks to bear in mind. If there is a large difference in the pay gap and your employees feel they have been treated unfairly then this could lead to equal pay claims. Around 1400 equality pay claims have been made by Carlisle Hospitals NHS Trust after an employment tribunal. At Birmingham City Council, £1.1 billion in claims have been made on similar grounds.  You need to be prepared for this too.

How can I start to prepare?

The sooner you start collecting the data, the better! If your organisation is large this will undoubtedly take up time and resources. Nonetheless, the earlier you do it, the more time you have to resolve any issues that emerge.

Then you need to analyse the gap. Think about determining effective hourly rate and creating scattergrams of salaries.  Ask questions about the data and resolve the issues - if two people are doing the same job, of equal value, why do they have different salaries? Do you need to increase someone’s salary? Does one employee require any help and training to ensure they are at the same level?

You might need to consider new ways of working to understand the gap and mitigate risk. Transparency is key here. Do you have job grades, salary ranges and job evaluation schemes set up? Adoping these policies will not only help you assess why your employees are paid what they are - they'll also motivate your workforce. Being transparent and using tools that are fair will allow staff to understand why they are paid the salaries they are paid, but also to understand how to get higher in the salary range or climb to the next job grade, thus creating a culture of more productive employees.

A great idea to consider is setting up a Job evaluation scheme. It is a systematic basis for determining the importance of jobs, based on knowledge and skills, complexity of the role, responsibility for people and resources and so on.

You need to set up tools that are simple and that work for your business. Identify risk areas and resolve issues before the gap is published. Make sure you understand why there is a gender pay gap (if there is one!) so you can educate management, explain clearly to employees and be equipped and organised for any questions.

Start preparing now! By reading this, you have given yourself a head start on truly creating a level playing field. In doing so, not only will you drive your business to success - you'll bring us closer to workplace equality as well.