But new law may not affect the underlying causes of salary inequality
The government recently confirmed plans to introduce legislation requiring companies with 250 employees or more to publish equal pay audits. Commenting on ONS statistics showing that on average a woman earns 80p for every £1 earned by a man, Prime Minister David Cameron said he hoped these audits will create greater transparency in an employer's pay practices. The theory is that this will embarrass companies into increasing women’s pay and closing the gender pay gap.
Guaranteeing equal pay for work of equal value to men and women has been the law since the Equal Pay Act 1970. So why has closing the gender pay gap proved such a hard nut to crack and will the proposed reforms make any difference? The solution appears fiendishly complex, a point reflected in the government consultation document (PDF) on the new proposals. The consultation, which closes on 6 September, asks what level of gender pay information should be required, how frequently it should be published and how long businesses should be given to prepare for the new changes. The proposal is that new legislation will be made in 2016 but will not come into force until later so as to give businesses time to prepare for implementation.
One concern employers are likely to have about greater pay transparency is that the publication of crude averages is likely to be misleading or confusing. Businesses will need to get better at collecting and reporting on pay differences between men and women, which may require expensive and time consuming changes to administrative processes and IT systems. Publishing contextual information alongside gender pay information to avoid misleading impressions is likely to become an important part of an employer’s public relations strategy.
The business risks of an employer having to undertake and disclose the results of an equal pay audit could be significant and may persuade more employers to settle equal pay claims rather than defend them in a tribunal. There is the risk of further litigation, disruption and cost, as well as possible reputational damage. Employers concerned about the equality of their pay systems may want to carry out an internal audit so they can take remedial steps prior to being required by law to put their gender pay equality information in to the public domain.
Gender pay reporting is unlikely to eliminate the gender pay gap on its own. The underlying root cause goes beyond conscious or unconscious bias in pay practices and lies partly with gender and cultural stereotypes for men and women. Children in primary schools will talk about “men’s work” and “women’s work”, and women are still only a small proportion of undergraduates in engineering, mathematics and computer science.
The publication of gender pay information will also not address women experiencing a negative effect on their wages through previously working part-time or because they have taken time out to care for children or other family members. Shared parental leave and pay provides greater incentives for men and women to share the responsibility of caring for their family and, over time, published gender pay information may show a reduction in the gap as these new rights are taken up. Better transparency should lead to greater understanding of pay differences and could, in turn, lead to better solutions to improve equality.
Pulina Whitaker is a partner and Lee Harding an associate at the London office of Morgan Lewis.
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