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UK Gender Pay Gap reporting: time for a change?

How will the EU’s new Pay Transparency Directives impact UK Regulations?

The UK introduced the requirement for all organisations with 250 or more employees to calculate and publish their Gender Pay Gap annually from 2017. After six years of annual reporting, it is clear that progress in closing the Gender Pay Gap remains very slow.

Gender Pay Gap reporting

When the regulations were launched in 2017 there was a Government commitment to review their impact after five years and to amend them if necessary. Although the Gender Pay Gap issue is a complex one, and we should certainly not expect a quick fix, we are now well past the five-year milestone and there is little evidence of any meaningful review. And even if there were, it would be difficult to conclude anything other than the fact that the regulations are not having the desired impact given the rate of progress is so slow.

Gender Pay Gap vs Equal Pay

In looking at this topic, we need to remember that the Gender Pay Gap is not the same as ‘Equal Pay’. I have worked with organisations in conducting an equal pay audit and, in some cases, we have found they are paying consistently or even paying women slightly more on an equal pay basis i.e., when looking at pay for employees in the same role or work rated at ‘equal value’.

However, when calculating their Gender Pay Gap using the UK regulatory methodology, the same employer finds they have a significant (15%+) Gender Pay Gap in favour of men. Further analysis shows that this discrepancy is driven by the overall workforce demographic and having male-dominated leadership teams. In these cases, pay differentiation is not the issue at all; it is instead related more to female retention and progression to the most senior levels in the business.

I have also seen the reverse situation where organisations know that they have a clear issue in how they pay their men and women but who then emerge with a near zero gender pay gap as their workforce contains a disproportionate number of low paid males, which reduces the average salary figure for men.

These results are not uncommon and highlight the difference between ‘Equal Pay’ and the ‘Gender Pay Gap’. They also open the debate on whether the current UK Gender Pay Gap focused regulations are really fit for purpose as a stand-alone requirement. The regulations have shone a spotlight on the issue meaning that organisations are giving greater consideration to the subject than ever before, which is clearly positive.

However, are those regulations helping to drive change? And are we even clear on which issue we are trying to address?

EU Pay Transparency Directives

The EU has reached its own conclusions on this subject, deciding that it needs to enforce the Equal Pay concept more widely. As a result, they are introducing a new suite of requirements under the Pay Transparency Directive. The EU Directive came into effect in the summer of 2023, and it has given EU member states a maximum of three years to write the requirements into their national laws (i.e., by early June 2026 at the very latest). This will create the most comprehensive set of pay transparency regulations in the world.

The nature of the new regulations shows that the EU has moved its thinking forward and, while they still want to measure and address any gender pay gaps, they have put this in the wider context of other requirements designed to help enforce the concept of ‘Equal Pay for work of Equal Value’.

UK Regulations

The UK is obviously not going to be covered by an EU Directive, but it is already clear that the EU regulations will lead to significant change in the UK employment market as employers bring EU-compliant approaches to the UK.

Maybe this will encourage the UK to recognise the constraints and issues of its current, one-dimensional approach. Could this lead us to take a more holistic stance with the concept of ‘equal pay for work of equal value’ at its heart and with more focus on addressing issues of the ‘Glass Ceiling’?

Time will tell, of course, but with the current UK regulations having had little impact over the last six years, perhaps there is some truth in the saying that ‘it is insanity to keep doing the same thing over and over, expecting different results!’

Would you like to know more?

If you have any questions about the above and how you can best manage this issue for your business, please get in touch with your usual Blick Rothenberg contact or Stuart Hyland using the details on this page.

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Stuart Hyland
Stuart Hyland
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