In October 2016 regulations come into force requiring organisations with over 250 employees to carry out an ‘Equal Pay Review’ and publish their findings on the gender pay gap. Are the senior leadership teams of these organisations really prepared for the impact the regulations will bring? How are organisations preparing for the new regulations? Are the regulations clear enough to allow this to be a positive experience for both employers and employees? At this Think Tank event we explored the positives and negatives of the Gender Pay Review. Below are the main conversation points.
These are the thoughts and takeaways from the latest Reward & Mobility Think Tank held on Thursday 9th June and hosted by Morgan Stanley’s Jarred Weese (Head of Compensation & Analytics). This Think Tank sought to discuss approaches to the ‘Gender Pay Review’.
The following summary has been prepared to reflect a segment of the discussion held amongst senior Reward professionals from leading national and international businesses. Specific company details, experiences and examples have been omitted from this summary as all discussions are held under ‘Chatham House Rules’.
How are organisations preparing today?
From the consensus of organisations present at our event it was clear that, for the moment, all communications about the publishing of the Gender Pay Review are being contained within HR. Typically this has taken the form of a working group which includes the Head of HR, Head of Talent, Head of Diversity and Head of Reward. This group of professionals have the difficult job of planning how to communicate the new regulations and the impact to the wider business and which stakeholders to involve at what time.
Given the nature of discussing employee pay and rewards, the utmost confidentiality is needed, and at this time most communications are typically kept confidential under legal privilege until the time comes to communicate to people outside of the HR working group.
As you would expect, this topic is at the forefront of most senior Reward professionals’ agenda, however the feeling is that the majority of most board level senior leadership teams are to some degree ‘burying their heads in the sand’.
To enable organisations to have the ability to improve their Gender Pay position before the publication of data comes into force, a draft run of the review is needed and the following should be part of the action plan moving forward:
- Engage Diversity & Recruitment teams to look at diversifying interview shortlists
- External and internal market data reports
- Locate anomalies and solutions
- Look at internal pay bandings
- Plan further Talent development initiatives
- Look at justifications for certain gaps
- Look at changes in job design across the business
- Evaluate training/coaching for managers before regulations come into force
What is the impact of the Pay Review?
The general view from Reward professionals is that when it comes to publishing gender pay data the implications for organisations are likely to have a harmful effect. The prospect of one piece of data being used is likely to be damaging without the full context and explanation to accompany the published figures. This then may lead to brand/reputational damage, being forced to disclose financial information, more difficulty in attracting talent and the possibility of employee equal pay claims.
Heads of Reward are experiencing considerable ambiguity when it comes to what should be included in the data which represents an individual’s pay and the population of the business that is eligible. For instance LTIP awards are normally associated with senior staff and with the majority of leadership teams being male throws up many problems. Other types of pay that need to be considered are:
- Fixed pay
- Variable pay
- Total Comp
- Car allowance
- Pension contribution
- Other cash elements
There needs to be further clarification on bonus elements when conducting a gender pay review, such as the difference between earned/paid bonuses, pro-rata bonuses, deferred bonuses, populations eligible for bonuses and the definition of a bonus which is related to works completed in the previous year.
When it comes to the point of data publication there are many things that can skew the numbers, which will be seen by the public and it’s incredibly important that information on how the figures were put together is available for everyone to se . A number of our members talked about their intention to publish over and above the requirements to offer total transparency and further context.
The variables which have a great impact on the data are:
- Maternity leave
- Not publishing historical data which shows the steps taken are moving the agenda in the right direction and the pay gap is getting smaller
- Female employees
- Under representation of senior female candidates
- In some circumstances, organisations who employ fewer women may do better in league tables due to having a smaller pay gap (in terms of volume) and less liability when it comes to equal pay claims.
- Job levelling – different areas of the business can be conducting different work yet doing the same level of job, but due to the demand for certain skill sets this can inflate the rewards/pay for such positions (such as Risk/Compliance). Market conditions and context around this should be explained further when releasing this data.
No one really knows the true impact, or the positive/negative outcomes the new regulations will have on organisations until it happens. The general consensus is that there is concern over the data being turned into industry league tables without the story behind it being told, which in turn will have a knock on effect for talent attraction and risks reputational damage.
To make sure the gender pay gap is something of the past we need to target the root of the problem and not just plug the gap with higher salaries. We must look to get past gender stereotypes and find a way of educating both men and women, from a young age, across all academic subjects to ensure that there is a 50/50 split of Talent (especially for senior leadership hires and beyond).
Is this a key topic for you? Be part of the discussion!
After such a positive Reward Think Tank on this topic, we are looking to host a follow up meeting in October once the legislation has been fully published. If you are a Head/Director of Reward and would value peer-to-peer discussion on this area then we would be delighted to hear from you and ensure you are on our limited number of guest spaces. Please register your interest by emailing: firstname.lastname@example.org