Sometimes, when I reach out to technology companies to find out what they’re doing to close their gender pay gap, they tell me “We don’t have a problem, we have an equal pay policy.” You can have an equal pay policy and still have a gender pay gap. The two are related, but they are not the same.
In this episode, we explore the difference between an equal pay policy and the gender pay gap so that you understand how your employer is offering equal pay and still have a gender pay gap. In order to close your gender pay gap, your organisation needs to think more broadly about how to attract, retain, engage, and develop more women through the talent pipeline.
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Addressing The Gender Pay Gap: Why Equal Pay Is Not The Only Solution
My name is Sherry Bevan and you are reading the blog Closing The Gender Pay Gap. In this episode, we are going to be looking at the difference between equal pay and the gender pay gap. Very often, what I find at the start of a relationship with a client is that they tell me, “We have an equal pay policy. We are okay. We don’t have a problem. We don’t have a gender pay gap because we apply equal pay for equal work.” That is brilliant and fantastic. I applaud you for having that equal pay policy in place. It’s certainly a foundation step to closing your gender pay gap. However, the fact that you have an equal pay policy does not mean that you don’t also have a gender pay gap because the two are quite different and measuring different things. That’s what we are going to explore. We are going to take a look and dive deeper into what we mean by equal pay. We are also going to explore what we mean by the gender pay gap and how the two are related.
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What Is Equal Pay?
Let’s get back then to equal pay and the gender pay gap. What’s the difference between the two and how do they relate to each other? Equal pay is the right for men and women to be paid the same by their employer for doing equal work. If you’ve got an equal pay policy, then that’s fantastic. It’s very much a foundation for closing that gender pay gap because you can have equal pay and have a gender pay gap. Barbara Castle was the Labour and Employment Minister who introduced the Equal Pay Bill back in 1970, though it didn’t come into force until 1975 on the same day as the Sex Discrimination Act.
Why tech companies need to understand the difference between equal pay and the gender pay gap
When we talk about equal pay, it applies to pay, salary, and all the other terms and conditions of employment including your pension, working hours, the annual leave allowance, holiday pay, overtime pay, redundancy pay, sick pay and performance-related pay. For example, if there’s a bonus in the employment contract as well as other benefits such as gym membership or a company car, equal pay is a legal obligation. The original Equal Pay Act came in 1970 but the Equal Pay Law is now covered by the Equality Act of 2010 and the Equality and Human Rights Commission’s Statutory Code of Practice on Equal Pay.
Let’s think about who has a right to equal pay, what that means, when might differences be allowed, and then how does that relate to the gender pay gap? Let’s start by thinking about who has a right to equal pay in the UK. In fact, it’s all employees, workers, apprentices and agency workers. It’s applicable regardless of, whether somebody works full-time, part-time if they are on a temporary or permanent contract. It also applies to self-employed people who had to personally do the work.
When we are looking at the equal pay law, equal work means like-work where the job and the skills are the same or similar but it can also apply to work rated as equivalent. That’s usually done using a fair job evaluation and it could be rated as equivalent because it’s the level of skill, the responsibility and the effort needed to do the work. We also have work of equal value so work that is not similar but it is of equal value and that might be because of the skill and training required, the responsibility or the demands of the working conditions. Two different jobs can be classed as equal work even if the roles themselves are completely different.
When are differences allowed? There are occasions when you might be allowed by law to pay somebody differently than someone of the opposite sex who does similar work. You can do this if that person is better qualified. If their skills are crucial to the job and they are hard to recruit. You can also do that. I pay them more depending on where they are located. For example, if your staff is based in London where the cost of living is higher, you might pay those staff more than you pay staff who perhaps based in Plymouth. You can also pay somebody differently if they do night shifts and the employer can prove that they can only cover those night shifts by paying staff more. Those are when the differences can be allowed for equal pay.
If you don’t do anything about gender pay gap, it’s likely that you’ve failed to attract the best talent out there.
There was a European Court ruling against Tesco. The female workers at Tesco who worked on the shop floor argued that they fail to receive equal pay for work of equal value when they compare themselves to the workers in a different location in the warehouses in the distribution centres, and this follows on from a ruling from the Supreme Court back in March 2021, that workers on the shop floor Aster could compare themselves with employees or workers in their work warehouses and distribution centres. You can see the people working on the shop floor are doing something quite different to the warehouses and distribution centres. However, it has been deemed that those two different jobs are of equal value and therefore, those workers should receive equal pay. That’s likely to be quite an expensive ruling for both Aster and Tesco.
The Gender Pay Gap
Let’s move on then and think about the gender pay gap. The gender pay gap relates to the shape of your workforce and the difference in average earnings between women and men. There are lots of reasons why you might have an equal pay policy and have a gender pay gap. For example, if you’ve got lots of women who are on predominantly lower grades or working in less well-paying parts of the business if women tend to leave before promotion, if you’ve got lots of men in the more senior roles or if a high number of your female workforce only work part-time, the gender pay gap in itself is not unlawful.
You must understand why you have a gender pay gap so that you can do something about it and you can protect your reputation as somebody else decides that you should be doing something about it. It’s not only your reputational damage that is at risk. If you don’t do anything about your gender pay gap or you don’t even understand, whether or not you have one and what the causes are, then it’s likely to be that you’ve failed to attract the best talent out there. You will find that your attrition rates are much higher than they ought to be. If you are producing diverse products and services for a diverse audience, then you should be having a diverse and inclusive team working on those products and services.
There are financial or business benefits as well. Companies in the top quarter for gender diversity are 15% more likely to outperform industry medians. A study by Morgan Stanley showed that when you have a better balance or more even balance of men and women in the workforce, those organizations delivered better returns and were less volatile. The more diverse your team, the better it is for profitability. When it comes to the technology sector, in particular, we know that around 78% of large organizations do have a gender pay gap. In fact, when we look at smaller businesses, their gender pay gap appears to be larger. There are lots of reasons for this. We know for a start that fewer women come into technology than into other sectors but there are other reasons that you might be having a gender pay gap as well.
Questions About The Gender Pay Gap You Should Be Asking Your Organization
Let’s explore some of the questions that you can ask yourself so you can start to understand your gender pay gap, why you have a gender pay gap, and therefore, what can you do about it? The first question to think about is, “Do people get stuck at certain levels?” You can do this by looking at your quarterly breakdowns. Look at the percentage of women versus men in the top quarter, in the upper-middle quarter, your bottom middle and your lower quarter. What we sometimes see in some organizations is that the split between men and women is pretty even in the bottom-middle and the lower quarter and it’s much more out of balance in that upper-middle and top quarter. Look at your quarters and breakdowns of talent, men versus women. Does it look like perhaps women are only getting to a certain stage in your organization and then quitting?
The next thing for you to look at is the gender imbalance in promotions. If you have several men and women in a certain grade or role, start by looking at the proportion of men versus women in that given grade or role. What would you expect to see is that when it comes to applying for promotion, the proportion of men and women applying matches the proportion of people in that grade and then you need to start looking at, “If I have 40% women and 60% men in that particular role, am I getting 40% women applying for promotion? Am I getting 40% women making it to the assessment stage and getting shortlisted and am I promoting 40% of women? Does the proportion of who gets to what stage match what you would expect? Is it relevant to the proportion actually working in that grade?” You can start to analyse and think about what it is because women aren’t applying for promotion or are it because they are not making it through?
You can have equal pay and have a gender pay gap.
The next question for you to think about is, “Are you more likely to recruit women into the lower-paid roles?” You would be looking at where people are coming into the organization and what roles they are being recruited into. Are you finding that your men and women are leaving at different rates, particularly looking at your more senior, higher-paid roles? Does the proportion of men and women leaving match or relate to the number of women at that grade? Are there particular aspects of your pay that differ by gender, for example, starting pay or bonuses? When it comes to starting salary, do you allow for negotiation at that starting stage? What we do know from all the research is that men tend to negotiate more often on their starting salary. Women do it less often, perhaps have less confidence about it but interestingly, if women do negotiate, they are often judged more harshly because it’s not what we are expecting of a typical female coming into a position.
The next thing to look at then is, do men and women receive different performance scores on average? You need to delve into your data, break it down by job and grade. Another thing to think about is, does it incorporate a self-assessment of performance and look at that separately? Again, what we know from the research is that men tend to overinflate their self-assessment scores and women tend to underrate themselves. They rate themselves lower than what their manager would rate them.
Another aspect to think about are your part-time employees or your remote workers. How do you actively support them to progress in their careers? Is it a well-known thing in your organization that if you are working part-time that you don’t get promoted? What about your remote workers? That perhaps is even more important to think about now that we are starting to see a more hybrid workplace in 2021 as we are coming out of lockdown.
The next thing to think about is, “Are you supporting both men and women to take on caring responsibilities?” This is where I would encourage you to look at the uptake of flexible working. What about shared parental leave or paternity leave? If you do an employee engagement survey, what do employees feel about taking up flexible working? Do they feel supported to do it? Do they feel supported if they work part-time? Are your staff even aware of what options are available?
The gender pay gap relates to the shape of your workforce and the difference in average earnings between women and men.
You may well have an equal pay policy but you might also have a gender pay gap for all of those different reasons that we have outlined. We know that 15% of people working in STEM in the UK are female and only 5% of leadership positions in STEM are female. The pay gap overall in the technology sector is around 19% and the bonus difference is around 41%, which is pretty big. We have looked at the difference STEM between equal pay and the gender pay gap and why you could have an equal pay policy but actually, you have a large gender pay gap. It’s not that the gender pay gap on its own is unlawful but it does make sense for you to be understanding why you have a gender pay gap so that you can do something about it.
Otherwise, you have and you also risk losing out on market share. We have looked then at the difference between equal pay and the gender pay gap. We have explored why having an equal pay policy on its own does not mean that you don’t also have a gender pay gap. It’s not that the gender pay gap is unlawful but it makes sense that you understand why you have a gender pay gap so that you can understand what’s causing it and do something about it. We know that organizations that invest in their female talent and close that gender pay gap will do better in the long-term. I will be back very soon with the next episode. I hope you have enjoyed this one. If you do want to send women to my Women in Technology Leadership Programme, please get in touch very quickly because doors close on 25th of June.
I will talk to you next time.
- European Court ruling against Tesco – Article
- Morgan Stanley – Why Gender Diversity May Lead to Better Returns of Investors
- Women in Technology Leadership Programme
About Sherry Bevan
A former Global Head of IT Service in a City law firm, my 25+ years’ leadership experience at firms such as Arthur Andersen (now Deloitte), Credit Suisse and McDermott Will & Emery gives me a first-hand understanding of the challenges faced by women in technology.
At the heart of what I do is creating clarity for women so that they get the confidence to lead in a way that amplifies their natural strengths and styles.
We all know that inclusion should be the norm and that inclusive organizations are more successful, more productive and more impactful. We feel the pressure to reduce the pay gap and improve pay transparency while maintaining company culture.
You can speed up the change by bringing in an experienced consultant, trainer and coach to help you close that gap.