House of Commons - Women in Workplace - Business, Innovation and Skills Committee

Women in Workplace - Business, Innovation and Skills Committee Contents

3 Equality legislation and equal pay

There is a need to change the culture around what is appropriate pay for men and women. In order to change culture, it is important to position the pursuit of equal pay above the political, economic or business objectives and identify equal pay as a core objective for business, as opposed to a mere add-on. [The Fawcett Society][73]

Gender pay gap

50. The quote above is from the Fawcett Society's written evidence, and emphasises the issue of equal pay. The Equal Pay Act of 1970 was introduced to tackle the lack of equality in the terms and conditions of employment as between men and women. According to the Office for National Statistics, the gender pay gap is defined as the difference between men's and women's earnings, as a percentage of men's earnings, based on median gross hourly earnings (excluding overtime) for full-time employees.[74] The Employment Lawyers Association warned that "care must be taken when vast quantities of complex data are reduced to a single figure purporting to represent the definitive 'gender pay gap'". However, it concluded that "the statistics clearly highlight that a significant gender pay gap continues to exist in the UK".[75] The Employers Network for Equality and Inclusion described the gender pay gap as "stubbornly persistent, given that the Equal Pay Act was introduced in 1970".[76]

51. The Office for National Statistics' Annual Survey of Hours and Earnings 2012 demonstrated that there remains a significant disparity between the salaries of men and women; the gender pay gap is currently at 9.6% (down from 10.5% in 2011).[77] The Employment Lawyers Association wrote that "the available data varies significantly depending on the methodology used and whether it is adjusted to take account of the number of women working part-time, the age group, relevant section or region".[78] For example, the headline figure of 9.6% conceals variations across different sectors, such as the fact that the gender pay gap for construction professionals is just over 17%.[79] There are also variations between different areas of the country. As Fair Play South West commented:

The trend is for the pay gap to be lower in areas of low GDP, where wages are low for both women and men, and higher in the relatively high GDP areas where it is clear that women do not benefit in pay terms from the better performing economy.[80]

52. Jemima Coleman, from the Employment Lawyers Association, confirmed this variation, and told us that the Office of National Statistics' figures show a 20% pay gap in the East of England and the South East.[81] She also highlighted the effect of including part-time workers:

Men are equally affected by the disparity between part-time work and full-time work. There is something like a 37.5% differential between all part-time workers of both genders and full-time workers. It particularly hits women because they are about three times more likely to be working part-time.[82]

53. We received specific examples of pay differentials between men and women. For example, Directors UK wrote that the Televisual Annual Pay Survey's report on average salary for male respondents in the television sector in 2011 was £56,000 compared with £49,000 for women.[83] Also, evidence highlighted the fact that women in the private sector are more disadvantaged than those in the public sector. The Fawcett Society wrote "the comparable (full time) pay gap figures stand at 13.2% in the public sector, versus 20.4% in the private sector. [...] Thus as women move to work in the private sector, women's pay will decrease and the pay gap may widen".[84]

54. According to the Fawcett Society, the gender pay gap not only discriminates again women, but also contributes to the country's lower productivity:

A levelling up of women's earnings has the potential to bring gains to the Exchequer not only in increased revenue from tax and national insurance, but also through a reduction in the payment of benefits and tax credits. It is possible to infer from national statistics that an average woman working full-time until retirement age would lose £361,000 in gross earnings over the course of her working life. Closing the gender pay gap would improve the financial wellbeing not only of women but also of their partners and children, and would reduce the likelihood of women's poverty in retirement.[85]

Eddie Gray, from the Women's Business Council, spoke of the loss of women to the workforce in economic terms: "Part of the reason I said yes to being a part of the Council was its focus on the economic potential and the idea that there was lost opportunity for the country here. [The Report will be] structured to identify from the evidence base those critical stages of a woman's life when we are either losing significant opportunities and the potential to contribute to economic growth or we are losing it from the system completely".[86] Indeed, the Equalities Minister, the Rt Hon Maria Miller MP, stated: "Every single person in this country has a part to play in making this country an economic success. We need to make sure that we are allowing everybody to fulfil their potential in the workplace".[87] In order to address this, the Fawcett Society recommended:

A root and branch review of equal pay law to ensure that it operates in the interests of women and employers. The current legal framework is ineffective, does not deliver equal pay and is wasteful of public resources".[88]

THINK, ACT, REPORT INITIATIVE

55. The Employment Lawyers Association told us that "the law alone cannot be a panacea for gender imbalance across sectors nor achieve absolute parity of pay between the sexes".[89] Instead, highlighting best employment practice, which results in economic benefits and equality between employees, is a powerful way of encouraging change. In September 2011, the Government launched the Think, Act, Report (TAR) initiative, the aim of which was to raise the profile of the issue of gender equality in the workplace.[90] To date, over 100 organisations have signed up to the initiative. Lord Davies' follow-up Report on Women on Boards, extolled the virtues of the initiative:

This joint government-business initiative provides a simple framework to help companies think about gender equality in the workforce. It asks them to report, monitor and take action where needed on key issues including recruitment, retention, promotion, and pay. [...] It is flexible and business-led—businesses choose what measures are right for them, what to report and where.

To date over 80 major companies, with over one million employees combined have signed up and are actively supporting the initiative, including BT, Tesco, IBM, Fujitsu, M&S, GlazoSmithKline, Morgan Stanley, National Grid, Ernst and Young, Eversheds, McDonalds, BAE Systems and BP.[91]

However, awareness of the initiative appears to be patchy. The Institute of Physics wrote:

The Government should do more to encourage more science-based companies to specifically become involved in Think, Act, Report and such schemes could be extended to smaller companies.[92]

Fiona Woolf, from the Business Women's Council, believed that greater use of the data would help awareness:

The challenge is not just around whether it is mandatory or not. The challenge for the Government Equalities Office is what they do with the information: whether they report it and communicate it and begin to use the organisations that are out there—who would be very happy to partner with them—to embed the message that this is good practice for the new business-normal environment they are in and, more importantly, the new war for talent that they have.[93]

56. It is possible that businesses which embrace the programme are likely to be confident about their employment practices and use the programme as a promotion of their good practice. In response to this view, Ruby McGregor-Smith, Chair of the Business Women's Council told us that, although voluntary, the scheme should not be underestimated:

I do not think you have to have everything made mandatory to ensure you get businesses to sign up to it. Business will absolutely do the right thing around things that present them as a better business. [...] If the bigger business adopt it, the smaller business who want to be bigger businesses one day will aspire to want to adopt that, too.[94]

57. Eddie Gray, from the Women's Business Council, argued that a greater level of commitment from the Government was necessary:

I think it is very interesting when you talk to senior people in business. You talk to chief executives who have strong interactions with Government. They would tend to report back that the issue of gender equality is here for a day as a message, it disappears again and then it comes back and goes away. We need a consistency and a drive from the Government level that says, 'This is important; we have expectations over time and we are expecting all parts of the business community to work to make this happen.[95]

58. Published examples of equal pay best practice in the private sector would provide evidence that equal pay is good not only for individuals, but for business. We welcome the Government's Think, Act, Report initiative to improve transparency on gender equality in the workplace. We urge the Government, through the Government Equalities Office, to promote the initiative more widely, and to use the evidence to prove that good employment practice is good for business.

59. The gender pay gap is stubbornly persistent. It is unacceptable that women are still systematically paid less than men, over 40 years since the Equal Pay Act was passed. We recommend a review of the Think, Act, Report initiative in the Autumn of 2013, two years after its establishment, including statistical analysis of pay differentials, to determine whether it is helping to effect change.

Equal Pay Audits

60. The Equal Pay Act 1970 aimed "to prevent discrimination, as regards terms and conditions of employment between men and women" and the Sex Discrimination Act 1975 aimed "to render unlawful certain kinds of sex discrimination".[96] The Equality Act 2010 was introduced to replace existing anti-discrimination laws with a single Act.

Section 78(1) of the Equality Act 2010 provides that:

Regulations may require employers to publish information relating to the pay of employees for the purpose of showing whether, by reference to factors of such description as is prescribed, there are differences in the pay of male and female employees.[97]

61. The process of gathering and publishing such information is generally described as an 'equal pay audit'. Baroness Prosser, from the Equality and Human Rights Commission, told us that "equal pay audits lead to transparency, and that of itself is a very good thing".[98] However, the Government has not yet introduced regulations under section 78 of the Equality Act 2010, requiring employers to undertake equal pay audits. The Fawcett Society told us:

Implementing, in full, existing legislation such as the Equality Act 2010 that encourages workplaces to undertake and publish gender pay audits, change attitudes, challenge stereotypes and cultures that sustain unequal pay practices. This would help dispel the myth that women deserve to be both paid less and valued less than men.[99]

62. Jo Swinson, Parliamentary Under-Secretary of State for Women and Equalities, Department for Business, Innovation and Skills, told us that the Government's intention was to empower employment tribunals to require employers to carry out an equal pay audit where they have found evidence of discrimination.[100] However, if the Government is serious about changing the treatment of women in the workplace, it must support a requirement that larger private sector employers (those with more than 250 employees) undertake and publish equal pay audits. When asked whether there should be a duty for private-sector organisations to carry out equal pay audits, Fiona Woolf, from the Business Women's Council, said, "Absolutely. I think equal pay audits are important". She supported her view with some examples:

I was involved in an equal pay audit, which was done by a new chief executive, somewhat to the surprise of the organisation. They said, 'Well, we do not think there is anything that we will find.' Of course, guess what? The result was indeed that there were some gender pay gaps that were quite startling. I then become President of the Law Society and we looked at the equal pay of the legal profession as an issue and discovered that, after lots of corrections for different types of work and different regions of the country, we still had a 7.9% pay gap in the legal profession, which was outrageous when you thought about the profession it was. As you might imagine, I am quite a fan of it.[101]

63. We welcome the Government's proposal to give tribunals the power to require an employer to undertake an equal pay audit when discrimination has been proved. However, there is existing legislation addressing inequality in pay that has not yet been implemented. The Government should introduce regulations under Section 78 of the Equality Act 2010, to require large private sector employers to undertake and publish equal pay audits. That data could then be used to highlight where pay gaps exist.

64. Larger organisations will already have that information to hand, so this requirement is not a burdensome task for employers. It would also highlight anomalies and therefore protect employers from potential employment law cases. With the introduction of regulations under Section 78 of the Equality Act should come clear guidance from the Equalities and Human Rights Commission (EHRC) on how to conduct an adequate equal pay audit, and how that work can lead to constructive changes within an organisation to the benefit of both employees and employers.

65. The Equality and Human Rights Commission (EHRC) should make public those businesses that are non-compliant under Section 78 of the Equality Act 2010 , as well that those examples of equal pay best practice in the private sector, to show that equal pay is good for business.

Public Sector Equality Duty (PSED)

66. The Public Sector Equality Duty (PSED), set out in Section 149 of the Equality Act 2010, came into force in April 2011. It requires that public bodies (and businesses that carry out public functions) have 'due regard' to the need to achieve certain equality objectives, namely: the elimination of 'discrimination', including inequality in pay; the advancement of 'equality of opportunity'; and the fostering of 'good relations between' men and women.[102] The PSED requires that public bodies consider all groups when making decisions, introducing policies, and continuing practices, when delivering services and when acting as employers. Sarah Jackson, from Working Families, argued that the PSED could be applied "very practically to enable an organisation to look at its practice, understand the gap between policy and reality and then take steps to make changes that will have an impact on women's ability to enter the workforce".[103]

67. In supplementary evidence, the Government highlighted the fact that the EHRC enforces the PSED, and that "it has unique powers to issue compliance notices to public bodies which have failed to comply with the Equality Duty and can also bring judicial reviews and intervene in court proceedings".[104] The EHRC was intending to produce a statutory Code of Practice on implementation of the PSED, but has been prevented from doing so because, according to the EHRC's website:

The Government feels that further statutory guidance may place too much of a burden on public bodies. Although the Commission has powers to issue codes, it cannot do so without the approval of the Secretary of State, as we are reliant upon government to lay codes before parliament, in order for them to be statutory.[105]

The TUC wrote about this development:

This has further deprived public authorities, public service users, and employees of detailed and authoritative statutory guidance on what is required to comply with the general duty. [...] This downgrading of the code of practice also creates the impression that the equality duty need not be taken as seriously as before.[106]

68. Evidence submitted to us suggested that the PSED and the specific duties enacted under the Equality Act 2010, for the purpose of enabling the better performance by public bodies of the PSED[107], are not being met. The Employers Network for Equality and Inclusion stated that:

The EHRC has published a [...] report in which it examines how public authorities have met their transparency obligations on equality. The report reveals that only half of the public authorities assessed were responding fully to the requirements of the specific duty regulations to publish equality information such as the diversity of their staff and people who use their services.[108]

Sheila Wild, an equalities consultant, also highlighted the positive impact of monitoring:

One of the reasons why local authorities did so well is that they were monitored. They were monitoring themselves and they were being monitored by the Equal Opportunities Commission. I do not know whether they are still monitoring themselves; I do know they are no longer being monitored as effectively by the Equality and Human Rights Commission as they were by the Equal Opportunities Commission.[109]

Brona Reeves, from the Employment Lawyers Association, was equally concerned about the lack of statistics or analysis on the impact of the PSED.[110]

69. The Government has committed itself to reviewing the Public Sector Equality Duty. In May 2012, the Home Secretary announced a review of the PSED, as part of the outcome of the Red Tape Challenge spotlight on equalities.[111] It is expected to report in the summer of 2013, a year after the start of the review. Jo Swinson told us that:

If we do not review it, it is very difficult to say whether it has or has not worked. That is the purpose of reviewing it. We are very committed to the principle. We want to make sure that the mechanism for delivering that principle is the right one. Undertaking the review will help us understand how well the Public Sector Equality Duty is indeed working in practice. It fits in with the Government's wider approach to legislation and policy, where, as a matter of course, regulation or rules will be reviewed on a regular basis. I think that is a healthy way to do government, so that you can take stock of progress and see what is working well and what needs to be improved.[112]

However, Ruby McGregor-Smith, Chair of the Women's Business Council—set up and funded by the Government—told us that she was "quite impressed with the Public Sector Equality Duty".[113]

70. The Public Sector Equality Duty (PSED) is a useful tool to ensure that public bodies take steps to secure parity in pay, and in other terms and conditions of employment. The Government is nearing the end of a year-long review of the Public Sector Equality Duty—even though it was only introduced in 2011—in the interests of removing unnecessary burden on businesses and organisations. We do not believe that the Public Sector Equality Duty is an unnecessary burden on employers, but is a vital tool for the collation of evidence and for ensuring that steps are taken with the aim of achieving parity. The Government should send a clear message that the PSED is valued. We urge the Government to retain the PSED in its current form, unless a full analysis of its compliance by public bodies has been carried out by the EHRC, and the results of that analysis point towards the need for change. Published statistical analysis should be at the heart of that review.

71. The Equality and Human Rights Commission needs to improve its performance in relation to the monitoring and assessment of compliance of the Public Sector Equality Duty. It should use its powers to issue compliance notices to those public bodies that have failed to comply with the PSED. The Government should give a clear statement of support for the EHRC in exercising these duties.

Equality Impact Assessments

72. Equality Impact Assessments are used to assess the impact of the decisions, policies and practices of organisations on certain protected groups, including women. Sarah Veale, from the TUC, told us about the benefits of equality impact assessments:

Once you have got into the hang of them they are quick and quite easy to do. You reap huge benefits from them. A lot of businesses have done them, including small ones, and have said 'Actually, having done one now we would not stop'. It is quite important, because people do instantly and immediately think these things are red tape, but as soon as you unthread the red tape, as it were, and work your way through what it is they are intended to achieve, you can actually suddenly experience the benefits first hand.[114]

The Prime Minister spoke about Equality Impact Assessments at the Confederation of British Industry (CBI) in November 2012:

We have smart people in Whitehall who consider equalities issues while they're making the policy. We don't need all this extra tick-box stuff [...] So I can tell you today, we are calling time on Equality Impact Assessments. You no longer have to do them if these issues have been properly considered.[115]

It is not clear how 'smart people in Whitehall' are expected to consider equality issues without conducting a form of equality impact assessment. The decision to 'call time' on them does not mean that the Government has reduced the priority it gives to equality issues. As we have previously said, the Equalities Minister, the Rt Hon Maria Miller MP, told us that "every single person in this country has a part to play in making this country an economic success. We need to make sure that we are allowing everybody to fulfil their potential in the workplace".[116] We are however concerned that, without analysing consistently and objectively the policies and processes within the context of equal opportunities, women will not be achieving their full potential and will not be contributing to the economic success of the country.

73. Equality Impact Assessments shine a light on the differing impacts of decisions, policies and practices adopted by large organisations, identifying those which might help to advance gender equality, as well as those which adversely impact on particular groups. Given the fact that large companies have Human Resource departments that hold the relevant data, they are relatively easy to undertake, and they provide a positive context in which to work. We urge the Government to reconsider its decision to 'call time' on the undertaking of Equality Impact Assessments. This change in policy is in direct contradiction with the Government's other measures directed at achieving equality in the workplace.

Changes to the Equality Act 2010

EMPLOYMENT TRIBUNAL FEES

Maternity Action highlighted the changes that will be introduced with regard to employment tribunal fees:

From mid-2013, women will face fees of £1200 to take a pregnancy discrimination claim to the employment tribunal. There are currently no fees for employment tribunal claims. We do not believe that these fees will have the effect of deterring unfounded or vexatious claimants. As all discrimination claims have an element of uncertainty, the fees will effectively deter women with well-founded pregnancy discrimination claims from taking action in the tribunal. Women's inability to afford a tribunal claim will also reduce their negotiating position proceedings.[117]

This point was echoed by Sarah Veale, from the TUC, who told us that she believed the new fees would adversely affect women:

Women tend to be low-paid and will be much more likely to be put off litigation simply because they cannot afford the risk that they might not get those fees back".[118]

74. Sarah Jackson, from Working Families, agreed. She highlighted the work of the legal helpline the charity runs for employees, the majority of whom are on family incomes of less than £28,000 a year, and of her fear of women not pursuing genuine discrimination cases:

These are people who are desperate to keep their jobs. We try very hard to help them settle their dispute with their employer before it gets anywhere near a tribunal, but for those few who do go through, it will be a significant barrier to them to have to find that sort of money. [...] Time and again, we hear from women who say, 'I can see that this is illegal, but I cannot afford to lose my job. I am not going to challenge it.[119]

THE REMOVAL OF THE QUESTIONNAIRE PROCEDURE IN DISCRIMINATION CLAIMS

75. The Government has decided to repeal the provision allowing for the questionnaire procedure in discrimination claims, under Section 138 of the Equality Act 2010, which enables an employee to ask their employer to provide certain information, if they believe they may have been unlawfully discriminated against. Maternity Action questioned this decision, writing that "this will reduce women's capacity to determine the likelihood of their claim succeeding and further deter them from pursuing formal action".[120] The Employment Lawyers Association agreed, warning that "although sex discrimination questionnaires usually impact [on] only one individual they provide transparency at an early stage without the need to progress to and win a Tribunal claim prior to the employer revealing information on pay disparity and workforce composition".[121]

76. Karen Jochelson, from the Equality and Human Right Commission (EHRC), told us that the removal of the questionnaire in discrimination claims would be a negative step for both employees and employers:

The questionnaire gives both the employer and the employee some guidelines about the appropriate kind of questions to ask, how to present your information, and what you are going to be called on to request. Without that, it makes it far more unstable for the employer. That would be an example of where red tape may be a positive thing that helps both our legal system and our employment system function a lot better.[122]

77. Reforms to employment legislation may make it harder for women to tackle inequality in the workplace. We urge the Government to remove the fee requirement for pregnancy discrimination cases. Pregnancy discrimination, by definition, affects women only and such a financial burden on those women would be in direct contradiction with the Government's aim of removing inequality in the workplace. The impact of the new fee arrangements for other gender-related employment tribunal cases must be monitored, and kept under review to ensure that genuine cases of discrimination are not being stalled by the introduction of fees. We recommend that the questionnaire procedures in discrimination cases, which gives both employees and employers guidance about what information will be asked in an employment tribunal, should be retained.

Data transparency

78. In order to address inequality, such as the gender pay gap, there needs to be a clear and detailed understanding of the underlying data. There is a need for transparency, without making this a burden on businesses, especially SMEs. The Institute of Physics highlighted the common reluctance of organisations to release such information:

Companies are often reluctant to release data and SMEs can prove particularly difficult to engage with, given their small size and their need to focus on their priority of simply continuing to exist and thrive. [...] We believe that more robust data is needed to fully understand the extent of the under-representation of women in physics, and whole science, workforce.[123]

In supplementary evidence, Jo Swinson MP wrote that "Greater transparency is key to ending the pay discrimination on the grounds of gender and the Equality Act 2010 made a number of important changes including banning pay secrecy clauses"[124] The Government should do more to ensure there is consistent and regular data transparency about women in all work positions, not just those in senior roles. That data should capture part-time employees, what roles women return to after maternity leave, and specific ages or periods in the employment lifecycle.

The Government has already done much to ensure data about women in senior positions is collated, assessed and acted upon. However, as with the measures in place for increasing women on boards, the prospect of regulation can be a useful motivation for intransigent companies which fail to engage with the Think, Act, Report initiative. Only when there is consistent, reliable data on equality issues can progress be planned, achieved and measured. The Government Equalities Office should collate data on women in the workplace, including figures on part-time employees, what roles women return to after maternity leave, and specific ages or periods in the employment lifecycle.

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