Tackling the gender pay gap and the new reporting requirements

26 August 2016 -

CMI chief executive Ann Francke says that managers will be at the forefront of introducing the cultural changes needed to make a success of the new gender pay reporting regulations

Matt Scott

British businesses have failed to make any progress on closing the gender pay over the last 12 months, with the 2016 Gender Salary Survey from CMI and XpertHR revealing that on average men are paid 23.1% more than women, compared to 22.8% in 2015.

“Forty years after the Equal Pay Act, how can that be the case?,” CMI chief executive Ann Francke asked. “The answer lies in the fact that the gap, in most cases, is not the result of unequal pay. Instead, it reflects the failure to achieve a balance of men and women in senior management roles, or to attract and retain women to some of the better remunerated occupations.

“The problem we face isn’t so much that women aren’t receiving equal pay for equal work – but that they aren’t getting equal work.”

As well as the ethical case for gender equality in the workplace, there are also business benefits to achieving gender diversity.

Research from McKinsey & Company has estimated the benefits of women fulfilling their economic potential and playing an identical role in the labour market to that of men to be as much as $28 trillion by 2025 – or 27% of global GDP.

And Credit Suisse found that having even one woman on the board of a company starts to bring an improvement, with boardrooms where there is one female seeing an average return on equity of 14.1% since 2005, compared to 11.2% for all-male boards.

And change is on the way to try and make the most of these benefits.

From April 2017, businesses with more than 250 employees will be required to measure, and then report, on how they pay men and women, affecting 8,000 British businesses.

Francke said that managers would be vital in ensuring the success of these new regulations in driving forward diversity and a cultural change in British business.

“Managers will have a central role in changing the cultures of our organisations and tackling the underlying causes of the gender pay gap: issues like the cultural assumptions that make women opt out, or the under-promotion of women, a problem highlighted by our latest research,” she said. “Promoting men ahead of women is keeping us all back.

“Diversity delivers better financial results, better culture and better decision making. Even before the new regulations kick in, employers need to get on board with reporting on their recruitment and promotion policies and how much they pay their men and women.”

“Managers must embrace this new period of transparency and make sure that they’re part of the solutions that businesses need,” she added.

How the regulations will affect your business

The regulations will require employers in Great Britain with at least 250 employees to publish information relating to the difference in pay between male and female employees and to provide the number of male and female employees employed in quartile pay bands.

The government expects employers to start calculating and publishing their figures from April 2017 onwards, employers will then be required to publish their first round of metrics no later than April 2018.

The new regulations will require employers to calculate three different measures:

The gender pay gap: Employers will have to calculate and publish the difference between the median and mean pay for men and women (expressed as a percentage of men’s median and mean pay).

The gender bonus gap: In addition to pay, employers will also have to publish data on bonuses. Firstly, the proportion of men and women who receive bonuses, based on headcount, in the 12 months preceding the relevant date.

Secondly, they will have to show the percentage difference between the value of the average bonuses received by men and women, again most likely on the basis of both the mean and median figures.

Numbers of men and women in each pay quartile: Employers will also be required to publish the proportion of men and women working in each pay quartile, most likely by dividing the workforce into four equal parts based on their hourly pay.

Find out more about the incoming regulations, including a case study of how to prepare your business for the changes, here