Gender on the Agenda
How can HR convince boards to close the pay gap?You’d have to be a hermit not to have seen the coverage of the gender pay gap that’s been splashed around the news for the past six months.
My company has even run its own pay gap audit. We found that 70% of employers don’t currently report on gender pay at all. Perhaps more interestingly, we found that HR Directors were genuinely confused about how they were going to pitch gender pay resolution to their boards.
Which is strange, given we’ve seen it coming for a while. Since the Equal Pay Act was launched in 1970, government legislation has tightened and evolved. Specifically, the Equality Act 2010 states that ‘Employers must give men and women equal pay if they do the same/broadly similar work.’
It’s in clear black and white that businesses cannot determine pay by gender.
Following the government’s ‘Closing the Gender Pay Gap’ consultation, further legislation is expected in 2016 requiring employers with more than 250 employees to publish information about the pay of their male and female employees.
And although employers will not be required to publish their information until April 2018, for many employers their 2016 pay review represents their first opportunity to reduce their pay gap figure.
Costly tribunals
The truth is the 2018 publication will no doubt generate a lot of (potentially negative) publicity as the inevitable comparisons between employers and sectors are made. Findings will be scrutinised by not only employees, but by the press as well.
Businesses could end up at costly tribunals, or even face significant reputational damage.
But how can an HR professional make board members sit up and realise the risks of neglecting the inequality in their company – aside from the dramatic ‘name-and-shame’ league table being pushed by the government?
Building a valid business case is vital, and highlighting the risks of ignoring the issue is probably more effective than focussing on the benefits.
Significant financial damage
Given the size of most employers’ annual pay bills, the financial cost of resolving equal pay differences can be considerable. But given a choice between settling potentially large damages from a legal claim, or addressing key risk area(s) identified in an audit over a number of years, most employers would probably prefer the latter approach.
The cost of awards where complaints are upheld is rising. Statistics from the Ministry of Justice put the average sex discrimination award at £23,478 between 2014 and 2015, up from £14,336 in the previous 12 months.
Disclosure of sensitive data outside the organisation
The 2014 Enterprise and Regulatory Reform Act gave new powers to employee tribunals to order employers to conduct equal pay audits and disclose the results. The risk of a single employee or group of employees taking their employer to a tribunal is considerable, and therefore of detailed and sensitive pay information being disclosed to external stakeholders such as competitors, unions, and the general public.
Reputational damage
The recent example of Volkswagen’s emissions scandal demonstrates the enormous challenge an organisation, whose reputation is based on trust and reliability, can face from negative PR.
Positively embracing equality enables an organisation to be viewed favourably by communities, customers and suppliers. The accountancy firm Deloitte recently publicly disclosed a 17.8 per cent difference in their male and female pay.
Organisations such as this, who pre-empt Gender Pay Reporting or an employee claim, can limit the PR threat to their reputations that exposure can pose.
Impact on employee engagement, recruitment and retention
An organisation is more likely to attract people from a wider pool of talent if it is explicit in its commitment to demonstrating equality.
The big objections
Over the past decade, only a minority of employers have conducted a periodic equal pay audit. In an autumn 2015 Paydata survey of over 80 public and private sector employers, 67% stated that they have either never carried out an equal pay audit or have not conducted an audit for some time.
So what deters employers, and how can we overcome these objections?
- Employers are required to act on the audit results. This may incur a systematic overhaul of the current pay scheme and even amended contracts. However, setting pay grades for each job will enable future pay audits to be far simpler.
- No job grades, or unclean people data. With little or no decent data, it can be a daunting task for businesses looking to do pay reviews. However systematic pay auditing can help to determine job grades and streamline contracts.
- Lack of time and resources. Some businesses feel they don’t have the resources to implement correct pay reviews, but done properly it is simply a case of adopting a procedure and taking on the necessary practices. It should be seen as a worthy investment of a company’s time.
- Confidence that current approach is fair. If the board believes there’s nothing wrong with the current approach, you will need to build a strong case as to why they should invest the time and resources required to change their current system. Face them with the possible costs of employee loss due to competition, and show them that decent pay schemes are proven to increase retention.
- Lack of equal pay knowledge within the organisation. Despite equal pay legislation being quite old, there are still those who are uneducated about the facts and figures, and unsure what it means to the business. This ignorance needs to be combated in order for your campaign to be successful. Give them case studies where pay schemes have worked.
Overcoming these objections is part of the battle when building your business case. As an HR professional, you may be pulling your hair out at the prospect of sitting in front of the board and pitching the importance of equal pay. But if the board sees the impact it can have on their business, they’ll soon change their point of view.
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