Laws forcing employers to reveal the gender pay gap in their workforce, which come into force on Thursday, could do more to reduce the earnings gulf between men and women than four decades of equality legislation, according to employment experts.
Thousands of employers will begin to record their gender pay gap figures for the first time and will have to publish their first figures before April next year.
The rules – which will be enforced by the Equality and Human Rights Commission – require companies who employ more than 250 people to provide data about their pay gap, the proportion of male and female employees in different pay bands, their gender bonus gap, and a breakdown of how many women and men get a bonus. The legislation will affect around 9,000 companies, who collectively employing more than 15 million people.
The changes could have a significant impact on the UK’s gender pay gap, said Sarah Henchoz, employment partner at law firm Allen & Overy. “The gender pay gap reporting provisions are likely to do more for pay parity in five years than equal pay legislation has done in 45 years,” she said.
The government hopes that by shining an unforgiving light on pay disparities, companies will be forced to take measures to eliminate gender pay gaps, which it argues could add £150bn to annual GDP by 2025.
A 2015 report from McKinsey & Company, Why Diversity Matters, revealed that the best companies for gender diversity were 15% more likely to have better financial results than their competitors. Additional research from the consultancy revealed that without concerted action, the UK’s gender pay gap would not close until 2069.
“Although administratively complex, this regime is good news for equality and gender diversity, which means it is good news for the bottom line,” said Henchoz. “Research has established a link between greater financial performance and diversity, particularly within the senior leadership team.”
But new research suggests many UK employers are unprepared for the change, with fewer than half saying they have sufficient salary information. A survey of 145 employers by Totaljobs revealed that 82% were not reviewing their gender equality and equal pay policies in light of the new legislation, while 58% did not have complete salary information across roles and gender. More than a third were failing to review salaries to guard against gender discrimination.
The research, during which 4,700 employees were interviewed, found that men were more likely to receive a bonus, and that these bonuses were likely to be larger. In the past year, 43% of male respondents had received a bonus, averaging £2,059, compared with 38% of women, who received an average of £1,128. While 58% of men felt both genders received equal pay, only 44% of women believed they were equally paid.
The government says the new rules will help employers identify their weaknesses and take steps to tackle them. “Helping women to reach their full potential isn’t only the right thing to do – it makes good economic sense and is good for British business,” said the minister for women and equalities, Justine Greening. “I am proud that the UK is championing gender equality and now those employers that are leading the way will clearly stand out with these requirements.”
But the Women’s Equality party warned that the rules alone would not eliminate the pay gap, which the government puts at 18.1%, and the party puts closer to 19%. With fears that figures could be easy to manipulate, the party is calling for companies to be forced to break down data by age, ethnicity and disability as well as gender. According to a recent report by the Fawcett Society, the overall pay gap for Pakistani and Bangladeshi employees was 26%, while black African women working full time were earning only 80.4% as much as their white male counterparts.
“We know that the pay gap between disabled women and non-disabled women is 22%,” said Walker. “Tackling the complexity of the gender pay gap means going much further than the government’s current proposals and businesses should be leading the way.”