Closing, and Disclosing, the Gender Pay Gap
It’s that time of year again that every woman dreads. No, not Valentine’s Day; that’s been and gone. This is another kind of annual event that can be far more depressing for many women – the deadline for businesses to report their gender pay gap. On 4th April, private sector companies with more than 250 employees will have to publish figures of women’s and men’s salaries, with 30th March the deadline for public sector companies.
In the current climate of global debate across society and business around gender diversity, equality and inclusion, there is increasing awareness of how sensitive these issues can be and, with the power of social media, we have all seen how movements such as #metoo can gather momentum and stimulate change.
So, it is no surprise that since its introduction by the UK government in 2017, gender pay gap reporting has been embraced by women seeking a new world order of openness and fairness. As US congresswoman Alexandria Ocasio-Cortez succinctly tweeted recently: “If the wage gap is a myth as some allege, then workplaces should have no problem with workers disclosing our salaries with one another”.
When it comes to the differences between women’s and men’s salaries, size definitely matters. According to the Office for National Statistics, the gender pay gap among full-time employees was 8.6% in 2018. This meant that on 10thNovember, women effectively stopped getting paid compared to their male counterparts.
Last year a number of businesses across various sectors reported eye-watering gaps, for example easyjet with 51.7% and HSBC with 59%. Despite this, there was good news that the gap had fallen from 9.1% in 2017 and there were success stories of zero or even negative pay gap figures, with shining examples including Unilever, Ocado and Channel 5.
So, it was disappointing last week to read the BBC report that according to figures already published for this year, the gap has widened for four in ten private companies, with 74% of businesses reporting a pay gap which favours men.
It is perhaps unsurprising that traditionally male dominated sectors such as financial services are reporting high numbers, with RBS and Lloyds Banking Group leading the charge with 36.8% and 32.8% respectively. What is perhaps more surprising is that with less than six weeks to go until the 4th April deadline, around 90% of private sector companies have still not reported their figures.
Communication is vital
It is not just the pay gap itself that can be a sensitive issue for companies, but the way employers communicate the news.
According to a YouGov poll from last July, four in ten employees at companies with over 250 employees said the gender pay gap had "still not been made clear to them"; this is shocking considering the poll was conducted more than three months after the reporting deadline.
So, what can companies do to communicate their pay gap more effectively, both internally and externally?
1. Be transparent
As with any corporate announcement, your stakeholders expect honesty and transparency. There is no point trying to hide bad news; it will come out eventually and will be even more detrimental if revealed by a third party. Go on the front foot to control your own narrative – report ahead of the deadline and publish across relevant corporate materials and channels, including your website and annual report. Since this is a regulatory obligation, you will have to report at some point, and it will be seen more favourably if you do so in an open and timely way.
2. Be authentic
You need to walk the walk, not just talk the talk. If you publicly advocate diversity and inclusion, and claim to have a number of women in senior positions, then your policies should reflect this, and so should your gender pay gap figures. The tone from the top is essential, so your leadership team should be prepared to take responsibility for the numbers and demonstrate genuine commitment to improvement. Ensure your messaging is in line with your corporate culture and the image you are portraying to your internal and external stakeholders. If you don’t, it will look disingenuous and could be even more damaging to your reputation.
3. Communicate internally first
The gender pay gap is a sensitive subject as it is, so it is important not to make the situation worse by allowing poor internal communications to cloud what may be neutral, if not negative, news. The last thing you want is for your employees to find out about your company’s pay gap in the Financial Times. Make sure you have a robust plan in place, with input from your senior management, communications team and HR department, to disseminate the news internally before the figures are made public. It is also essential to have a strategy for how to deal with any potential fall-out. You need to be prepared for questions around why the figures are so disappointing or how your company compares against your peers.
4. Have a plan
It is not just about managing the news, but also tackling the root of the problem. If the pay gap you are reporting is not where you would like it to be, then make sure you demonstrate that you are taking the issue seriously and you have a plan in place to address it. Why are the figures so disappointing? What are you doing to improve them? If you can, share the plan, or a brief outline of it, internally. Look at your industry peers - have they performed better? If so, what are they doing differently? If not, what could you learn from companies in other sectors?
There is a general understanding that this is a long-standing issue and there are no quick-fix solutions, so most stakeholders will accept that you need to put a long-term strategy in place. The key is to demonstrate that you have a solid plan and that you are committed to implementing it. For now, there is no obligation for firms to say how they will close the gap, but who knows how long that will last. According to Rebecca Hilsenrath, the Chief Executive of the Equality and Human Rights Commission (EHRC): "We believe that it should be mandatory for employers to publish, alongside their pay gap data, action plans with specific targets and deadlines."
5. Get ready
Gender pay gap reporting obligations came into effect in 2017, which means we are now in the third year of public disclosure. This is an annual event and should be embedded in the corporate calendar for publicly listed companies as much as financial results and AGMs. There is no excuse to drag your heels or leave reporting to the last minute. There should be an ongoing process throughout the year to check in with the business and see what progress is being made, and preparations for communications around that progress (or lack thereof) should be made weeks, if not months, in advance of the deadline. And if there is a gap that needs to be addressed, then at least you have time to work on closing it.
Whilst you may be obliged to report your gender pay gap, there are no fixed guidelines in terms of how it should be communicated. And in today’s world where organisations can be publicly shamed and backlash on social media is common, it is important to be aware that if this issue is managed well, you could win the trust of your employees, investors and customers; but if handled badly, it could lead to long-lasting reputational damage.
Ultimately, surely the best way to deal with the gender pay gap is by not having one at all?
Co-founder, Purpose Union