2020 vision: Committee recommends that SME businesses publish annual gender pay gap data

Increasing the number of companies required to report, publish action plans and an explanatory narrative on what they are doing to close the gap, is one of the key recommendations set out in the Business, Energy and Industrial Strategy Committee’s latest Gender Pay Gap reporting paper.

Whilst it may seem unsurprising that ‘median pay across the economy is 18% in favour of men’ the statement highlights that the report reveals ‘some alarming truths’: gender pay gaps ‘of over 40% are not uncommon in some sectors, 78% of organisations reporting gender pay gaps in favour of men’. But the latest analysis is even more damning – ‘1,377 employers (13% of the research sample) have gender pay gaps in favour of men of over 30%’.

What is equally concerning is that evidence suggests the pay gap is even greater in SMEs with 50-250 employees, but currently reporting is only a requirement for organisations with 250+ workers (see source). Staggeringly the ‘current reporting requirements only apply to half of the UK workforce’, meaning that data on the remaining 50% is unaccounted for and is unchallenged.

As the UK’s gender pay gap is already deemed ‘one of the highest in Europe’, the report sets out to need for a ‘greater pool of organisations to publish a clear narrative, alongside their figures, to explain the reasoning for the gap, and an action plan for closing it’. The report continues that they must then report progress against this action plan annually –  currently there is no mandation to publish an action plan. Progress or otherwise can only be deduced from the stats.

‘Pay reporting can’t be the only first step in closing the gap’, emphasises the Committee statement on Parliament.uk. Holding an organisation accountable for their actions, and the progress made against the plan stated, is imperative to bring about real economic change.

Chair of the Business, Energy and Industrial Strategy Committee, Rachel Reeves MP, extends this view a step further remarking that ‘a persistent gender pay gap shows that companies are failing to harness fully the talents of half the population’. She continues: ‘the penalties of working part-time, both financial and in terms of career progression, are a major cause. Companies need to take a lead. For example, why aren’t they offering flexible working at senior levels? They must look at why they have a pay gap, and then determine the right initiatives, policies and practices to close it. Chief executives should have stretching targets in their Key Performance Indicators and be held to account for any failure to deliver. Our report recommends that the Government requires all organisations with over 50 employees to publish annual gender pay gap data from 2020’.

This 2020 vision does in part appear to have be borne out of holding the government to account. Reeves reminds us that the ‘Prime Minister spoke about the gender pay gap as a ‘burning injustice’ and of closing the gap for good within a generation, and it is now time for the Government and businesses to deliver on that ambition’.

But along with strongly recommending that the Government widens its net for the number of organisations required to report, it is clear that the guidance must improve with it. The back and forth on ‘how the remuneration of equity partners is included’ was not only onerous ahead of the first reporting date, but also confuses and blurs attempts to ‘understand the scale of gender pay gaps in businesses and the reasons behind it’. The report deems that the ‘Government was wrong to omit the remuneration of partners from the figures required in the Regulations’ and should therefore use improved guidelines to ‘clarify how data on partner pay should be calculated and included in time for the publication of data next year’.

Whilst excluding partner pay was one area where the legislative decision to reference pay for ‘workers’ skewed the figures, the guidance on what was to be classed as ‘ordinary pay’ was also open to misinterpretation, making comparisons between businesses hard to draw. The committee will be unaware that attempts to get the Government Equalities Office to work with employer stakeholders to improve guidance ahead of the launch fell on deaf ears. My distinct impression was that all that mattered was to rush in gender pay gap reporting to meet a manifesto commitment, rather than take the time to ensure this new obligation was meaningful and there were appropriate sanctions for non-compliance.

What I’d like to see is:

  • Mandatory narratives and action plans, with failure to meet agreed KPIs year on year having serious consequences. Currently the only sanctions available against organisations are for failing to report.
  • Improved guidance produced in collaboration with industry before any rollout to smaller organisations
  • Including Northern Ireland in this legislation; we may not have a functioning Assembly but that shouldn’t mean ¼ of the UK is not covered by any reporting obligation

It’s in the Government’s best interest to close the gap to grow the economy over the next generation. In the meantime, we wait for the government to respond with bated breath.