WHAT'S IT ALL ABOUT...
In 2018, for the first time ever, companies with over 250 employees had to report on their gender pay gap figures, and the results showed that eight in ten UK firms paid men more than women.
This year, the results paint a similar picture, with 78% of companies reporting a pay gap in favour of men, 14% favouring women and the rest reporting no difference.
Looking beyond the figures, Laura Timms, MHR Analytics' keen advocate for women in business and technology, discusses what the gender pay gap really means…
What is the gender pay gap?
The gender pay gap refers to the difference between men and women’s hourly earnings. Many confuse this with pay inequality, which is when men and women are paid differently despite carrying out work of the same value. Unlike pay inequality, the gender pay gap isn’t illegal – it can still stem from underlying discrimination or gender stereotypes, but this isn’t always the case.
Research shows that women essentially work for free for the first two months of the year because of the 17.9% gender pay gap, and its stats like this that have become the focus of the media worldwide.
When we look at individual industries, the gender pay gap becomes wider than the national average, with companies in sectors like finance, travel and construction reporting significantly higher pay gaps. Barclays Investment Bank reported that their pay gap was 44.1%, while EasyJet revealed that their pay gap was a staggering 47.9%.
Admittedly, it’s easy to point the finger when we see statistics like this, but organisations are complex and there are many other factors aside from gender discrimination which can and do influence pay gaps.
Why is there a gender pay gap?
One of the main causes of the gender pay gap is the low number of women in senior positions. Cranfield School of Management reported that women represent only 8% of the most senior jobs in the boardroom and sadly, this has only increased by 2% in the last decade. The invisible barrier preventing women from reaching these influential positions is often described as the ‘glass ceiling’ – to understand why this exists we must dig deeper.
One reason comes down to the fact that, due to the uncontrollable force of biology, women must take time off work if they choose to start families and this responsibility can lead to women opting for part-time work on a long term basis too. This type of work tends to be more flexible, however, it also pays less, and in the long-run, this can lead to women experiencing slower career progression than their male peers.
Positive legislation changes, such as Shared Parental Leave, work to rectify this issue, however, there are still deep-rooted societal issues preventing this change. For example, Facebook and Apple have started a new trend of businesses offering egg-freezing as an employee benefit so women can delay having children to focus on their career. This suggests that a choice must be made between work and family rather than providing more flexibility to allow women to be successful alongside their home life.
Another cause of the gender pay gap is due to the fact that certain roles and industries are heavily dominated by males, meaning that men naturally occupy the majority of higher paying positions in those areas. Similar to this, some female-dominated roles, are typically less well paid than male-dominated roles. So for example, a flight attendant would earn significantly less than a pilot, which causes some disparity, as evidenced in the EasyJet figures. The answer is not to increase the pay of flight attendants, but instead encourage more women to become pilots, through training schemes and awareness campaigns to challenge classic gender stereotypes.
Furthermore, it’s estimated that as much as a third of the total gender pay gap is due to discrimination based on gender, which has been illegal in the UK since the 70s. This is often based on underlying prejudices which echo that women and leadership simply do not go together. Like any other form of discrimination, this is wrong, and the new government initiative aims to give employers visibility on this issue so that they can work to promote equality within their workplaces.
With all this in mind, it seems like the solution to the problem should be simple: more women should simply opt for senior positions in lucrative industries. Unfortunately, until the above societal norms change and businesses begin to take responsibility, these roles will remain unattainable to women. Forcing businesses to report their gender pay gap is the first step towards this.
What are the benefits of closing the gap?
Of course, closing the gender pay gap will promote gender equality and finally solve an issue that we should not still be talking about in the 21st century, but apart from this, what other incentives do businesses have to begin to address their gender pay gap?
Well, first of all, let’s look at the specific business benefits: higher employee retention, improved employee satisfaction and engagement, higher levels of productivity, increased innovation, and of course, a lower risk of legal claims regarding equal pay. World Economic Forum data also suggests a strong correlation between a company’s economic competitiveness and closing the gender pay gap.
The benefits spill-over into wider economic benefits too, with Research from the European Institute for Gender Equality revealing that additional women joining the labour force could lead to an increase in employment, with 6 million new roles created across Europe by 2050. It’s also believed that this could initiate a GDP increase of 5.5% by 2050.
Additionally, research shows that achieving gender equality in the workplace has a knock-on effect in other domains such as education and politics — two additional areas where we see females being unrepresented.
What changes can we expect going forward?
Going forward, there are reports that the government will also demand organisations to report on their ethnic minority pay gap, in addition to removing the 250 employee threshold to include all businesses.
How can we fix it?
The first step towards closing the gender pay gap is identifying it. It’s down to employers to determine whether or not a pay gap exists in their organisation, but to do this effectively they need the right tools.
Our recent Twitter poll of 1000 people aged 25-54 revealed that 38% are still unclear about their organisation’s gender pay gap reporting, with 21% of people saying their company struggled to file the mandatory report.
Manually analysing employee payroll data can be an extremely tedious process involving the management of multiple spreadsheets. Once a company has identified that they have a gender pay gap they will then have to spend additional time trying to aggregate this data to get a clearer picture about the nature of the gap.
An easier approach would be to utilise a gender pay gap reporting tool. This eliminates the need to spend months processing data, as it quickly provides a visual representation of the gender pay gap to help businesses understand what’s really going on within their organisation.
But simply knowing that you have a pay gap isn’t enough to instigate change – organisations need to know exactly what’s driving this. Gender pay gap reporting software enables companies to see salary distributions to pinpoint the key drivers which are influencing their pay gap. This gives them the power to understand how their pay gap fluctuates across different locations, departments and job roles, giving them the specific insights they need to reverse this.
Once companies are clear on why they have a pay gap, they can act with confidence, carrying out special initiatives to level out the playing field. A few that come to mind include introducing schemes that encourage women to apply for management positions, promoting flexible work and hosting internal campaigns around gender equality in the workplace.
Laura Timms is Product Strategy Manager at MHR Analytics and a keen Advocate for women in business. With a background in Psychology, Laura has managed research and strategy for business technology products for the past four years.
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