Pay gap reporting will help productivity

The UK’s transparency policy will create a virtuous circle, writes Kate Cooper

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To London, where the gender pay gap is big news. On 4 April, all UK companies, charities and public sector bodies with more than 250 employees had to submit their gender pay gap figures – the difference between the average earnings of their male and female staff.

Former deputy leader of the UK Labour Party, Harriet Harman, proposed the initiative when the centre-left party was last in power in the early 2000s. It met with considerable resistance from her cabinet colleagues – and even the equality sector. Resistance often comes from where we least expect it. Harman persisted, insisting that forcible transparency was vital to equality. Her clause remained in the legislation, which finally came into force this spring.

Initial analysis of the data reveals the stark disparity that more than three-quarters of UK companies pay men more, on average, than women. These findings are publicly available and, by being so easy to understand, provide organizations with clear targets for improvement and empower individuals. Women, particularly when job seeking, can consider what a large pay gap reveals about the culture of an organization.

Many companies rushed to justify their pay gaps. But the time and energy spent in defence contributes to maintaining the status quo. It also avoids the real issue, which is the “so what?” This question must be asked – and answered – if the gap is to be narrowed and, eventually, eliminated.

Irrespective of the moral argument for equal pay for equal work, research repeatedly shows that there is a clear business case for diversity (McKinsey 2015). Leaders must do all they can to facilitate this by creating equitable and inclusive recruitment, retention and reward policies.

A pleasing by-product of the legislation is the requirement for British companies to publish the average hourly rate for a job. Standardizing the hourly rate, irrespective of the person doing the job, helps to address many inequalities. Those involved with recruitment can take this opportunity to lose the legacy of a higher or lower salary that a new employee may bring with them – and pay for the job, not the person.

A recurrent theme in our own research is the great value people place on flexible working. This may mean hours spread differently across a week, but it might also mean fewer hours at work. Clear and transparent communication of equitable hourly rates will contribute to pay parity between part-time and full-time employees. A person working fewer hours per week should receive the same hourly rate as a full-time employee doing the same job. This parity is both rational and ethical because doing more hours does not guarantee better quality and should not attract a higher rate of pay. It might even be that the law of diminishing returns applies to those working more hours.

Whenever a supposedly disadvantaged group receives attention and, in this case, direct action, it invariably draws comment from those concerned with the interests of other less privileged groups. The demand for gender pay parity and establishing rates for the job, not the person doing it, should inevitably have a positive impact elsewhere.

Campaigners who highlight injustice experienced by one group – whether that is discrimination because of social class, ethnicity, religion, disability or sexual orientation – need not be wary that the current focus on gender will diminish their profile. It will enhance it. The right to equal reward is not only a woman’s right, but the right of all groups who are discriminated against and whose contribution and potential are not fully appreciated.

Gender may turn out to be merely the first of many ways in which we explore pay, and opportunity, disparities. Ultimately, though, it may be customers who force businesses to address pay gaps. When clients begin to discriminate on grounds of pay parity, businesses will undoubtedly work harder to close the gap. She who pays the piper, calls the tune.

— Kate Cooper is head of research, policy and standards at the Institute of Leadership & Management

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