Driven by the government’s new ‘Closing the Gender Pay Gap’ consultation, equality in gender pay has found itself on the HR agenda of many organisations for 2016. Whilst there has always been sporadic interest in pay equality, the government’s announcement and the subsequent media coverage has certainly put the spotlight on gender pay.

The latest ONS Annual Survey of Hours and Earnings highlights that whilst differences in pay between men and women are moving in the right direction, a gap still exists; according to the survey, the gap currently stands at 9.4 per cent. The government’s focus on compulsory gender pay reporting is designed to enforce increased transparency when it comes to the differences which exist between males and females. Recent data suggests only 1% of businesses publish pay gap data externally. 

Employers with over 250 employees will be required to publish information about the pay and bonuses of their male and female employees. Businesses will be required to first measure any baseline gaps in April 2017 and then again in April 2018. With figures reported on the latter date. Pay and bonuses are to be measured and calculated separately. Data from bonuses is likely to cause the biggest gaps as these are often individually awarded rather than companywide. 

Building a business case

Employers have expressed their natural concern about their obligations and the potential risks of publishing this information.  It is not thought that the Gender Pay Reporting legislation will be too onerous for employers to comply with; the problem lies with explaining and addressing any gaps which do exist.

To help businesses understand the importance of addressing the equal pay issue, we’ve listed the ways in which closing the gap will improve your businesses future and the future of your employees too.

Equal pay legislation has tightened in recent years

As legislation has tightened, the financial risks of an employee making an equal pay claim have increased. The costs associated with bad practice far outweigh the costs of implementing good practice. Employment tribunals are time-consuming and costly. An increase in legal challenges (Birmingham City Council was required to pay out £757 million in equal pay claims!) and the rising cost of awards where complaints are upheld (statistics from the Ministry of Justice put the average sex discrimination award at £14,336 for 2013-2014), means that ignoring equality is expensive and potentially detrimental to both the bottom line and the reputation of your organisation.

Enhancing your reputation

As noted complaints and legal challenges are damaging to your reputation. Positively embracing equality enables an organisation to be viewed favourably by communities, customers, both existing and new employees and suppliers.

Improved employee engagement

Staff are more likely to perform well, feel motivated and committed and therefore retained, if they feel valued and respected in their working environment. An organisation is more likely to attract people from a wider pool of talent if it is explicit in its commitment to demonstrating equality.

Improved business activity – it makes business sense

People are also more likely to use the services provided by an organisation if they are known for treating their staff fairly. Public bodies are increasingly awarding contracts to private companies and third sector organisations to deliver public services. Their procurement teams will more than likely require good equality practices in the organisation they commission. By excelling in their equality practices, third sector providers can have a better chance of securing such contracts.

Employers therefore have a choice. Wait until the new legislation comes into force and then decide how to proceed, or be pro-active and conduct an equal pay audit now to ascertain whether they have an issue and what may be driving it.

The dangers of ignoring equal pay are – potentially significant financial damage from tribunals, disclosure of sensitive data, adverse impact on employee engagement and therefore retention, and most importantly the reputational damage and negative PR for employers who are exposed as unequal payers.

The issue is clearly moving higher up employer’s agendas, with an increasing number wanting to be pro-active on the issue. Whatever the government’s final guidelines, what appears clear is that this issue will not go away for employers.

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