People Advisory Services Gender pay gap reporting tight for time March 2018
Contents Introduction 01 Insights into emerging market practice 02 Timing of reporting 02 What do employers tell us about their expected gender pay gap? 03 What do we see from the reports that have already been published? 04 Quality and structure of reports 05 Actions to address the pay gap 06 Conclusions 08 How we can help 09 3 Gender pay gap reporting tight for time
Introduction As the deadline for publishing Gender Pay Gap reports required under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (the Regulations ) fast approaches 1, we expect that gender pay gap disclosures will continue to be subject to considerable scrutiny by the shareholders, the media and other stakeholders. We also expect to see a reasonable number of late or incorrect filings with consequential (and inevitable) bad publicity. It is a legal requirement for all employers that meet the criteria of the Regulations to publish their gender pay gap report. The Equality and Human Rights Commission (EHRC) has the power to enforce any failure to comply with the Regulations. While there is some debate around whether the EHRC actually has the resources to take action, the real risks of non or partial compliance are reputational damage and negative employment relations. This begs the question, what is best practice for this new area of disclosure and how can an employer show that it is discharging its responsibilities to the optimum level? Although a number of employers are yet to publish their information, we now have a growing picture of emerging practice through research and regular conversations with our clients across a variety of sectors. In this paper, we summarise our key observations on best in class gender pay gap reporting together with the main findings from our analysis of gender pay gap reports published on the Government website 2. 1 The first statutory disclosures required by the Regulations will have to be publically reported on the company website as well as on a designated Government website no later than 4 April 2018. For more details on the Regulations and what information needs to be reported, refer to Gender Pay Gap Reporting guidance at www.gov.uk and Managing gender pay reporting guidelines issued by the Government Equalities Office and ACAS (March 2017). 2 Analysis based on reports published as at 9 February 2018. 1
Insights into emerging market practice Timing of reporting As at the beginning of February, only around 12% of employers affected by the Regulations had published their reports, seventeen of which were in the FTSE100. We have worked with a number of employers who decided to publish early. There are a variety of reasons why this may have been the case. Examples range from employers seeking to show their credentials by publishing early, to having experienced stakeholder pressure regarding gender pay transparency, or wanting to take a leading position on gender parity and seeking recognition for this at a time when there was little competition for airtime on the subject. Most employers, however, are expected to publish their results in the final few weeks before the 4 April deadline and they have multiple reasons for doing so. Again, by way of example, reasons include: Challenges in gathering the data and interpreting the regulations Wanting to get it right and using the time available to test and re check results Concerns about falling outside the pack among sector peers Fears about negative publicity The need for consistency of internal and external messaging, requiring extra work Wanting to publish the disclosures as part of the annual cycle of remuneration reporting A desire by management to be confident that the gender pay gap identified does not amount to a breach of equal pay law 2 Gender pay gap reporting tight for time
What do employers tell us about their expected gender pay gap? We expect that most companies will have quite a significant gap. Results from an EY survey 3, as shown in Figure 1 below, indicate that in most organisations the gender pay gap will fall between 0% and 40%, with most employers also feeling that they could be missing opportunities to make the most of their work in the area. Figure 1: Results from EY Survey conducted on 20 September 2017 during gender pay gap webcast with 200 attendees What is your actual or estimated gender pay gap? The gap Percentage of respondents 0 20% 30% 21 40% 38% 41% + 5% Don t know 27% Where are you on the Gender Pay Gap maturity curve? Leveraging the opportunity fully 16% Meeting the requirements but may be missing opportunities 56% Possibly not addressing the risks 28% Many companies will see their gender pay gap results as a wake-up call which means that the most interesting question arising from the calculations and published results will be: What are you going to do about your published gender pay gap? Transparency is an important step, but the focus moving forward will be on visible action to reduce a gender pay gap. 3 EY Survey 20 September 2017 during gender pay webcast with 200 attendees. Gender pay gap reporting tight for time 3
What do we see from the reports that have already been published? We have conducted an analysis of gender pay gap reports published on the Government website 4. We started by breaking down reported figures and reviewing the data by sector. We then looked in more detail at selected reports and we assessed their quality and structure. Finally, we focused on the narrative in each report and identified the most common actions that companies plan to take in order to address their gender pay gap. Sector analysis 5 We present median and mean gender pay gap figures broken down by sectors 6 in Figure 2 below. While it is still too early to comment on any trends for different sectors, it is a useful point of reference to observe initial results and, as more employers publish their reports, to see if and how these results change. Figure 2: Median and mean gender pay and bonus gap Sector No of companies Median hourly pay gap Mean hourly pay gap Median bonus gap Mean bonus gap Accommodation and food services 39 6% 10% 9% 13% Administration and business services 35 5% 7% -2% 9% Arts leisure and entertainment 19 2% 7% 20% 32% Charity, social and care work 119 3% 5% 0% -7% Construction 15 19% 17% -44% -1% Education 99 22% 15% -3% -2% Energy 40 22% 18% 34% 29% Facilities management 16 1% 1% 11% 9% Financial Services 28 23% 24% 30% 50% Human health 19 6% 10% 6% 6% Manufacturing and engineering 120 9% 11% 13% 24% Professional Services 29 21% 20% 29% 40% Public sector 99 8% 9% -6% 5% Real estate 16 15% 22% 28% 48% Retail, wholesale and distribution 74 7% 13% 19% 39% Technology and science 42 14% 15% -20% 32% Transportation and storage 19 8% 12% 10% 31% Utilities and waste management 13 8% 6% 14% 1% Other 28 6% 12% -15% 4% 4 Analysis based on information reported at https://gender-pay-gap.service.gov.uk as at 9 February 2018. Our review of data indicates that some of the figures may not have been calculated correctly, nonetheless, for the purpose of the analysis reported figures have been taken at face value. 5 Analysis of gender pay gap information as reported by 877 employers at https://gender-pay-gap.service.gov.uk as at 9 February 2018. 6 The median/mean figures for each sector or group of sectors presented in Figure 2 above represent the average of all median/mean figures (as reported on the website) for employers in this sector. 4 Gender pay gap reporting tight for time
Quality and structure of reports While the majority of disclosures are still due to be published, our analysis of selected reports 7 indicates that they tend to fall into one of the following categories: Minimalist approach: a description used for companies that published regulatory figures via the Government website, with no link to their website detailing pay gap figures, nor a written statement confirming their accuracy (as mandated by the Regulations). Our analysis indicated that: 25% were not longer than 1 page. 34% of employers failed to provide a link to a gender pay gap report on their website. 16% did not provide any narrative for their data. Moderate approach: to include companies that published regulatory figures via the Government website, they provided a link to their website detailing pay gap figures and a written statement confirming their accuracy. Some companies provided some context for their numbers but they did not provide a detailed accompanying statement with actions they planned to take. Our analysis showed that: 84% of employers provided some narrative for their data and 50% included some type of infographic to make information more accessible for the reader. Nevertheless, 45% of employers failed to explain what actions they planned to take in order to address their gender pay gap. Heavily invested approach (best in class): this final group of companies published regulatory figures via the Government website together with a detailed accompanying statement which outlined how the gender pay gap initiative aligned with their corporate vision, the perceived underlying causes of any gaps and actions / targets that they have set to move the needle. Our analysis showed that: 35% of reports included a narrative with infographics and identified actions to address the issue. The average length of these reports was closer to 4 pages. While the length of a report is a crude measure for analysing the extent to which companies are producing comprehensive reports, it can be an indicator of the depth and accessibility of the information. Figure 3: Gender pay gap report signatory HR Director or other senior HR role Other Director CEO The majority of reports were signed by a CEO or a Director role and 29% were signed by a HR Director or another senior HR role. 15% 25% 29% 7 Analysis of gender pay gap information as reported by 877 employers at https://gender-pay-gap.service.gov.uk and analysis of selected reports for 575 employers, as at 9 February 2018. Gender pay gap reporting tight for time 5
Actions to address the pay gap We identified the most common actions that employers plan to adopt in order to address their gender pay gap. These were focused around three key areas: Flexible/family-friendly working for example making it available to those in senior roles, encouraging more men to work flexibly and supporting women returning to work. Review and enhancement of recruitment practices to attract a wider talent pool for example profile raising activities, targets to shortlist at least X number of women for senior roles. Supporting women with further career development through mentoring and a variety of development programmes. Career support Explore how to attract broader talent pool/profile raising Enhance recruitment processes Flexible/familyfriendly working Most common actions to address the gender pay gap Training Apprenticeships Review of HR/reward processes Data analysis Senior person or working group responsible Succession planning Recruitment shortlist targets for senior roles Target setting Support return to work Role models 6 Gender pay gap reporting tight for time
Gender pay gap reporting tight for time 7
Conclusions While it will take some time for a consistent market standard to emerge, we already see different approaches to gender pay gap reporting. These range from a minimalistic approach focused on basic compliance to more elaborate examples of best in class disclosures that articulate a business case for diversity and an action plan to address the issue. We encourage all employers to follow the heavily invested approach as a benchmark and to view gender pay gap reporting as much more than just a compliance exercise. Calculating your gender pay gap is just the first step to a greater change. It is an opportunity to improve diversity across your organisation to create a powerful narrative that enhances your reputation and raises your attractiveness to a diverse pool of talented employees. 8
How we can help EY can advise you on all aspects of your gender pay gap reporting and action planning. Assisting in understanding the Regulations and providing assurance for your methodology, calculations and the narrative. Supporting you to respond to identified gaps, providing diagnostics and talent strategies to identify the root cause and action plans to readdress the balance. If you would like to discuss the topic further, please do not hesitate to get in touch with: David Ellis Partner E: dellis@uk.ey.com T: + 44 20 7980 0163 Rupal Patel Partner E: rpatel15@uk.ey.com T: + 44 20 7951 0658 Shaun Scantlebury Director E: sscantlebury@uk.ey.com T: + 44 20 7951 1115 Gender pay gap reporting tight for time 9
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