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Addressing the gender pay gap: employer methods

This report presents the findings of 14 interviews with employers in the private and public sector.

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3. Perspectives on Gender Pay Gap Reporting Requirements

This chapter outlines how employers regarded the gender pay gap reporting requirements described in Chapter 1. In general, these requirements were perceived to be effective in raising the profile of gender equality internally, improving organizational knowledge and understanding of the gender pay gap and providing an impetus to action. At the same time, several limitations of the reporting requirements were also observed, largely related to how the requirements interacted with specific organisational pay structures. This chapter also considers the relevance of pay gap reporting to small businesses.

Benefits of Reporting on the Gender Pay Gap

Raising the Profile of Gender Equality

Of those participants obligated to report their gender pay gap, many emphasised the merits of these requirements, whether in the context of the PSED or the private sector reporting requirements. As Hymans Robertson noted, in a manner that was consistent with a number of respondents:

We view the introduction of gender pay gap reporting as a positive step in the drive for gender diversity at work - it will be an important part of driving change in businesses (Sally Haran, Head of Talent Management. Hymans Robertson LLP, Financial Services. 501-1000 employees)

Given the highly self-selecting nature of our sample, this finding in itself should not be surprising, as participants knew the nature of the research in advance and therefore those with more favourable views were more likely to volunteer their time. However, the findings provide a useful insight into the ways in which reporting requirements can influence organizational practice.

For many participants, the introduction of reporting requirements marked the beginning of their engagement with the gender pay gap specifically. For some, however, the reporting requirements supplemented and developed pre-existing concerns about gender equality in the workplace. For example, Deloitte responded to the question of how the reporting requirements can contributed to change in the following way:

Has it driven change for us? It's certainly helped drive that change. Having a number, a measurement on anything, particularly when you're in professional services, where you have a large number of accountants, that's always a good thing. And so it's been an additional impetus and driver, but actually we had an action plan in place prior to our first gender pay gap report. Our gender pay gap analysis told us what we already knew and had a clear plan to address - that we didn't have enough women in our most senior positions. (Emma Codd, Managing Partner for Talent. Deloitte LLP, Professional Services, 17,000+ employees)

It was also emphasised by some interviewees that reporting requirements had led to an increased emphasis and priority for this issue, even when it was already on the agenda. Glasgow Caledonian University (GCU) reflected that the requirements had, at least in their context, worked against complacency:

The reality is that if we just carry on doing the stuff we've been doing, it's just going to be glacial. So these sorts of interventions - and I'm including the gender pay gap reporting - it's a shock to the system…it's provided the lens then for, as I said, the opportunity to try and understand it. (Director of People and Equality and Diversity Advisor. Glasgow Caledonian University, Higher Education. 1001-5000 employees)

The reporting requirements also ensured that the issue of gender equality remained on the agenda, even in contexts where it might otherwise be regarded as inconsistent with traditional expectations of job roles. As Scottish Water observed:

It would have been easy in the past to kind of go, "Well for goodness sake, we're a water utility, we treat sewage and all the rest of it, traditionally of course we don't have many women working for us." Whereas now, actually, with this reporting framework round about it, it gives added legitimacy to seriously ask the question of what more can we do? (David Hanlan and Darren May, Specialist HR Consultant and Performance & Reward Lead. Scottish Water, Water Utility. 1001-5000 employees).

Another benefit of pay gap reporting was that it could provide the impetus for discussions about nature and causes of the pay gap, which could in turn catalyse conversations within employers. As Standard Life Aberdeen reflected:

We held open conference calls which could accommodate up to a hundred people at a time immediately after publishing our pay gap. We talked through the analysis, data, and what was being done to address the gap. From having spoken to people afterwards, they really valued the opportunity to hear that first-hand, but also to be able to ask questions of us and of our leadership team around what were we actually doing…Through the rest of the year, we held a number of different opportunities for people to engage and hear and ask questions, from listening sessions with our co-CEO, to larger round tables in different locations. These were very interesting for us to hear some of the things that our people felt were causing the gender pay gap. It meant that when we then looked at our gender action plan, the actions that we've got in place to try and reduce the gap and improve the progression of women through the organization, we had some first-hand feedback from our people about what it's actually like in the business. (Heather Inglis, Senior Global Inclusion and Diversity Manager. Standard Life Aberdeen, Financial Services. 5001-10 000 employees)

The development of organisational knowledge and capacity in relation to the gender pay gap also had some additional benefits when it came to engaging with third parties. For example, Deloitte indicated that the work they had been doing in relation to agile working - see chapter 4 - had allowed them to demonstrate the success of these processes to other businesses. The additional benefits of increased capacity were also evidenced at Highlands and Islands Enterprise (HIE), who report via the PSED, with regard to their business development responsibilities:

I think where it's been particularly useful is helping us focus on how we can influence private and third sector gender pay gaps as well. Because obviously we've got responsibilities as an employer but we have a role where we can work with businesses to get the most benefit from considering diversity in their workforce. For example, women in leadership, as well as addressing occupational segregation, which is one of the biggest causes of the gender pay gap across most organisations. (Equalities Manager. Highlands and Islands Enterprise, Government Agency. 201-500 employees).

As the above indicates, raising the profile of gender equality, driving internal conversations and developing capacity are all potential benefits that have emerged from the reporting requirements.

Limitations of the Reporting Metrics

Industry Specific Limitations

Despite generally positive sentiments, there were several instances where minor limitations in the reporting framework emerged, although these were primarily technical in nature. For example, reporting requirements for bonuses may also fail to take account of different working patterns, as Hymans Robertson noted:

As the bonus gender pay gap is measured on absolute bonus values and is not adjusted to reflect whether somebody is working full or part time, a proportion of our bonus gap can be attributed to more women working part time than men at Hymans Robertson. (Sally Haran, Head of Talent Management. Hymans Robertson LLP, Financial Services 501-1000 employees)

In another example, Deloitte explained the specific challenges associated with reporting as a partnership and the steps they had taken to address this:

Two-thirds of our partners are equity partners which effectively means they're owners of the business, and obviously there is no ability to include them in the gender pay gap calculations under the regulations…so we had to come up with a way that we believed would be totally transparent on the overall earnings gap in our business, while also being compliant with the regulations for reporting. This meant that we needed to come up with an additional report - we came up with a way that basically is one number (our total gender 'earnings gap'): it takes all earnings for the financial year in question, so salary and bonus for employees and every earning that the equity partner would have, and then applies the gender pay gap calculation. (Emma Codd, Managing Partner for Talent. Deloitte LLP, Professional Services, 17,000+ employees)

There were several other examples of diligence and innovation in relation to reporting. For instance, Scottish Water were required to report under the PSED, but chose to supplement this analysis using the private sector requirements. As these calculations revealed, the PSED requirements produced a pay gap slightly favouring women, while the private sector methodology identified a pay gap in favour of men as it incorporated more data. In another context, Healthcare Improvement Scotland choose to analyse their pay gap figures on an annual basis, rather than the two year intervals required by the legislation, from the perspective of gaining a greater understanding of the effects of their interventions.

The research also suggested that pay gaps could interact in important ways with the overall compositions of organizations. This can be illustrated in the case of Scottish Water which had a pay gap that was lower than the national average. This reflected the fact that while women are a minority within the organization, they occupy well-remunerated positions. As they noted:

One of the things that we discovered when we looked into it…is that although we are currently 72% male in our workforce, the women that we do employ - which has been growing, actually, we used to be 22% female, we're now 28% female - the women we do employ on average tend to be in higher graded jobs, which means they're on higher salaries, which keeps the pay gap low, because the level of job that people do isn't a factor in gender pay gap calculation. It's just the average pay of men, the average pay of women. (David Hanlan and Darren May, Specialist HR Consultant and Performance & Reward Lead. Scottish Water, Water Utility. 1001-5000 employees).

As this organisation publicly reports in relation to PSED requirements, which are due for review, it may be worth considering ways in which these issues could be taken into account in the analysis of gender pay gaps within the public sector.

Another dimension of reporting that emerged in the data was that the production of gender pay gap statistics could potentially normalise - rather than problematise - gender differences within organisations. For example, in sectors with high pay gaps, having a pay gap that was lower or equivalent to the sectoral average could be understood as indicating that, while there is a gap, there isn't anything specifically problematic about the organization in question. As one anonymous respondent noted, when asked about the impact of reporting requirements:

Impact? I think it has certainly raised awareness amongst senior managers. It's not unexpected, our gap, and we're not alone, certainly, in the gap amongst organisations that we would recognise as competitors, who do similar work…I think what it has done as well...it's made us realistic about what we can actually do to change it. Do we want to change it? Do we need to reduce it? How could we manage to do that? I think we have reflected that it's not always within an employer's ability to be able to reduce that gap, there are so many other impacting factors to that. (HR Manager, Technical Services Organisation. 501-1000 employees)

The above findings, therefore, indicate that while the reporting requirements of the pay gap have considerable potential to further the goals of gender equality in work, ongoing monitoring and development are important to ensure these policies reach their full potential.

Gender Pay Gap Reporting and SMEs

Given the emphasis in most pay gap research on larger employers, this research was keen to engage with small and medium-sized enterprises (SMEs). Analysis from the Office of National Statistics (ONS) has indicated that smaller companies have, on average, slightly higher pay gaps than companies with over 249 employees.[35] However, in 2019, the UK Government rejected the recommendation of the Business, Energy and Industrial Strategy Committee to extend reporting requirements to all companies with over 50 employees, citing the additional logistical and regulatory burden such a requirement would create, alongside concerns with the volatility of pay gaps in smaller organisations and the reliability of data[36]. From this perspective, as it is unlikely that pay gap will be extended to this sector of the economy in the near future, finding an effective way to engage with gender equality concerns in this part of the economy will be important going forward.

One dimension of the responses from businesses in this sector was their future orientation, at least in contexts where there was a strong emphasis on growth. Here, some employers were focused on building fairness into the structure of their organization going forward. As one business reflected:

Our policy, if you like, is not to create the inequality in the first place. And being a young company and being forward thinking that's kind of the opportunity, I think. A lot of the older companies we see in the news are struggling to make up that within the definitions they have of their pay grades and scale. There's been quite a few discrepancies that are now being rectified. But as a company, because we're transparent about our recruitment processes and we're transparent about our aims within that, we've got a chance to avoid that situation. It's something that we'll become more aware of as we scale…we have put in systems and processes to ensure that we are being fair to our team members. (Anonymous, Digital Health Company, (Anonymous, Digital Services, 1-10 employees).

Amiqus articulated a similar point, stating their ambition to develop an organization with a strong focus on equality, rather than seeking to introduce this into a pre-existing structure at a later date:

To me it's about, you have to get the grassroots sorted out. Then it's not so much that you have to put things in place to manufacture figures, if you have a very balanced kind of team throughout the organisation then it's going to stay balanced, it's going to continue that way. If you put the right foundations in place, to me, then that's just naturally going to progress and stay balanced throughout the organisation. Being a young organisation we can put that in place early. (Head of People. Amiqus Resolution Ltd, Digital Legal Services, 11-50 employees)

Amiqus evidenced several examples of policies to encourage diversity. They emphasised, for example, their flexible and remote working practices, their transparency of salaries from a specifically gender-conscious perspective and a range of mechanisms to encourage inclusivity at work. These policies can be understood as structural approaches that sought equalise opportunities for women and men in ways that recognize the distinct barriers facing women in the workplace.

Going forward, in order to ensure that the aspirations stated above can be realized, it may be important to develop and share knowledge of best practices for small businesses.

Another component of gender and SMEs concerns the issue of business creation. While the businesses interviewed in this sample had diverse teams of founders, the overall percentage of businesses led by women in Scotland is small.[37] Addressing this particular gap - and its consequential impacts on the pay gap - is likely to require additional action beyond those simply concerned with the activities of employers. As the Women in Enterprise Framework and Action Plan, published by the Scottish Government in 2017, makes clear, women face a number of structural barriers to starting and growing enterprises, including lower capitalization[38].

Another goal is therefore the cultivation of female entrepreneurship and ensuring that potential barriers to participation are removed. In the research, HIE emphasized the importance of developing business support that was appropriate to female entrepreneurs. As they noted:

A lot of the evidence has shown that women are somewhat less confident about setting up a business. However, if support focuses on the issues that women are more likely to face this can create a more comfortable environment, particularly at the start up stage. Women can also find it particularly useful to be mentored by successful female entrepreneurs when they are starting businesses. (Equalities Manager. Highlands and Islands Enterprise, Government Agency. 201-500 employees)

Engaging with the SME sector, therefore, involves both developing strategies for developing best practice and cultivating structural gender analysis in lieu of reporting requirements, which provides a potentially useful context for developing the Scottish Business Pledge, as well as maintaining a start-up focused strategy taking forward existing research into the barriers facing women seeking to start businesses.

Conclusion

The above findings suggest that the reporting requirements for both the public and private sector may provide a useful impetus to action for certain employers, both by raising the profile of the gender pay gap and generating institutional capacity to respond to and record it. However, it also indicates that the gender pay gap reporting requirements as currently formulated may, in some contexts, require additional and ongoing development in relation to sector specifics. Specifically in relation to the public sector, the Gender Pay Gap Action Plan's commitment to reviewing the specific duties underpinning the Public Sector Equality Duty in 2019 may contribute to this ongoing development. Moreover, ensuring that policy could assist SMEs and start-ups in addressing gender pay gaps, including the differential levels of male and female start-up formation, will be of ongoing importance.

In this context, the commitments in the Gender Pay Gap Action Plan to refreshing the gender and diversity elements of the Scottish Business Pledge may potentially play an important role in sharing and encouraging effective practices, for example in relation to flexible working and recruitment practices. Similarly, the plan commits to working with businesses to develop gender pay gap action plans, which is likely to be of assistance to both larger and smaller enterprises. In relation to the question of gender and entrepreneurship, the Gender Pay Gap Action Plan sits alongside the Women in Enterprise Framework and Action Plan, which focuses on promoting female entrepreneurs with a focus on mentoring, networking, role models, finance and support.

Contact

Email: joseph.ritchie@scot.gov

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