Gender pay gap reporting: like pulling teeth

VENEER OF EQUALITY?

This year’s results paint a mixed picture. The overall median gender pay gap (GPG) has widened very slightly, currently 9.6%. The median bonus pay gap sits at 15.5%. 22% of relevant employers report no GPG or a GPG in favour of women. The Government Equalities Office estimates that around 50% of relevant employers have put in place an action plan to address their GPG.

CMI research conducted at the end of last year found that despite the reporting requirements entering its second year, over two fifths (41%) of managers in large business were unaware whether their organisation published their GPG. More concerning is that 31% of public sector managers stating that their organisation doesn’t need an action plan as there is no gender pay gap. This seems contrary to the data.

CMI knows that Gender Pay Gap Reporting requirements are not a silver bullet in tackling this issue. Instead, companies need to address the the systemic causes of the gap.

ROOT CAUSES

The key cause of the gender pay gap is the lack of women in leadership roles – the further up in an organisation you go, the fewer women you see. CMI analysis shows that women comprise over a quarter (27%) of the most senior leaders (CEOs, senior directors and directors), but make up nearly two thirds (59%) of managers in entry-level management roles. Not having female role models creates a confidence gap between male and female employees.

We’ve also found that less than ten percent of women have proactive sponsors: senior leaders who will coach them and ensure they gain access to the top roles and opportunities.

Workplace culture also has a huge role to play. If gender bias hasn’t been considered in a company’s recruitment and employee development policies, there is no reason to think balance will assert itself in the workforce.

TRANSPARENCY WITH TEETH

The business case for gender balance is even more difficult to ignore. McKinsey estimates that implementing gender equality would add £150bn to UK GDP in 2025 – a five per cent increase. Furthermore, companies with gender parity are 22% more likely to outperform their competitors in terms of profitability.

So beyond the moral case for treating all employees fairly, there is a business case for driving diversity.

Taking gender pay reporting requirements seriously sends a clear message to your organisation: gender equality is a priority of the company’s leaders and will be scrutinised going forwards. If organisations fail to promote women, Government must have a role.

This means requiring firms to have real objectives for closing the pay gap and to set action plans which address these objectives, and taking meaningful action against those that don’t. At CMI, we refer to this as ‘transparency with teeth’.

For example, we are currently exploring whether the FRC’s Corporate Governance Code on diversity reporting could be made mandatory. The Code requires companies to set out the board’s policy on diversity including gender, any measurable objectives that it has set for implementing the policy, and progress on achieving those objectives. Firms failing to comply would find themselves facing fines and consequences from the appropriate regulator.

If we are to truly close the gender pay gap in the UK in less than the 60-odd years now predicted, the the Government needs to get serious and consider how it trades in a toothless grin for something with a little more bite.

Ann Francke is CEO of the Chartered Management Institute

The CMI has published the Blueprint for Balance report to boost gender equality in the workplace