A league of their own: interpreting gender pay results
The clock keeps ticking down to 4th April, and yet the 537 companies who have published their results remain very much in the minority. When so many surely have their results ready to go by now, it begs the question: why are we waiting?
From speaking with clients, it seems part of the reason businesses are hanging back is because they are worried about employees past, present and future comparing them unfavourably to their competitors. They worry that the gov.uk site will act as a kind of league table, making it easy to name and shame companies with poor results.
Let’s bust a few myths
The key point here is that the gov.uk site is not a league table. Why? First, because it does not compare or rank results. Instead, it functions mainly as a database that can be filtered by sector to show the required data.
Second, there is no sensible way to compare ‘apples with apples.’ Third, as the Financial Times recently pointed out, some of the results were just not plausible and consequently a handful of companies have re-published results – however, there will be more subtle inaccuracies that won’t be picked up.
What’s clear from the existing reports is that correctly interpreting gender pay figures is no mean feat. Outside observers may well draw their own conclusions about the results, but it’s a pointless exercise unless you understand the following:
- The reporting entity: Based on the legal entities, some companies will only be reporting on a subsection of their overall business or a number of separate business entities. For example, a UK legal firm couldn’t compare themselves to a global equivalent, who is only required to report on a subsection of their business.
- Ratio of women to men: The disproportionate ratio of males to females in some sectors is well known; for example, construction or engineering. However, unless you know for certain whether the females’ and males’ distribution is the same within all the pay band quartiles or if they only have to report on a small section (as above), it is hard to say with certainty.
- Top-heavy distribution: While many companies’ pay gap is a result of the unequal distribution of males to females within their organisation (for example, males are more prevalent within the top pay bands) you cannot know this for certain from their gender pay report.
It’s also very important to point out that the gender pay gap calculation differs significantly to the bonus gender pay gap one, meaning that it doesn’t always give a fair reflection of a company’s situation, and is therefore open to misinterpretation.
Gender pay gap
Clients ask us all the time about what to include and how to calculate the hourly pay.
Experience has shown that more complicated reward arrangements can favour one gender over another. For example, where an employee works variable hours and has variable pay (could include productivity bonuses, allowances, etc) it is necessary to calculate their average hours over a 12-week reference period. If they received higher pay than usual during the relevant pay period (due to productivity bonuses, allowances etc), this could inflate the hourly rate calculated for gender pay gap reporting.
A way round that could be to report by averaging both pay and working hours over a 12-week reference period, or by dividing pay received in the relevant pay period by hours worked in that period. Using the most accurate approach, rather than the most favourable, will show you where the gender pay gap really exists.
I think that this reporting requirement needs some refining, because the current format masks rather than clarifies the issue of the bonus gender pay gap.
The gender pay gap calculation looks at a snapshot of employees within the relevant pay period, but the bonus gender pay gap calculation is based on the preceding 12 months. This means there is a mismatch of reporting dates and it doesn’t take account of employee movements, such as maternity or paternity leave, promotions, leavers and new joiners. There is a clear misalignment and therefore it’s hard to draw a firm conclusion.
- It also raises the question of what is considered a bonus. For some companies, particularly charities who pay no bonus at all, items such as long service awards will fall under the bonus category and will have to be reported on under the bonus pay gap.
- Another consideration is events that have happened in the period, that can make the gap look extreme, or events that have yet to happen (a merger, for example) that can make the gap look bigger than expected. An awareness of the actual company structure is helpful for context here, as well as having insight into what type of bonuses are due to be paid out and who is likely to get them.
Clearly, there’s a lot to consider when evaluating gender pay results, and neither is it the kind of job you can accomplish with your mind on lunch.
If you’ve yet to report, don’t be scared. Being clear about your numbers, understanding the nuances in how these are calculated and understanding the causes, will at the very least provide you and your company with confidence around your submitted data. Creating a narrative that will be published on your company’s website as well as the gov.uk website, provides further context and insight for those who might be interested – including any current or prospective employees.
Sarah Lardner is client director at Innecto Reward Consulting.
This article was supplied by Innecto Reward Consulting.
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