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This year’s results were poor: across 45% of firms the discrepancy in pay increased in favour of men, while at a further 7% there was no change at all.  Overall, the median pay gap in favour of men lowered slightly from 9.7% last year to 9.6% this year; however most newspapers seized on the fact that in almost half of all firms, the discrepancy had increased.

A third of private and voluntary organisations also failed to provide a link to a gender pay gap report on the Government’s website. Although publishing a report is not mandatory, failing to do so sends a message to employees and stakeholders that this is a ‘tick box’ exercise and not a key priority that is tied to the future success of the company. Businesses that want to move from compliance to leadership should be open to sharing the reasons for any pay gaps and communicating the action they are taking to close them.

There are many initiatives companies can take to redress a structural imbalance, such as tackling unconscious bias through training, offering more flexible working and encouraging the uptake of shared parental leave. Some companies will have implemented changes to bring more women through their recruitment pipeline, but, ironically, if you recruit higher numbers of women at junior levels in order to progress them through the company, the data will show a gender pay gap getting bigger before it gets smaller. In some cases, this could explain why gaps have widened. It could take five years or even a decade before we see substantial change when these initiatives begin to bear fruit.

Reputational risk
All of these factors represent a reputational risk for companies. Some businesses compound the problem by turning the spotlight onto their already poor performance. Although Ryanair’s gap had improved by 9.6% – comparatively good for the airline sector – Ryanair boss Michael O’Leary drew negative headlines when he referred to “nonsensical” pay reports as “meaningless rubbish”. Companies who do not adequately explain their gap also run the risk of being named and shamed by MPs, keen to shine a light on laggards.

The Government has hinted at the possibility of legislating to force companies to change. In response to an urgent question on the topic, Minister of Women Victoria Atkins said that: “If we do not think that employers are making enough progress, we will act.”

Perhaps most important of all is the challenge of internal communications. A large gap within a company could foster resentment, damaging morale and employee retention. In the short term it is important to be open and transparent with employees about where you need to improve and what action you are taking.

Communicating a positive story
In amongst the negative headlines, some companies stand out for their huge progress. Among the most impressive improvements was challenger bank Monzo, where in 2017 women were paid 48% less than men in the company, but in 2018 this gap had decreased to 14% while the bank grew from 300 employees to 700. Monzo attributed its success to making internal bias training for interviewers and managers part of the induction process and collecting comprehensive employee data, while acknowledging that “we need to continue to improve”.

Mars decreased its gender pay gap from 2.5% to 0.1%, displaying its leadership in working to tackle the gap. Mars used its reporting data from the previous year to inform its strategy and attributed progress to the company’s ‘inclusion first’ approach.

With a move towards increased reporting requirements of all kinds, from racial diversity to energy consumption, companies will face increasing pressure to communicate and justify their data, not only to the media, public and political stakeholders but above all, to their employees. In five years’ time, companies will not be able to get away with having a stubbornly large gender pay gap. They will be expected to demonstrate progress – and the only way to make that progress is to put a plan in place now.

If you would like more information on how your business can improve its gender pay gap, communicate the actions you are taking to be a responsible business and move from compliance to leadership, please email Responsible Business Director Alice Wood on alice.wood@lexcomm.co.uk

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