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Gender pay gap reporting: What can we learn from the UK?

26 November, 2018

Gender pay gap reporting is coming to Ireland. Although it is not yet clear when reporting will officially begin, draft legislation (the General Scheme of the Gender Pay Gap Information Bill) was published by the Irish government in June 2018. At its simplest, the gender pay gap is the difference between the average wages of men and women.

The drivers of a gap are typically diversity/demographic factors such as the distribution of men and women across the levels of seniority but they may also include pay factors which could represent equal pay risk areas i.e. differences in pay between men and women performing equal work (this is prohibited under legislation; men and women must be paid equally for “like work”, “work of equal value” or “work rated as equivalent”).

These are clearly very different drivers and will need to be addressed through very different means. The aim of gender pay gap reporting is to create greater transparency and awareness of the factors contributing to the gap, so that it can be closed. High level details of the metrics to be reported (Figure 1) were included in the draft legislation and greater detail will emerge over time.

Existing UK gender pay reporting figures

  1. The difference in the mean hourly pay of male full-pay relevant employee and female full-pay relevant employees, expressed as a proportion of the male figure
  2. The difference in the median hourly pay between male full-pay relevant employees and female full-pay relevant employees expressed as a proportion of the male figure
  3. The difference in the mean bonus pay, between full pay relevant employees and female full-pay relevant employees, expressed as a proportion of the male figure
  4. The difference in the median bonus pay, between full-pay relevant employees and female full-pay relevant employees, expressed as a proportion of the male figure
  5. The proportion of male and female full-pay relevant employees in each quartile of the overall pay range
  6. The proportion of male and female employee who received bonus in the year

Proposed Irish gender pay reporting figures

  1. The difference between the mean hourly pay of male employees and that of female employees
  2. The difference between the median hourly pay of male employees and that of female employees
  3. The difference between the mean bonus pay of male employees and that of female employee
  4. The difference between the median bonus pay of male employees and that of female employees
  5. The difference between the mean pay of part-time male employees and that of part-time female employees
  6. The difference between the median pay of part-time male employees and that of part-time female employee
  7. The difference between the mean pay of male employees on temporary contracts and that of female employees on such contracts
  8. The difference between the median pay of male employees on temporary contracts and that of female employees on such contracts
  9. The proportions of male and female employees who were paid bonus pay
  10. The proportions of male and female employees who received benefits in kind
  11. The proportions of male and female employees in the lower, lower middle, upper middle and upper quartile pay bands

By implementing gender pay gap reporting, Ireland will follow in the footsteps of many other OECD countries including France, Germany, Sweden, Iceland and Australia. The UK recently introduced gender pay gap reporting and the first submission of reports occurred in April 2018. In this report, we will consider the experience and insights of our nearest neighbour so that Irish employers can navigate the journey effectively and avoid potential pitfalls. The PwC UK report Mandatory UK gender pay reporting- the story so far provides a deep dive into the UK experience, including full details of the results.

In Ireland, the gender pay gap is 14%, according to the most recently available data from the OECD/Eurostat. Women make up 46% of the Irish labour force and in an increasingly tight labour market, the ability to secure female talent is vital for employers. When reporting becomes a reality, organisations that can demonstrate they are taking sizeable steps to address their gender pay gap could emerge ahead in their ability to attract pivotal talent. This will be particularly important for skills in short supply that are also highly mobile, such as IT.

Closing the gender pay gap will undoubtedly have a positive effect on Irish women and the Irish economy: PwC’s 2018 Women in Work Index reports that closing the pay gap globally could increase OECD female earnings by as much as $2 trillion in the long-run.

Challenges and opportunities

Although the gender pay gap in Ireland has been reported for some time, a formalised approach to reporting will provide much greater insight, specifically about the gaps that exist in individual organisations and across sectors. Whilst details are not yet available, we expect that employers will be required to report their gender pay gap information to a designated public body, as well as publishing details on their websites. This level of transparency is likely to bring a high degree of scrutiny for companies from a range of stakeholders including Boards, shareholders, employees, the media and regulators; this has certainly been the case in the UK.

One of the big impacts of gender pay gap reporting will likely be on employer branding. An organisation’s employer brand affects their ability to attract (and retain) female and male talent, so negative results may adversely affect their talent pipeline, in turn, impacting efforts to improve organisational diversity and compounding the gap in the longer term. When deciding whether or not to work for an organisation, for example, 82% of female millennials identify an employer’s policy on diversity, equality and workforce inclusion as important. Gender pay gaps are likely to feed into a candidate’s assessment of an organisation’s commitment to diversity and inclusion.

For those employers who are embracing diversity and inclusion, gender pay gap reporting presents a positive opportunity to strengthen their employer brand by promoting their efforts publicly. For those who are yet to embrace the topic, it will provide a chance to understand the reality in their company, why a gender pay gap exists and what the key contributors are. They can then begin to make data-informed decisions.

Lessons learned

Regardless of an organisation’s track record on diversity and inclusion to date, the impetus for Irish employers to be proactive now is clear. Reflecting on experiences in the UK, we believe that the key lessons for Irish employers are:

Start early and allow enough time

Getting a head start makes sense for a range of reasons.

  • Ensuring data availability and accuracy: Poor quality human capital data was a challenge for UK employers, so maximising your preparation time will ensure that you have the right data and that you are confident of its accuracy.
  • Assessing capability: In the UK, it is estimated that as many as 1 in 6 employers may have reported their gender pay gap figures incorrectly. Early engagement will help you to assess the capability level of those charged with reporting for your organisation and to take action to build the requisite skills or to seek external support.
  • Validating results: Maximising the time available will ensure there is sufficient time to check your figures for accuracy and re-run them if necessary.
  • Understanding the drivers of your organisation’s gender pay gap: If a gap is identified, it will be important to have the time to understand why it exists so that the right actions can be developed and taken to close it.
  • Addressing equal pay concerns: Gender pay gap reporting may identify areas of concern in relation to equal pay issues. Early action will afford companies the time to engage legal advisors to conduct an equal pay review under legal privilege to assess if there is an issue and the time to address it. In the UK, gender pay gap reporting resulted in equal pay reviews in some instances.
  • Ensuring compliance: In the UK, approximately 1,500 organisations missed the reporting deadline. The draft Irish legislation includes a number of measures or penalties to tackle those who do not report so meeting the deadline for submission will be important. Organisations will also want to avoid the reputational damage which could result from a late or nil response.
  • Allowing time to take action: There was a rush of submissions close to the closing date in the UK, with more than 1,100 companies reporting their figures in the 24 hours before the April deadline. Organisations which calculated their gender pay gap close to the deadline (which related to the period April 2016-April 2017) did not have the time to take action to address the results before the next reference period closed (April 2017-April 2018). This left employers in the challenging position of potentially reporting the same (or worse) figures two years in a row. As most of the UK gender pay gap was attributable to representational issues (i.e. fewer women in senior level roles), time is needed to develop and embed solutions, which are likely to be longer-term in nature. Although we don’t yet know how reporting will work in operational terms in Ireland, getting started early will provide the greatest window to take action
  • Aligning actions to your compensation cycle: Understanding your gender pay gap in advance of your annual pay review can help to avoid compounding issues and if action needs to be taken, this may be the best (or only) opportunity to do so from a budgetary perspective.
  • Securing leadership support: Organisations in the UK where a C Suite member -other than HR- was highly engaged on the topic were more likely to spend time communicating their results than if it was HR pushing the agenda. Securing buy in at a senior level early in the process is crucial for both the reporting element as well as longer term action-planning.

Develop your narrative and action plan

Gender pay gap reporting is a complex and emotive subject; organisations can avoid the potential misinterpretation of their data and negative PR by taking time to develop a narrative report to explain their results and to educate stakeholders about gender pay gap reporting. Although it was not mandatory in the UK, many organisations took the opportunity to include a narrative with their submissions. Including details of a tangible action plan as part of the narrative provides valuable reassurance to stakeholders that action will be taken.

Communicate proactively to all stakeholders

Communicating to all stakeholders is vital, particularly employees, and timing is key. For example, some organisations in the UK did not communicate to their employees before their results were made public which is likely to have had a negative effect on employee engagement, morale and productivity. Tailoring your narrative to your specific stakeholders will also be important. Although key messages should be consistent, it is likely that the message to your Board, for example, will have a different focus to that intended for employees. Take the time to develop the right messages for each stakeholder group.

Take action to close the gap and communicate as you execute

Gender pay gap reporting on an annual basis will mean that there is regularly available information to track progress (or lack thereof). In the UK most organisations embraced the opportunity to take action. Once figures are reported (or before if possible), put in place a realistic plan that can be actioned in time for the following year’s reporting and report regularly on progress to internal stakeholders. Your plan may include a broader review of pay structures, the introduction of a job evaluation scheme, etc. You may also come under pressure, as many UK employers did, to analyse other (non-mandatory) pay gaps e.g. race. Many of these activities will take time so it will be important to manage stakeholders’ expectations around timelines. Regular communications will provide an opportunity to engage stakeholders on an ongoing basis and should support more positive responses to subsequent results.

Consider sector collaboration

Certain sectors in the UK (e.g. construction, insurance) had particularly large gender pay gaps as a result of occupational segregation i.e. men and women undertaking different types of role. Organisations may wish to collaborate on D&I initiatives to improve their attractiveness as a sector, for example, partnering with third level institutions to encourage women to undertake STEM qualifications.

Next steps

The timeline for introducing gender pay gap reporting in Ireland is not yet clear as the Bill is at the beginning of the legislative process. However, this is an opportune moment for employers to prepare as the topic is clearly on the government’s agenda.

For those wishing to make the most of the opportunity, now is the time to act. By reflecting on the lessons learned and taking concrete steps, organisations can position themselves well for whatever gender pay gap reporting will entail.

Contact us

Kathryn Brady

Director, PwC Ireland (Republic of)

Tel: +353 1 792 6428

Gerard McDonough

Partner, PwC Ireland (Republic of)

Tel: +353 1 792 6170

Anna Kinsella

Director, PwC Ireland (Republic of)

Tel: +353 1 792 6171

Stephanie Good

Director, PwC Ireland (Republic of)

Tel: +353 1 792 5374

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