Closing the gender pay gap

As the government introduces compulsory pay gap reporting for all large companies, Melanie Stancliffe tells the property industry to get its structures in place now

Gender-ladder-REX

In a move resisted by many business groups, the government has announced plans to encourage equal pay by introducing compulsory pay gap reporting for all companies operating in the UK that employ 250 or more employees. Surveying and property companies will be no exception.

By 30 April 2018, these companies will be required to report publicly the gender pay gap in their businesses. Typically a confidential matter, they will have to publish percentage differences in hourly pay for male and female employees, the percentage difference in bonuses and the gender split in all quarters of the business (from top to bottom). The information will have to be made available to the public via the company’s website.

For the property industry this could present a bigger challenge than some other sectors. While much has changed in recent years, the property industry is still heavily male dominated, with women representing only 15% of the workforce. Such a large deficit of female employees inevitably leads to a continuing gap in pay between men and women and currently the pay gap of the property industry is 25.9%, which is still well above the UK average (of 20%). This disparity is something which there will be an impetus to review and improve in light of the new draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 (“the regulations”).

Indeed, under the regulations, employers will also have to disclose the collected information to the government. It is likely that this will then be collated into gender pay gap league tables, which will be published on a government website. While specific details of how the tables will be assembled have not yet been given, it is expected that they will be based on a sector-by-sector approach.

While the government’s stated intention is not to “name and shame” specific employers, it is likely that employers who fail to publish or have large discrepancies will be highlighted by unions and employee groups. Employees seeking information to aid their claims will also be acutely interested in the results.

Companies have up to two years to investigate and begin to improve on any pay inconsistencies before disclosure is required. They must be proactive and take advantage of the opportunity to improve their position now to avoid the inevitable negative attention and commercial risk which will come with publishing a poor report.

What must be included?

The final regulations are not expected to come into force until 1 October 2016; however, little change is expected to the draft regulations, which require affected companies to publish:

overall gender pay gap figures calculated using the mean and median hourly gross pay over a specific pay period (normally a week or month, depending on the usual pay cycle);
the numbers of men and women in each of four pay bands, based on the company’s overall pay range;
information relating to the difference between men’s and women’s mean bonus pay over a 12-month period; and
the proportion of male and female employees who received a bonus in the same 12-month period.

Employers can choose to add narratives offering explanations for any pay gap when publishing the data and can detail any measures they plan to introduce to close the gap.

What does “pay” include?

Employers will be required to publish their overall pay gaps based on gross hourly pay for men and women. Pay is widely defined and includes most pay, with the exception of overtime pay, but including bonus pay and holiday pay. Expenses, benefits in kind and the value of “salary sacrifice” schemes are excluded. However, shift premiums, on-call allowances and standby allowances are included.

What impact will this have?

There are very mixed opinions on the potential impact of the regulations. Some see pay gap reporting as a positive step towards encouraging increased diversity and transparency. Others doubt the usefulness of the information, with many going as far as to argue that it could in fact increase workplace stereotypes and discrimination by deterring women from entering sectors where they are already under-represented.

The disclosure of information to the general public and staff is expected to impact, positively or negatively, on a company’s public image and thereby its recruitment, retention and, ultimately, its reputation. The media will more than likely use the information to highlight discrepancies between employers which could lead to brand damage and negative publicity. There are also risks relating to the disclosure of sensitive financial information and potential claims for equal pay going back over a six-year period.

Regardless of the external impact, companies will face the extensive administrative burden and cost of collecting, sorting and publishing the data as they will need to take a snapshot of the pay of their employees at the end of April each year. They must ensure their HR software enables them to deal efficiently and effectively with the new guidelines.

What about the property industry?

As stated above, recent surveys have highlighted a continuing pay disparity. Male property professionals currently earn a gross average of £57,509, with females’ yearly average sitting around £45,689. This represents a current pay gap of 25.9%. While this is an improvement on last year’s figure (27%), it is still well above the UK average. The intention of the legislation, particularly the focus on the representation of women at each pay level, will also mean that management of the bigger firms will need to focus on this issue, address pay inequality and look at pay parity throughout people’s careers. On the positive side, however, it will give the impetus for the sector to look at its practices to cater for greater equality of opportunity.

The publication of sector league tables could also present a real risk, particularly for smaller property companies looking to recruit the best talent. Those who, through no fault or bias, will have a gender pay gap of size could struggle to attract female candidates. There is a real risk of losing female talent, particularly if yearly figures suggest a lack of progression.

How to prepare

Businesses must act now. The first challenge for employers will be reviewing the resources needed to produce a pay gap analysis. Many property companies won’t have adequate personnel or software resources and will be forced to consider using external support. Putting HR and IT systems in place to collect this data will involve an upfront cost. Putting it in place will also take time.

Equally, reviewing any disparity in pay needs to be undertaken in advance to ensure companies have enough time to deal with the emerging issues. One recommendation is for companies to run a “practice” pay gap review this year to discover why the pay gap exists and also to consider how the real review will be managed. This will highlight potential red-flag areas and allow businesses to put systems in place to remedy issues in advance of the 2018 publication deadline.

Where pay gaps exist, it is important for companies to consider the wider picture, identify the cause(s) and, in particular, consider whether gender is a contributing factor. Recruitment negotiations, ad hoc promotions, inflexible working and few family-friendly rights can all contribute to a gender pay gap. Other factors such as the negotiation of starting salaries and bonus payments should also be considered – men are thought to negotiate higher salaries and bonuses on entry. Companies need to be sure that those managers leading the recruitment processes are conscious of the need for pay equality and do not contribute to the gap.

By segmenting a workforce and looking at pay data at each level of seniority, companies can begin to assess whether the gap is more prominent at particular grades. This can be tracked and, if necessary, clear targets set for change to address any gender disparities.

Rather than focusing on one year’s data, it is recommended that companies expand the timeframe and analyse trends to identify key action areas. This continual monitoring of progress must be effectively communicated in each annual report.

Companies will have the right to explain the reasons for any pay differential, which will be a face-saving public relations exercise for some. Companies must think carefully about providing detailed narratives on their gender pay gap figures. The efforts they make now will enable them to identify the key issues and any extenuating circumstances (such as timing of bonus payments) to improve the presentation of their data.

Proactivity means that any unjustifiable pay gaps can be addressed in advance of April 2018. For many property companies, whole system change will be the only way to make real progress, but this will take time and organisation. Starting early will not only ensure compliance with the regulations but will also allow companies to tell a positive story and ultimately show a long-term commitment to fairness which will only serve to enhance their reputation and make sure they are the employer to choose in their industry.

Melanie Stancliffe is an employment partner at Irwin Mitchell