Spotlight on regulations, part 3 – the Gender Pay Gap

The World Economic Forum has stated that at the current rate, the gender wage gap is unlikely to be closed for 170 years. 
 
What are the key statistics?
In April 2017, the UK – where the gender pay gap was 18.1% in 2016 – became one of the first countries to compel disclosure on the gender wage gap in an effort to eliminate pay disparity between genders. The regulations, developed between the Government Equalities Office and ACAS, will oblige companies with over 250 employees to publish wage gap figures, on their public website and a government portal.

There has been an underwhelming response to the gender pay gap regulations: so far only 85 out of 9000 companies have disclosed the gender pay gap.

According to The Financial Times, less than half of UK companies believe that new disclosure requirements will solve the pay gap issue.

What are the implications if we just pay lip service instead of taking it seriously?

Sending the wrong message
Businesses who comply half-heartedly, choose not to comply in a timely fashion, or present a wider than average gender pay imbalance, without explanation, will be implying that wage equality and inclusion are unimportant within the organisation. It would be difficult for a business to, in the annual report, claim the that equality is valued, where gender pay gap disclosure reflects the exact opposite. The narrative must be consistent with pay gap figures, or there must be an explanation of what is being done to improve them.
 
Disengaged employees
Organisations which have not taken control of the conversation around gender pay are likely to alienate employees. Members of staff who read the disclosures may be demotivated by large pay gaps, negatively affecting engagement levels. Companies with higher employee engagement tend to have much stronger long-term growth.  

A negative reputation
A reluctance to comply may cause reputational damage as it implies reluctance to correct a corporate ill.

What can we do to encourage better reporting in this area?
– Companies must build measures into their business story, discuss why this gap exists and how it is being addressed. Transparency is key.

– Rather than being seen as an obligation, a company should view extra disclosure as a way of measuring how successful they are in creating and promoting equality. To do this, companies must actively seek to link wage equality to purpose and business strategy.

– Avoid short-term fixes. Creation of KPIs that encourage companies to rectify the gender pay issues, over a period of time, offer a chance to mitigate reputational damage that may result as well as offering long-term significant change. Immediately raising the wage of female staff is a step in the right direction. However, more representation will ensure that females are able to access the higher paid, more senior positions going forward.

Turning risk into opportunity
Luminous believes that using the most recent disclosures to further your business story is the most effective way of mitigating pay gap risks and creating sustainable long-term value.

In our view, the significant number of companies slow to publish figures are missing out on the comparative advantage that comes from early adoption.

 
To see more, take a look at an article published in CorpComms magazine earlier this year that Stephen Butler, our Investor Engagement Director took part in: ‘Addressing the gender pay gap’
 
 
 

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Stephen Butler

As Investor Engagement Director, Stephen leads a team which provides strategic, best practice and compliance advice to clients across narrative reporting, digital, investor events, sustainability and integrated reporting.