From the TUC

Gender pay gap reporting: is it anything more than a policy gimmick?

14 Oct 2015, by in Equality

David Cameron’s attempt to claim Labour territory has included strong messages on the gender pay gap. In his conference speech last week he declared, “I’m a dad of two daughters – opportunity won’t mean anything to them if they grow up in a country where they get paid less because of their gender”. Back in July, he announced his ambition to “end the gender pay gap in a generation” and his plan for a new law that will require large companies to publish information about the difference between average male and female earnings. He said this will “create the pressure we need for change, driving women’s wages up”. Yet, last week Conservative MEPs were in a minority voting against a gender equality resolution in the European Parliament that included a recommendation for employers to work in partnership with trade unions to monitor the gender pay gap and develop action plans to close it.

Responding to the government’s consultation paper on gender pay gap reporting, it was hard to keep the cynicism at bay. One question asked whether introducing civil enforcement procedures would help ensure compliance with the new law. Elsewhere, it proposed that the commencement of the regulations “should be delayed for an appropriate period to give businesses an opportunity to prepare for implementation”. As I said in a CiF blog this law is not asking big businesses to do much in terms of data collection and they have already had ample time to prepare for it.

Not to be deflated by the tone of the consultation paper or constrained by the restrictive questions and tick boxes, the TUC has set out a ten-point plan in its response that might make gender pay gap reporting the “really big move” that the Prime Minister claims it will be.

  1. Gender pay gap information must be shared with employees and trade unions

Clearly, this government is not keen on workers pressing for improvements in their own pay and conditions – contrast the slow, cautious approach it is taking to these mild transparency requirements for big business with the pace at which it is racing through unjustified and wide-ranging restrictions on trade union activities – but the government’s own background research confirms that by far the most important trigger for action on the gender pay gap is a complaint or action from employees. Burying a gender pay gap figure in an annual report is unlikely to result in pressure for change. Giving the information to workers (the people directly affected) and their representatives might just lead to some useful discussion, further investigation and action.

  1. Information needs to be detailed enough to shine a light on the main causes of the pay gap

If the information doesn’t help identify the main causes of the pay gap then it won’t help plan action to address those causes. As well as an overall gender pay gap figure employers should have to publish information on things like the distribution of men and women in the workforce, a measure of the part-time pay penalty, pay gaps within grades or job roles and pay gaps in bonuses and other additional payments.

  1. A standard method for calculating the gender pay gap must be prescribed

This will help enforcement, allow comparisons to be made across employers and help prioritise where action is needed most. It will also prevent employers cherry-picking a measure that shows them in the best light.

  1. A supporting narrative is needed that explains how the gender pay gap is calculated and action planned to narrow it

Tesco is one of only a handful of companies that has published a gender pay gap figure voluntarily. It reports that its pay gap is less than one per cent but nowhere does it explain what the figure represents. Does it only compare the pay of men and women who work full-time or does it include part-timers too? Does it cover all or just shopfloor staff? Also, examples of gender pay gap reporting from countries like Finland, Germany, Sweden and France show that companies are required to do more than just publish data. They have to explain how they are going to narrow the gender pay gap – something that employees, trade unions and others can then hold them to account for.

  1. There must be adequate monitoring and enforcement

The Equality and Human Rights Commission should be given new powers: a power to issue notices ordering employers to comply and, if they continue to refuse, powers to issue fines or to apply to a court for enforcement of those notices. The EHRC, which has had its funding slashed by more than 60 per cent since 2010, would need extra resources to reflect any new responsibilities for monitoring and enforcing this flagship government policy (though we expect it is likely to face further cuts in the upcoming spending review). Compliance with the law should also be a condition of becoming a preferred bidder for public sector contracts and tribunals should be able to take a failure to comply into consideration when hearing related claims of equal pay or sex discrimination.

  1. Mandatory gender pay gap reporting must start in 2016

The Prime Minister should remember his ambition to end the gender pay gap by the time his two daughters enter the workplace and get on with things rather than delay any longer. Section 147 of the Small Business, Enterprise and Employment Act 2015 required mandatory gender pay gap reporting to be introduced no later than 12 months after the Act was passed (i.e. before April 2016). However, section 147 has never been commenced and it is apparent from the consultation paper that this government is considering giving businesses even more time before they have to start taking their equality obligations seriously.

  1. The threshold for reporting should be lowered

Lowering the limit would benefit a lot more employees and research shows that there is little difference between companies with 150-249 employees and those with 250 or more in their attitudes towards gender pay gap reporting (for example, 47 per cent of large companies and 42 per cent of those with 150-249 employees were open to the idea of reporting pay gaps internally).

  1. Guidance must encourage equal pay audits and transparent pay practices

Guidance that accompanies the new regulations should remind employers that full equal pay audits, which involve identifying where men and women are doing equal work, comparing their pay and closing any gaps that can’t be justified, are the best way of ensuring compliance with equal pay law. They should also be directed to the excellent Code of Practice on Equal Pay which explains: “Transparency means that pay and benefit systems should be capable of being understood by everyone (employers, workers and their trade unions). It should be clear to individuals how each element of their pay contributes to their total earnings in a period.” However, research suggests that in parts of the private sector this is far from being the case: 28 per cent of employers give staff no information about pay and a further 16 per cent either actively discourage staff from talking about pay or insert clauses in their contracts to prevent them from doing so (despite the Equality Act 2010 making these clauses unenforceable in some circumstances). Reporting high level gender pay gap data won’t necessarily challenge this kind of secrecy around pay levels and how pay is determined.

  1. Equal pay questionnaires should be reinstated, employment tribunal fees repealed and collective bargaining promoted

Alongside the new reporting requirements the government needs to reverse policies that weaken compliance with equal pay legislation and undermine women’s efforts to organise to improve their pay and conditions. Reinstating the statutory equal pay questionnaires that were abolished in April 2014 would allow employees to ask their employer for information about their pay and that of potential comparators. Abolishing employment tribunal fees that were introduced in July 2013 would ensure workers with equal pay complaints had access to justice (in the year following the introduction of fees equal pay claims dropped by more than 80 per cent). And, if the intention really is to trigger action that drives women’s wages up, collective bargaining needs to be promoted not destroyed (the ILO, European Commission and others have found that the gender pay gap is lowest in countries where collective bargaining coverage is high). But this is unlikely to happen under a government that has imposed pay freezes and pay restraint on public sector workers (two-thirds of whom are women) and is now busy restricting their rights to protest against it.

  1. Analysis of pay gaps by ethnicity and disability should be encouraged too

Research suggests that there are significant pay gaps linked to disability and ethnicity too. Guidance introduced alongside these regulations should encourage employers to start gathering information on these pay gaps too and to start considering what action is needed to address them.

Download TUC response to GEO consultation [PDF]