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UK companies sceptical about gender pay gap reporting regulations

Equal pay

UK companies are sceptical about the impact the new Gender Pay Gap reporting requirements will have, according to a new survey by Mercer.

The research found that although 74% of firms agree with the principle of gender pay gap reporting, over half (52%) are either unsure or think the current proposals will make little or no difference to the gender pay gap. Furthermore, amongst the 114 companies surveyed, only half deem the Government’s definition of pay as fit for purpose, describing it as complex (40%), illogical (31%) and burdensome (31%).

UK companies recognise that through the new gender pay reporting requirement, the Government has not got the balance right between adding a burden on business and providing meaningful insights,” said Fiona Dunsire, Mercer’s UK CEO. “Importantly, this very high level single measure does little to show the way forward for organisations. We share the view of professionals and academics that pay programmes themselves are only one part to addressing the gender pay gap. Our recent When Women Thrive research shows that robust processes to address gender gaps in promotion and development and of active management of parental leave programmes also have a big impact.”

Chris Charman, Principal in Mercer’s Talent business added: “The unclear way that pay is defined* in the proposed regulations is not appreciated by businesses, as it not only differs from existing equal pay legislation but is quite alien to how companies actually manage and define pay, bonus, shift pay and other reward programmes.”

Many organisations are very concerned about their reputations and the potential increase in equal pay cases. It is more worrying however that many of these large employers – the listed companies alone representing some 3.8 million employees – do not seem to be getting to grips with the detail needed to understand how to tackle any gender pay gap in their organisations. For example, Mercer’s survey showed that only 11% have undertaken any analysis on the levels of starting pay for men and women performing the same work, despite it being a basic analysis on a well-documented issue.

What companies are doing
According to Mercer’s research, most companies have undertaken some gender pay gap related activity. The most prevalent initiatives include analysing the gender pay gap (54%) and creating a diversity and inclusion strategy (54%). Much less common initiatives were setting goals for female inclusion (22%) or analysing labour flow and promotion rates by gender (27%).

Furthermore, Mercer’s research shows that few have investigated the potential drivers behind any pay gaps. Of those that have done some analysis, looking at pay differentials by grade or level is most prevalent (36%). However, few have looked into whether there’s a gender pay gap on their promotion increases (22%), a mere 9% have looked at bonus awards and even less (3%) have done any post-maternity analysis.

Future expectations and plans
More than half (51%) of companies expect the new mandatory reporting to be ‘difficult’ or ‘very difficult’, however 75% feel they are ‘ready’ or ‘somewhat ready’ for it. Respondents were also positive about how they expect their organisation to fare against national pay gap levels. Of those that expressed an opinion, 65% expect their organisation to perform well against the UK norm and 84% expect to perform well against their UK peers.

In the future, although almost all companies plan to do some work in this space in the next 18 months, only under half will undertake any activity beyond the gender pay gap reporting requirement itself.  Examples of key substantive interventions (based on Mercer’s When Women Thrive gender research) and the percentage of organisations reporting they will be undertaking such activity include: benchmark workforce metrics (34%); improving the business case for diversity (22%); promoting family friendly policies (20%); set goals for female inclusion (20%); and conduct unconscious bias training (19%).

“Most of the analysis and activity done by companies to date – and what they plan to do in the future – will not equip them to properly understand nor to address the gender pay gap in their organisation. Despite this most still think they will perform well,” said Mr Charman. “This disconnect is worrying and might cause some unpleasant surprises for organisations. More broadly, the goal of closing the gender pay gap in a generation appears a distant prospect.”

Mercer’s Gender Pay Gap Reporting Survey provides insights from reward professionals on their perceptions and their organisation’s views on the proposed gender pay gap reporting legislations being issued by the Government. Mercer received responses from 114 organisations, of which 55% are listed and include 40% of the FTSE30, representing a market capitalisation of more than £550bn.