Gender pay gap reporting: Government's new rules will not tackle financial inequality, critics warn

The current overall gender pay gap for full-time workers is 13.9 per cent, according to the Fawcett Society

From Thursday, companies employing more than 250 people will have 12 months to meet a deadline to publish their gender pay gap figures (Shutterstock)

Experts, including employment lawyers, HR professionals and campaigners, are warning that the Government’s new rules on gender pay reporting won’t do enough to tackle considerable financial inequality still overshadowing a multitude of industries.

From Thursday, companies employing more than 250 people will have 12 months to meet a deadline to publish their gender pay gap figures, but critics have said that the reporting won’t be granular enough to facilitate real change.

“As is stands, the reporting won’t reveal whether men and women are paid equally for doing the same or comparable jobs. It will simply show the mean and median difference in pay and bonus remuneration across a particular company,” says Suzanne Horne, an employment law partner at Paul Hastings.

Ms Horne says that the real problem lies in the fact that women are still underrepresented at senior levels.

“The reporting will tell us what we already know, whilst neglecting to consider the myriad of factors that legitimately differentiate pay such as levels of responsibility, nature of work, experience and geographical location to name but a few,” she says.

According to the Fawcett Society, one of the UK’s largest charities promoting women’s rights, women in Britain earn significantly less than men over their entire careers as a result of differences in caring responsibilities, clustering in low-skilled and low-paid work, the qualifications and skills women acquire, and outright discrimination.

The society says that the current overall gender gap for full-time workers is 13.9 per cent and that women are frequently still being paid less than men in the equivalent role, despite that being illegal.

According to the organisations statistics, 54,000 women are forced to leave their job early every year as a result of poor treatment after they have a child. And a total of 80 per cent of people in the low paid care and leisure sector are females.

Sophie Walker, leader of the Women’s Equality Party, in a statement this week challenged the Government “to stop fiddling around the margins and build an economy that sees women”.

She said that the new rules coming into effect “will not be enough to close the gender pay gap” and that her party would require companies to publish pay data broken down by age, ethnicity and disability, in addition to gender.

Ms Walker said that her party would also extend this to businesses with more than 50 employees within three years.

“Tackling the complexity of the gender pay gap means going much further than the government’s current proposals and businesses should be leading the way,” she said.

Others have echoed those remarks.

“Although median and mean hourly pay provide useful comparisons of average earnings, they do not reveal differences in rates of pay for comparable jobs, which is the focus of the equal pay legislation,” says Clare Gregory, partner in the employment and pensions group at global law firm DLA Piper.

Elliott Silk, head of employee benefits at wealth management business Sanlam, says that the effectiveness of the new rules might also be hampered by technicalities.

“Many companies who are perceived to have 250 employees or more might not have to disclose this information as there may be multiple employing entities meaning that their individual businesses actually have less than this number of staff,” he says.

Beyond immediate annual compensation, Rose St Louis, a savings expert at insurance company Zurich, says that the regulations don’t address the huge pension shortfall that many women are projected to be facing when they retire.

Analysis of 250,261 workplace personal pension plans held with Zurich between 2013 and 2016 shows that last year— on average—men under the age of 35 received £217 more in employer pension contributions than women of the same age.

Extrapolated over the long run, the figures imply that women could face a pension shortfall of up to £47,000 by the end of their working lives, which is much greater than that faced by their male counterparts.

Ms St Louis says that the Government’s latest measures should help combat the issue of salary, “but better education and guidance must be available to employers and employees alike to tackle the systemic challenges”.

Not everyone is wholly pessimistic about the new rules though.

Sarah Henchoz, an employment partner at the law firm Allen & Overy, says that although the new regulations are “administratively complex” they are likely to achieve significant change.

“Credible research has established a link between greater financial performance and diversity, particularly within the senior leadership team. Where the gender pay gap results are challenging, an employer will undoubtedly want to implement a strategy to redress the balance and remove any barriers to women progressing to senior positions,” she says.

Sarah Churchman, head of diversity at professional services firm PwC says that although “simply reporting numbers won’t change things”, it is an “opportunity for organisations to understand what’s happening in their business and to take bold actions that drive to the heart of the issue”.

She says that this could include organisations creating more returnship programmes and setting targets for female representation at all levels.

Last month Vodafone said that within three years, it aims to hire 1,000 women who have been out of the workplace for several years, in most cases to raise a family.

Citing research that Vodafone commissioned from professional services firm KPMG, the telecom giant said that there are about 96 million skilled women between the ages of 30 and 54 on career breaks worldwide.

Of those, an estimated 55 million have experience at middle-manager level and above.

The value of the economic activity generated by bringing those women back into the workplace could be in the region of £151bn per year, the research shows. And in terms of earnings, the cumulative financial boost for the households of those women could be some £419bn a year, according to KPMG.

“Even if gender pay gap reporting doesn’t catapult companies into ‘setting things right’, it will certainly accelerate the conversation that started with the Equal Pay Law in 1970,” said Sumita Ketkar, a lecturer in leadership and professional development at Westminster Business School.

“A holistic approach is needed towards solving a problem of ‘mindsets’ that have been embedded in our social fabric for too long,” she said.

“With more stakeholders including men roped into the ‘feminism’ narrative, it may just be that good times lie ahead.”