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Mind the Gap - Does the pay divide still exist?

Steve Coomber

Boosting the female talent pipeline

Despite being over a decade into the 21st Century, and it’s sadly still common knowledge that women still trail behind men when it comes to places in the boardroom. But are they level with their peers in terms of financial remuneration? Steve Coomber asks if the pay divide still exists – and what companies are doing to address it

At a meeting of the London Trades Council in September 1874, Mr King, a member of the London Consolidated Bookbinders Union, proposed a motion in support of the recently founded Women's Trade Union League, noting that women's low wages were both demoralising and immoral. A discussion among the delegates – all male – ensued, followed by agreement to postpone any decision on the motion until the next meeting. As 1874 slipped into 1875 the women of the Women's Trade Union League were still waiting for that vote of support. Nearly 140 years later, and women in the UK are still waiting for pay parity with men.

It may be the 21st Century, but with some employment issues it seems as if we are stuck in the Dark Ages. Despite equality legislation the gender pay gap – the relative difference in the average gross hourly earnings of women and men within the economy as a whole – remains stubbornly persistent. Office for National Statistics data puts the overall gender pay gap at 19.7%, (9.6%, excluding part-time work). UK data compiled by the Fawcett Society reported a full-time gender pay gap in 2011 of up to 55% in the finance sector and up to 33.3% in the City of London. Costly equal pay settlements make frequent headline news. 

Women's struggle for equal pay has a long history in the UK. In 1883, of 17,430 workers in 110 manufacturing companies, a woman's average weekly wage was 41% of her male counterpart. In 1888, after outmanoeuvring an attempt to refuse her admission, women's rights campaigner Clementina Black proposed to the annual Trades Union Congress, "That in trades where women do the same work as men they shall receive the same wages." 

During the First World War the War Cabinet agreed to equal pay in some areas – munitions and transport workers – but not in others, such as clerical and administrative work. Despite seven million women working in industry for the war effort between 1943 and 1945, the wage gap remained. Women in electrical engineering earned 45s per week on average, men earned 105 shillings.

In 1955, the civil service introduced gender pay parity, phased in over a seven year period. Other public sector employers followed. The private sector dragged its heels, though. In 1961, when the full effect of equal pay in the public sector took effect, the national hourly average wage for men was £14 2s 1d, but £7 5s for women.

Finally, following a strike for equal pay by sewing machinists at Ford's Dagenham plant in 1968, the Equal Pay Act 1970 was introduced, coming into force in 1975.

Complex legal framework

Now set out in the Equality Act 2010, the law on equal pay in the UK is complex. It is also inadequate, in the view of many campaigners, focusing primarily on punishing transgressions rather than promoting good practice.

"The legislation is narrow in its focus,” says solicitor Jemima Coleman, chair of the Employment Lawyers Association sub-committee that responded to the House of Commons Select Committee inquiry: Women in the Workplace earlier in 2013, and an employment law specialist at Herbert Smith Freehills LLP. “It looks at whether a man and woman are paid equally for doing the same job, something of equal value, or something rated as equivalent. Essentially, in those situations the law says that there is an implied clause in your contract that a woman will be paid the same as a man," says 

When the law was introduced in the 1970s, women could only make an equal pay claim if they were doing the same work, or work rated as equivalent under a job evaluation scheme, to a man used as a point of comparison – the comparator. 
A decade after the Act came into force, women's average hourly pay was only 73% that of men's. In many jobs traditionally undertaken by women, the lack of a male comparator excluded them from any right to equal pay. In 1984, however, an 'equal pay for work of equal value' amendment was included, allowing comparisons between men and women doing different jobs, where experts deemed the work of "equal value".

Succeeding with an equal pay claim is not easy. Employment Tribunal statistics for 2011/12 show that of 23,800 equal pay claims dealt with by the tribunal, only 32 were successful at the hearing. 

Employers can offer various defences. "If you are starting a claim the first thing you have to do is establish a comparator," says Charles Pigott, a professional support lawyer and employment specialist at law firm Mills & Reeve. "One possible defence an employer will have is that you can't choose a particular comparator for a particular reason – they're not working for the same employer or same establishment, for example. Or you have not stipulated the comparator precisely enough. A lot of claims get knocked out on the basis that there isn't a viable comparator."
Potential claimants must establish that the work is of equal value. For a number of reasons, including the shortage of experts, the procedural and legal complexities and pressure on tribunal time, these cases often take many years to resolve. Take the series of equal value claims brought on behalf of a number of speech therapists against their employer in the NHS in 1986, supported by the Manufacturing, Science and Finance (MSF) union. Fought through the European Courts, it took over a decade to achieve a resolution in the women's favour.
There is also a material factor defence if employers can show a good reason, other than sex discrimination, for a differential in pay. "It could be, for example, because of regional differences in pay," says Pigott. "It could be, if you are looking at high level jobs, that there was a particular non-discriminatory reason why that comparator was recruited to a higher salary. For example, if there was some scarcity element to the job which meant that they could only recruit by offering an additional salary".

Equal pay, best practice 

Rather than wait for equal pay claims to force an evaluation of reward systems, organisations can be proactive. The current UK government favours a voluntary approach to adopting equal pay best practice. This is clear from its Think, Act, Report initiative to increase awareness of gender inequality in the workplace, and from the reluctance to introduce mandatory provisions such as s.78 of the Equality Act 2010, bringing in compulsory gender pay gap reporting for companies with 250 employees or more employees. But if organisations fail to act, the government's stance may change.

Fortunately, there's no shortage of advice on offer. Sheila Wild was the lead on equal pay at the Equal Opportunities Commission and the EHRC. She led on three codes of practices, was the coordinator and report writer for the equal pay task force, commissioned the development of equal pay audits and disseminated guidance on them, before leaving for consultancy and a career change in 2011. 
"Have a structured pay system. Think about how you are going to evaluate different jobs. Then do an equal pay audit. That is the ideal," she says.

As Wild notes, many organisations don't have a pay structure, small organisations that have grown quickly, for example, or companies in certain sectors such as financial services. But without a structure it is much harder to keep tabs on potential pay discrimination.
Job evaluation is equally important. "This is an area where successive governments have missed the point; they have gone for the outcome rather than the underpinning. Equal pay legislation actually begins with assessing the size and relative worth of jobs, and most policy initiatives skip over that bit," says Wild.

The equal pay audit is the gold standard tool for diagnosing equal pay problems. "It might sound obvious, but how many employers actually sit down and ask how much they pay their employees and why they are paid that amount. If you want to think about the best way to reward staff and attract the right people, and make sure you're not at risk of any equal pay challenges, the equal pay audit is a good start," says Laura Hutchison at the EHRC. The EHRC suggests a five step approach (see box).
There are challenges around conducting an equal pay audit, though. It may inadvertently penalise employers that want to get equal pay right, observes Wild. If they actively look for discrimination and find it, they risk equal pay claims. That's why some organisations lobbied, albeit unsuccessfully, for legislation allowing organisations a limited time to fix pay practices that contravened equal pay laws.
Another issue is expectations. "Say that you are doing an equal pay audit and two things happen: all the women think they're going to get a pay rise; all the men think their pay is going to go down. Neither of which is true," says Wild. "So it's managing expectations, and that requires good communication."

Chris Charman, a director of the UK rewards practice at professional services firm Towers Watson, suggests that tackling equal pay issues is often best framed in the context of creating a well designed reward system. "The business case for all managers is to say 'are our rewards systems and processes working the way that we want them to?' If they are, the organisation would not expect to find gender bias, but be spending its money on performance and potential, recognising the market skills of different people, and having good reasons why the rewards system works in the way it does."

A comprehensive approach is needed, initially based around understanding how pay works in an organisation, so people can identify right variables to analyse. Elements of the rewards system that are examined, says Charman, include: base pay comparisons, focusing on people doing the same kind of work; bonus payments, and how this works-out for part-time workers, for example; starting salaries, to see if that is one of the root causes of subsequent pay disparity; access to overtime; and promotion prospects - are they similar for men and women, what do people get when they get promoted?

Ideally the process creates a well-structured, equitable, non-discriminatory rewards system that boosts productivity and talent retention and acquisition. While, at the same time, providing the organisation with evidence to justify pay decisions and pay gaps. 
Transparency is particularly important in the quest for pay parity. It is easy for organisations to be opaque about pay systems. The government is set to withdraw the formal Equal Pay Questionnaire, which allows employees to question employers about pay practices, in favour of an informal solution. And while s77 of the Equality Act makes pay secrecy clauses unenforceable in certain circumstances, the Employment Lawyers Association noted that, "Despite the law, many employers retain such clauses in the hope that they will operate as a deterrent to frank discussions about pay."

So organisations can be much more transparent about reward systems. "Be clear to staff why people are paid the way that they are," says Hutchison. "So there are clear reasons explaining what makes up people’s pay, why they get it, and that there are non-discriminatory reasons for those rates of pay." That might involve detailing the grading structure, for example, or outlining the basis on which performance bonuses are paid.

The Fawcett Society suggest reporting on a range of metrics, including pay measures such as the overall gender pay gap, full-time gender pay gap for men and women’s starting salaries.

The broader issues

Of course the issue of the national gender pay gap extends way beyond individual organisations or industry sectors. 

As Coleman observes, "There are other factors such as under representation of women in some of the most lucrative professions – for example, the finance sector and engineering are dominated by men. There is also the impact of motherhood on women's careers, so the fact that a woman takes maternity leave and may return on a part-time basis will impact on her pay. There is a lot less high paid quality part-time than full-time work, and women are about three times more likely to be working part-time. Also you have the underrepresentation of women at senior levels in varying degrees across many sectors within society. These are huge contributing factors to the gender pay gap overall."
This is where both government and the private sector must play a role. For example, that may be through initiatives designed to increase the number of women in senior roles, change attitudes around the value of part-time work and the roles and abilities of women in the workplace, reduce occupational segregation, or increase the availability flexible working and non-standard working arrangements.
In 2009, an EHRC position paper estimated that without corrective action it would take another 20 years to achieve gender pay parity. For many people that's 20 years too long. But, by proactively adopting best practice on equal pay and publicising their actions, organisations public and private, can move that date a little nearer, and make a significant contribution to closing the gender pay gap for good.


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