• How do you close a gender pay gap?

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  • 23 Aug 2017
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With organisations fearful of following in the BBC’s footsteps, employers are being urged to take action to tackle inequality 

When the BBC published the salaries of its highest-paid employees in July, the numbers were met with predictable outrage. They demonstrated a huge gulf in pay between many comparable male and female presenters. And for employers, the reaction was particularly ominous given that businesses with more than 250 staff must report their gender pay figures by April 2018.

Some of those that report will have headline pay gap figures far larger than the BBC’s 10 per cent (the UK average has been put at 18.1 per cent). And they won’t, of course, be publishing individual salary breakdowns that will be scrutinised by the tabloids. But employers are still concerned about damage to their brand, discontent among employees and inaccurate interpretation of their results.  

Beyond communicating the context of their pay gap, what can they do? One of the biggest issues – and a major factor for companies in the creative or knowledge industries – is that recruitment practices can perpetuate and broaden pay gaps. Many businesses rely on the open market to source talent and end up paying the asking price for their preferred candidate, instead of setting clear salary bands for specific levels.

Paying one person more than another at the same level can be justified if the individual has a skillset of genuinely unique value to an organisation, but the process can result in the bravest candidates getting the biggest packages. “Previous research has shown women tend to be more moderate on what they ask for, which can have a medium and long-term effect,” says Charles Cotton, the CIPD’s senior performance and reward adviser.

“When you are recruiting externally, you have to think about what the short-term impact is going to be and what the impact on the medium or longer term will be. Can you increase pay for the rest of the staff?”

The BBC will close its gender pay gap by 2020, director general Tony Hall pledged in a letter to employees. It’s an ambitious goal, particularly when short-term fixes are hard to come by. Anyone looking to make pay more consistent in a hurry will have to boost women’s pay, rather than cutting men’s, says Cotton. “You could either increase women’s pay, which would be a quick fix with a cost implication issue, or you could reduce men’s pay, which would be a legal issue.”

Where pay inequality exists, boosting women’s pay early will at least put companies on the front foot ahead of challenges from female staff. A group of BBC presenters, for example, is vocally lobbying Hall for a pay boost.

“If there are gaping, unjustified gaps then address them immediately. After this, it is vital that employers work to build clear, definitive structures around pay, linking rises and promotions to expertise, performance and tenure,” says organisational psychologist Dee Murphy.

Another quick fix – which could be less expensive – relates to bonuses, where employers could pay everyone at the same level a fixed bonus rather than a percentage of their salary, a practice that entrenches pay gaps.

The alternatives can be costly. Duncan Brown, head of HR consultancy at the Institute for Employment Studies, blogged about the experience of his colleague, Sheila Wild, founder of the Equal Pay Portal. Wild helped a professor friend to fill out an equal pay enquiry questionnaire, downloaded from the government’s website. She submitted it to her university’s HR department and was given a pay rise of more than £20,000.

But employers shouldn’t be tempted to take refuge in short-term fixes at the expense of more meaningful measures, warns Cotton. “If your organisation is predominantly female and you have a handful of men, you could easily change the mean and median by employing a few lower-paid men, but that wouldn’t necessarily benefit women. It would just reduce the pay gap.

“Organisations may be tempted to take the quick-fix route, but they should recognise that it’s not so much where they are now, as where they are getting to and how they are going to get there.”

Firms that articulate the often-nuanced reasons behind a pay gap could win more sympathy from staff, especially if they are able to demonstrate what they are doing to close the gap.

This is also likely to win favour among investors, says Luke Hildyard, policy lead for stewardship and corporate governance at the Pensions and Lifetime Savings Association: “Showing they have been frank, reflective and self-critical on why they might have an unbalanced workforce is the first and most immediate step investors would want companies to take.”

EasyJet is one organisation that has articulated both its problem and its proposed solution. In its 2016 annual report, the airline explained that pilots are predominantly male and cabin crew are mostly female. Irrespective of gender, pilots are paid similar wages at easyJet, and the same is true for cabin crew.

To bridge the gap this causes, the airline introduced a scheme to encourage more women to become pilots. It set itself incremental goals, one of which was to double its female pilot intake within two years. It succeeded in just 12 months: the figures went from under 6 per cent in 2015 to 12 per cent in 2016. It is just one small step but, when it comes to gender pay gaps, being able to show you are confronting the problem is immeasurably important.

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  • Another interesting challenge with the collated gender pay gap analysis is that it is either provided as a % differential across all pay within the organisation, or within four quartiles (with the quartiles representing seniority groups) - and therefore a proportion of the gender pay gap reflects the reducing number of women to men further up the organisation hierarchies. This issue can be addressed by improving recruitment practice, internal learning and development opportunities and promotions so that the gender balance in the higher levels is more equal. I had previously felt the gender pay gap reporting was a blunt tool, but if the consequence is that the figures highlight (inadvertently) the under-representation of women in senior grades, then that may prove to be useful after all!

    I await with interest as the front-runners begin to apply this type of analysis to BAME, and disability pay gapping!