‘Companies sceptical about nature and impact of proposed gender pay gap reporting regulations’ – Mercer

Businesses are sceptical about the impact the new gender pay gap reporting requirements will have, according to a study by Mercer. Its 114-company survey found that although 74% of firms agree with the principle of gender pay gap reporting, over half (52%) are either unsure or think the current proposals will make little or no difference to the gender pay gap. Furthermore, only half deem the government’s definition of pay as fit for purpose.

Chris Charman, Principal in Mercer’s Talent business, said:

‘The unclear way that pay* is defined in the proposed regulations is not appreciated by businesses as it is not only differs from existing equal pay legislation, but is quite alien to how companies actually manage and define pay, bonus, shift pay and other reward programmes.’

What are companies doing?

The research suggests most companies have undertaken some ‘gender pay gap related activity’. The most prevalent initiatives include:

• analysing the gender pay gap – 54%
• creating a diversity and inclusion strategy – 54%

Much less common initiatives were:

• setting goals for female inclusion – 22%
• analysing labour flow and promotion rates by gender – 27%

But Mercer’s research shows that few have investigated the potential drivers behind any pay gaps. Among those that have done some analysis:

• looked at pay differentials by grade or level – 36%
• looked into whether there’s a gender pay gap on their promotion increases –22%
• looked at bonus awards – 9%
• done any post-maternity analysis – 3%

Future prospects

• Over half (51%) of companies expect the new mandatory reporting to be ‘difficult’ or ‘very difficult’.
• But 75% feel they are ‘ready’ or ‘somewhat ready’ for it.
• Of those that expressed an opinion 65% expect their organisation to perform well against the UK norm, and 84% expect to perform well against their UK peers.

Charman said:

‘Most of the analysis and activity done by companies to date, and what they plan to do in the future, will not equip them to properly understand nor to address the gender pay gap in their organisation. Despite this most still think they will perform well. This disconnect is worrying and might cause some unpleasant surprises for organisations. More broadly, the goal of closing the gender pay gap in a generation appears a distant prospect.’

‘Gender Pay Gap Reporting Survey’, Mercer, June 2016. Responses were received from 114 organisations, of which 55% are listed and include 40% of the FTSE30, representing a market capitalisation of more than £550 billion. For more information, please visit: www.uk.mercer.com/our-thinking/gender-pay-gap-reporting.html

Background – Mercer summary

The draft regulations were released by the government on 12 February 2016 and will be mandatory for employers with at least 250 employees based in the UK; this reflects section 78 of the 2010 Equalities Act. They include requirements to report on overall mean and median gender pay gaps, number of men and women in each quartile of their overall pay distribution, the difference between the mean bonus payments paid to men and women in the 12 month period up to the end of each April as well as the proportion of male and female employees who receive bonuses during the year.

Final regulations are due shortly with the legislation expected to be enacted 1 October 2016. Organisations will have to display the results of their analysis prominently on their web site for three years.

* ‘Pay’ is defined as: including basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay [this includes short- and long-term incentives] and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances). It does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.