Better corporate reporting to put brighter spotlight on gender pay gap, says NAFP

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Better corporate reporting on the gender pay gap will provide an insight into whether companies are making full use of the talent available to them

The National Association of Pension Funds (NAPF) has today published its submission to the Government’s consultation on closing the gender pay gap.

The consultation seeks views on the Government’s manifesto commitment to require larger employers to publish gender pay information. The regulations would cover private and voluntary sector employers in England, Scotland and Wales with at least 250 employees.

The consultation also seeks views on wider action that can be taken to inspire girls and young women, modernise workplaces and support older working women.

In its submission, the NAPF warmly welcomes the consultation and highlights that the specific issue of the gender pay gap was addressed in its discussion paper ‘Where’s the workforce in corporate reporting?’.

The NAPF are eager to draw attention to the currently very limited reporting by companies on how they manage their workforce and the consequences of this lack of transparency for long-term investors (such as pension funds). They believe that a clearer line of sight is needed into how a company’s workforce is composed, nurtured and motivated and subsequently how stable and productive it is in order to inform judgements on the sustainability of the operation.

It is believed that better corporate reporting on the gender pay gap will provide an insight into whether companies are making full use of the talent available to them. A significant gender pay gap may for example be a driver of high turnover or poor morale and thus be of concern to long-term investors. It is commonly accepted that closing the gender pay gap would undoubtedly be of benefit to investors and to society as a whole.

“We applaud the companies that have already chosen to be more transparent when reporting about the gender pay gap in their firm,” said Joanne Segars, chief executive of the NAPF. “Disappointingly, these companies are in the minority and many firms still fail to provide any meaningful data on this issue – and so fail to assure investors and customers alike that this topic is being taken seriously.

“Our considered view is that while we encourage the Government to introduce new requirements for companies to report on the gender pay gap, this should form part of a drive to improve the quality of corporate reporting on the wider issue of the workforce, or human capital. This will prevent the gender pay gap being seen out of context and bring much greater scrutiny to an area which is fundamental to the long-term success of UK companies.”

Following the news that many businesses will soon be required by law to publish gender pay data, HR leaders and employment lawyers are already considering how their organisations must adapt and ensure compliance.

Law firm Burges Salmon has published a list of preparatory steps for employers to help identify areas of potential risk and is urging those businesses with 250 employees or more to start auditing their current pay structures well in advance of the obligation to publish gender pay data, to ensure they identify any potential issues in time to address them. Without doing so, publication of these statistics could pave the way for equal pay claims from employees.

Details of how the new gender pay gap regulations will be designed, including how data will need to be presented, will be determined following the Government consultation period, which is due to end later this month. Regulations are likely to be in effect in March 2016.

According to Burges Salmon, here are the next steps employers should follow:

  1. Review your current pay structures and grading systems to identify any areas which might require closer review or audit
  2. Think about how you will manage any risks associated with conducting a more detailed review or audit, including the use of legal privilege
  3. Explore any apparent gender pay disparities revealed and the reasons for them
  4. Devise a strategy for dealing with any potential areas of concern
  5. Develop an employee communication strategy

Adrian Martin, partner at Burges Salmon, said: “Despite the pay gap between men and women shrinking in recent years, there is still a considerable amount of work to be done to tackle pay inequalities.

“Many organisations will have pay structures in place which might result in disparities in pay between groups of male and female workers because many of the reasons for the gender pay gap are, at least in part, attributable to historic and systemic inequalities in the economy and society as a whole.

“If businesses can put steps in place to audit their pay structures and rectify any issues they come across, they will be at an advantage when the time comes to publish their salary data.”

Statistics from the Office for National Statistics (ONS) suggest that whilst the gender pay gap in the UK is reducing, it still persists in most sectors of the economy. On average, women working full-time earn 9.4 percent less than men in comparable jobs. The disparity rises to over 15 percent for managers, directors and senior professionals and reaches 25 percent in skilled trade occupations. When part-time employees are included the difference is 19.1 percent across the whole workforce.

Once the new regulations are in effect, failure to publish gender pay date will be a criminal offence, attracting a fine of up to £5,000. In addition, Burges Salmon is encouraging organisations to consider the reputational and employee relations risks associated with any failure to comply.

Adrian continues: “As employees learn more about the gender pay gap and the work being done to mitigate the risk of inequalities in the workplace, they will undoubtedly have questions about their own organisations’ structures and processes. It is imperative that businesses have a solid communications strategy in place to deal with employee reactions and manage relationships within the workforce.”

A full copy of the NAPF’s submission to the Government’s consultation can be found on the NAPF website here, along with a copy of the NAPF’s discussion paper ‘Where is the workforce in corporate reporting?’.

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