Should I care about Gender Pay Gap Reporting?

Many SME business owners and HR managers haven’t given much thought to the gender pay gap reporting responsibilities that began in April. If you employed fewer than 250 employees on 5th April this year, then probably with good reason, as you won’t fall into the category of having to report any figures. But this doesn’t mean it is something you can ignore, as there are considerations even for those who don’t need to report.

On a practical basis, if you are near the 250 employee mark then you obviously need to be alert to the requirements. The calculation of how many employees you have may not be straightforward and does include some contractors. Participation is not obligatory but it is welcomed for companies with just slightly fewer than 250 employees.

In reality, most UK SME’s will not be participating in the reporting at the moment but it may be something on the horizon. For example, Iceland, who have topped the World Economic Forum’s Global Gender Gap Index the last 8 years straight, are looking to extend reporting to companies with only 25 or more employees. Currently in the UK, larger companies need to report on the following, and are encouraged publish an action plan alongside their results:

  • the difference in the average hourly rate for men and women,
  • the proportions of men and women within each quartile of pay,
  • the difference in average bonus for men and women, and
  • the proportion of men and women who receive bonuses.

In smaller companies, it is harder to calculate these averages of course – you may only have a handful of senior managers and perhaps a few part time admin people, but it is still sensible to ask yourself how your organisation would fare. If nothing else, you could one day be required to defend an equal pay claim in tribunal.

Data availability

A key logistical question: if you were required to report, or just wanted to look the information up yourself, how easily could you obtain the data?  Where do you store records of bonus payments? How easily can you pull reports of pay levels in order to make comparisons? There are various systems available, many low cost and some even free, that can help with this if you are currently relying on a mismatch of random spreadsheets.

Decision making

How do you make decisions regarding pay, how objective are these and would they stand up to scrutiny? In many organisations, performance-related bonus decisions are still influenced by employees “putting in the hours” as opposed to more subtle measurements of productivity and outputs. This can not only disadvantage those with caring responsibilities, but also impact employee performance and actually have a negative impact on productivity.  If SMEs give consideration as to how pay and bonus decisions are made, and put basic processes in place to ensure these are objective, this can be a significant help in future.  Anomalies are much harder (and more expensive) to fix when they are discovered later down the line.

Market Rate

A regular thorn in the side of those fighting for equal pay is ‘market rate’.  Many roles traditionally filled by more females attract a lower market rate than those traditionally filled by more males, even if they require similar levels of skill.  Take for example, Asda’s female-dominated shop floor staff, vs higher paid male-dominated warehouse staff. It is hard for organisations, particularly SMEs, to justify paying over market rate in order to counteract this imbalance.  However, the eventual result of the Asda legal battle and any others that follow, as well as awareness through gender pay gap reporting, could bring about a shift and create more parity in the market rates of roles.  It is worth all SMEs being aware of these discrepancies in market rate when setting pay levels and reward schemes, to ensure that they do not exacerbate the situation further and can plan for any future developments.

Unconscious bias

I think it is safe to assume that few business leaders would make a conscious decision to pay women less than men, or vice versa. There are many other factors that unconsciously impact on the gender pay gap though. As we discussed in our previous news article about avoiding discrimination in recruiting, people often have a picture in their head of what a successful senior engineer, sales leader or MD will look like, and this can impact how successful women are in applying for higher paid roles. Overtime may be allocated in a way that makes it more accessible to one gender than the other. Bonus structure might include elements that unconsciously put one gender at a disadvantage. The only way to tackle unconscious biases is to acknowledge that they exist and consciously counteract them. A process that is much easier to work through with a trusted colleague than alone, and even easier with data available to flag any potential imbalances. With awareness, SMEs can ensure that these biases do not become systemic within the organisation as it grows.

Although SMEs do not currently need to take part in Gender Pay Gap Reporting, it is something to be conscious of for all organisations. Focus is only going to increase; on ethnicity and disability pay gaps as well as gender. By setting up systems, processes, checks and balances, a growing organisation will make life much easier for themselves should they be required to report in future or to defend any of their decisions.  And as with many things, getting the measure of an issue is the first step in changing it.