By early April next year, private-sector employers (and charities) with 250 or more employees must publish a snapshot of how much they pay male and female staff, what bonuses are paid and the proportion of men and women in each of their pay quartiles. Whilst 2018 may seem a little way off, companies must already be collecting data now to include in next year’s report. From Daniel Puckey, Senior Consultant, Willis Towers Watson.

They should also be thinking about a question commonly asked by HR professionals: ‘What do the figures mean to us as an organisation and what, if anything, should we be doing with them?’

The gaps revealed
Research by Willis Tower Watson shows that the mean gender pay gap across industries is around 23 percent in favour of men – which is broadly in line with the most recent figures from the Office of National Statistics. The research, based on April 2016 data for 67 firms, also highlights a mean bonus gap of around 51 percent – far in excess of the pay gap. In both pay and bonus data, there are significant differences across industries. For instance, the insurance industry tends to have some of the highest pay gaps with a mean of 30.5 percent, while gaps in the retail industry are towards the lower end with an overall mean of 13.5 percent.

A more detailed analysis, using the company-by-company figures, shows the breadth of outcomes in the data, which varies at the extremes from a 2 percent pay gap in favour of women to a 50 percent pay gap in favour of men.  Bonus gaps also vary significantly and can be impacted by company eligibility policies.  Our research shows that although there was very little difference in the proportion of men and women receiving bonuses (with a mean difference of less than 1.5 percent), companies’ bonus practices reflected the full range of options: from those paying bonuses to virtually all employees right through to those restricting to the top few percentage of earners. This range of outcomes emphasises the importance of companies providing a narrative around their gender pay gap figures (which is permitted in the new rules) to explain the reasons behind some gaps. For example, part-time and full-time workers all count as a single employee in the reporting. So, if a high proportion of women are working part-time and therefore receiving pro-rated bonus awards, there could be an apparent disparity in the distribution of bonus pay.

Preparation is happening, but there’s more to do
The research also shows that companies are generally better prepared in terms of gathering the data required for the new requirements than even a few months ago, helped in part by the publication of guidance from organisations such as ACAS.

But calculating means, medians and quartiles is just the start of it. Companies need to do far more than simply comply with the requirement to publish the necessary numbers. Given the potential of gender pay figures to impact (negatively or positively) recruitment, retention and internal and external reputation, there are two critical activities to think about now.

Understand the gap
First, businesses need to understand whether anything they do (or don’t do) is exacerbating the gender pay gap. This analysis needs to be panoramic, encompassing not just rewards, but recruitment, career progression, promotion and possible glass ceilings, and whether the way they organise work impedes women from progressing to higher pay quartiles.

A key question to answer is whether businesses face any risks relating to equal pay.  Gender pay gap reporting will highlight to employees differences in pay levels, and the publication of your figures may increase the likelihood of employees bringing an equal pay claim.  Understanding the differences in pay levels for men and women in equivalent roles will enable you to understand what risks you are running and help you to target resources where it can really make a difference. Pay governance may also be exacerbating the pay gap, whether that is inconsistent application of pay policies or other areas such as performance rating differentials between men and women, or differently applied pay increase and bonus payments.   Recruitment, promotion and starting pay can also influence your gender pay gap.  Understanding the numbers of men and women recruited and promoted and whether they are paid differently at the start of their career with the company, will help focus on broader recruitment and talent practices.

The relatively low proportion of women in the top pay quartile (38 percent on average in our survey) is likely to be a key driver of the gender pay gap; having a clearly articulated career framework for all staff will help you and your employees understand how careers progress in the organisation. It will also provide better insights into the senior management group talent pipeline; using this information and auditing your succession management approach could influence your gender pay gap figures in the longer term. Even those firms with a negligible or non-existent gender pay gap need to examine these processes, lest they find a gap opening up in subsequent years, or lest their ‘success’ in terms of gender pay parity was circumstantial or accidental, and therefore temporary. Having understood the reasons for any gap, firms can then develop an action plan for narrowing and closing it.

Talk about the gap
Gender pay is big news, and will become even bigger news over the next 12 months as businesses release their pay gap figures. Companies may hope to publish quietly and go unnoticed but, in our experience, this is unlikely. Current and potential employees, the media, customers and investors all have an interest and will potentially pick up any apparent issues with your figures. It’s therefore essential for businesses to demonstrate that their gender pay gap is not an equal pay issue and also to show that action is underway to deal with gaps and open up opportunities for women to populate upper pay quartiles. Good communication around gender pay reporting will integrate the story with a business’s broader approach to diversity, aspiration, strategy, and what type of employer and company it wants to be. This isn’t just a rewards story.

Be ready for the long haul
A good communications strategy should focus on the facts and the plan for addressing any concerns that arise through gender pay gap analysis. It shouldn’t dismiss less-than-ideal findings with rose-tinted assertions about a diversity-friendlier future. The point to remember here is that gender pay reporting is now an annual requirement – information on gender pay must be maintained online on employers’ websites for a minimum of three years, and future failures to close the gap will be readily spotted. Any plans and improvements sketched out in this year’s narrative have to be authentic.

The problem is, there’s an imbalance over timescales here. Any serious action plan by a major employer to close the gender pay gap is going to take more than 12 months to deliver tangible improvements. As ACAS points out, some measures will initially make the figures look worse: giving the example of a business that aims to remedy under-representation of women in Science, Technology, Engineering and Maths (STEM) roles by running an entry-level recruitment campaign that encourages women to apply. In the short-term, with more females on starting salaries, its gender pay gap could widen.

Another example would be part-time working. Schemes to encourage part-time working, as a way to keep parents and carers in the workforce, or to aid their re-entry into it, could also widen the bonus pay gap if most take-up of the scheme is by women. Hence the importance of the narrative, ensuring that practices seen as positive internally don’t turn into a negative story.This is why a communications plan is so important. Explaining the gap is the minimum organisations need to do in communication terms. Beyond that, they need to communicate their short, medium and long-term plans for closing the gap. Communications should be external as well as internal, targeting the business’s potential and future workforce as well as its current employees.  One thing’s that certain is that scrutiny of progress on gender pay gaps is going to be rigorous and sustained. No business should under-estimate the work involved to prepare, disclose and communicate, either this year or in future.