While the mandatory pay gap reporting regulations introduced in 2016 have led to some shocking revelations, their scope needs to be broadened as well as deepened, argues Susan Milner. She writes that the pace of change is slow, while labour market changes mean that more and more women remain trapped in low-paid, low-hours employment.
On 4 April, the second round of gender pay gap reporting will take place for English, Scottish and Welsh businesses and voluntary sector organisations with 250 or more employees (30 March for public sector organisations). In the first round in 2018, around 94% of all organisations covered by the regulations reported, providing the most detailed set of information about gender pay gaps we’ve ever had. Alongside analysis of the Annual Survey of Hours and Earnings, which is published by the Office for National Statistics and provides a broader picture of the UK workforce, we are able to see which organisations and sectors still have above-average gaps, and to start to try to work out why, and what could be done to reduce them. In this respect the 2016 regulations fulfilled the aim stated by the then Prime Minister David Cameron to ‘cast sunlight on the discrepancies and create the pressure we need for change’.
However, despite formal compliance, the potential to change organisational behaviour has not yet been realised. Already there has been media comment about increases in gender pay gaps in many companies since 2018. What more needs to be done, then?
Pressure to publish gender pay gap data was intensified in 2018 by the interest shown by the media. Newspapers published detailed comparative analyses of median pay gaps, revealing strong patterns of occupational segregation in many sectors, particularly transport, construction, finance and education. Reports emphasised the need to focus on pay gaps at the top of organisations, and highlighted the exceptionally large discrepancies between men’s and women’s pay in finance, law and business consultancies, as well as game-playing by some of the latter, such as the exclusion of senior partners’ salaries.
In the run-up to reporting in 2019, attention has shifted to enforcement. Many organisations were found to have filed inaccurate reports in 2018, with missing or egregiously flawed data. Although the Equalities and Human Rights Commission (EHRC) issued 1,456 compliance letters to organisations, and took enforcement measures against 100 companies which had published erroneous data, few corrections appear to have been made. No organisations have been subjected to further compliance action, although the EHRC has the power to issue fines. The Chair of the parliamentary Women and Equalities committee, Maria Miller MP, criticised the EHRC’s enforcement strategy in 2018 as ‘toothless’. Although enforcement has undoubtedly helped to raise formal compliance, and thereby transparency through the publication of reports, more needs to be done to encourage organisations to comply with the substance of the regulations, by providing verifiable data as a minimum first step, as well as accompanying narratives explaining reasons for pay gaps and outlining remedial actions.
The government’s own overview suggested that fewer than half of organisations filed accompanying narratives (of variable quality, some simply restating the headline data). The EHRC’s analysis of a sample of gender pay gap reports found that only around half provided explanations of the data, as the regulations require, and only around 20% reported on actions to address gender pay gaps. The accompanying narratives are important, both internally in order to allow organisations to understand the reasons for pay gaps and measure progress against their own benchmarks, and externally, to increase knowledge about the types of action that are likely to support change.
In many ways foot-dragging by some businesses is to be expected, and is part of the wider process of change. The statutory regulations were introduced precisely because voluntary self-regulation by businesses in the 2011 ‘Think, Act, Report’ initiative had signally failed to show measurable change. The government’s approach is to use the regulatory duties as a way of incentivising a longer-term cultural shift and to support employers in making organisational changes through information. This deeper change could take up to five years, it is thought.
Without strong and sustained pressure, however, risks of inertia and incentives for backsliding are likely to grow. In 2018, the parliamentary Business, Energy and Industrial Strategy committee urged the government to be ‘more ambitious’ in pushing businesses to do more to tackle gender pay gaps, and to extend the remit of regulations to cover smaller businesses. Recommendations included more detailed requirements for reporting, including information on race and ethnicity pay gaps, and data on pay for full-time and part-time employees. However, after consultion, the government rejected these recommendations, arguing that they would impose costs on business and that information could be unreliable because of the small size of the dataset. It also ruled out inclusion of senior partners’ and directors’ pay in reporting, arguing that these are composed of performance-related bonuses rather than pay. Consultation on requirements for businesses to report on race and ethnicity pay gaps, which have been found to be significant based on the available evidence so far, are currently under way, but fears have been expressed that proposals may be quietly shelved.
The 2016 regulations marked an important shift in the way government deals with gender pay gaps, and sparked a welcome increase in transparency, awareness and discussion. This shift came about as a result of many years of activism and evidence-gathering about what works. So far, the first round of reporting has led to some shocking revelations which will put pressure on employers to measure gaps accurately and act on them. But the agenda for change needs to be broadened as well as deepened. Although the gender pay gap for full-time employees continues to fall, the pace of change is slow and the gap is still higher than the European or OECD average. Moreover, labour market changes mean that more and more women are trapped in low-paid, low-hours employment, resulting in a persistent pay gap when part-time work is included. Further pressure will be needed to keep pay inequalities in the public spotlight.
Note: the above draws on the author’s published work in British Politics.
Susan Milner is Associate Professor in European Politics at the University of Bath. She leads a GW4 research consortium on Pay Equality and is co-editor of a special issue of Gender, Work & Organization, to appear in 2019, on ‘Challenging gender pay gaps, organizational and regulatory strategies’.
All articles posted on this blog give the views of the author(s), and not the position of LSE British Politics and Policy, nor of the London School of Economics and Political Science. Featured image credit: Pixabay/Public Domain.