Business, Innovation and Skills CommitteeWritten evidence submitted by equal pay expert Sheila Wild

Executive Summary

An effective voluntary approach to closing the gap would entail:

Strong and consistent leadership.

All national statistics on earnings to be disaggregated by gender.

Accessible advice and information for both employers and employees.

Regular monitoring of the take up of advice and information and of the extent of good practice.

Reform of the equal pay provisions of the Equality Act 2010, while desirable in the long-term, is at the present moment unlikely.

Because the gender pay gap has no one single cause, a number of levers need to be applied if the gap is to be closed. They include:

Breaking down the segregation of women into lower-paying occupations and workplaces.

Continuing the improvements to maternity and parental leave arrangements. This enables women to maintain their earning power and enables sharing of parental responsibilities, thereby lessening the pay penalty for motherhood.

Opening up flexible working in senior jobs. This too enables women to maintain their earning power and facilitates the sharing of parental responsibilities.

Implementing pay and reward practices which ensure that equal work attracts equal pay.

It would be useful to have an annual or bi-annual report to ministers which, in addition to the variables currently reported on, also examines the statistics on the gender pay gap across the protected grounds and looks at workplace characteristics, personal characteristics, and hours and patterns of work and the relationship between these and the gender pay gap.

Introduction

1. For over 30 years I was the policy lead on equal pay at the Equal Opportunities Commission, and more recently, the Equality and Human Rights Commission, and in that capacity I worked with employees, employers, trade unions, and advisory agencies such as Acas and the Chartered Institute of Personnel and Development. My aim was to get equal pay out of the “too difficult” box and into the “can do” box, and to this end much of my work involved the development and dissemination of good equal pay practice.

2. I now work as a freelance consultant specialising in equal pay. I have recently set up EqualPayPortal,1 an independent website aimed at equipping people to understand and deal with equal pay issues.

3. As a freelancer, my resources are limited, and this submission will therefore focus on key components of an effective voluntary response to the gap, and the Committee’s first two questions, namely:

Do the Gender Equality Duty and the Equality Act go far enough in tackling inequalities, such as gender pay gap and job segregation, between men and women in the workplace?

What steps should be taken to provide greater transparency on pay and other issues, such as workforce composition?

In the interests of brevity I will not repeat the headline statistics on the gender pay gap, but will assume that these are already available to the Committee.

An Effective Voluntary Approach

4. There is no reason why a voluntary approach to closing the gender pay gap should not be effective, but the current approach is lacking the basic essentials. What is needed is:

Strong and consistent leadership.

Gender disaggregated statistics on earnings.

Accessible advice and information.

Regular monitoring of the take up of advice and information and of the extent of good practice.

A legal framework which supports transparency of payment systems and the resolution of equal pay issues for both individuals and groups of employees with common cause for complaint.

Strong and Consistent Leadership

5. Successive governments have taken an inconsistent and sometimes weak approach to tackling the gender pay gap. Both the legislative and policy frameworks have developed in a piecemeal way, which the Equality Act 2010 has done little to counter.

6. While there is a recognition that a key component of the gender pay gap is women’s labour market disadvantage, and welcome and necessary interventions such as improvements to parental rights and opportunities to work flexible hours have been introduced, the equal pay element of the gap is increasingly overlooked. There is no monitoring of the extent to which women are getting equal pay, and no encouragement of good equal pay practice. If government seriously wants to narrow the gender gap, and wants to do so by means not of compulsion but by self-regulation, then strong and consistent leadership is essential. In its absence, intentionally or not, the issue slips down the business agenda, leading some to call for increased regulation.

Gender Disaggregated Statistics on Earnings

7. Statistics on earnings are not always disaggregated by gender. This means both that our understanding of the gender pay gap is more limited than it needs to be, and that action to tackle it cannot be properly targeted.

8. To give an example, the Office of National Statistics recently published Average Weekly Earnings—Bonus Payments in Great Britain2 [ONS, September 2012]. This shows that £37 billion was paid out in bonuses in 2011–12—up 3% on a year earlier, of which £13 billion was paid out to employees of businesses in the finance and insurance industry. Although this was a 9% fall from the 2010–11 level, financial sector bonuses made up 36% of all bonuses in 2011–12, even though just 4% of all employees work in the industry. We know from previous ONS analyses of the gender pay gap that:

(a)the gender pay gap is wider at the upper end of the earnings distribution than at the lower end;

(b)bonus payments at the higher end of the earnings distribution make a major contribution to the gender pay gap; and

(c)the gender pay gap is considerably wider in the financial services sector than in other industrial sectors.

However, in the absence of any gender disaggregation of the statistics in the ONS report on bonus payments, it is not possible for policy makers to determine whether the 9% fall in what was paid out in bonuses has had any impact on the gender pay gap or not.

9. Given that the surveys which inform ONS’s earnings’ analyses already collect data on the sex of employees, it would seem reasonable to ask the ONS to disaggregate by gender all of its reports on earnings, thereby enabling us to focus on those parts of the labour market where women are most seriously disadvantaged. ONS have told me they have no plans in the future to breakdown bonus payments by sex.

Recommendation

All national earnings data to be disaggregated by gender.

10. Improving the quality of the information available at a national level would enable action to be better targeted. The gender pay gap, the reasons for it, and what should be done about it remain highly contested issues. Even in the past few months we have seen vastly different responses to it: the gap is widening; the gap is narrowing; women are earning more than men; it’s not a gender gap, but a mummy gap.

11. All of these responses are to some extent correct, but none of them tell the full story, for while it is the headline figure for the full-time gender pay gap that drives public policy both on the gap itself and on equal pay, more detailed analyses show that within the overall gender pay gap, progress is uneven: the gap is narrower or non-existent for younger women and at the lower end of the earnings’ distribution, but the gap for some groups of ethnic minority women, for older women and at the upper end of the earnings’ distribution shows no sign of closing. And looking more closely at the part-time women’s pay gap (women working part-time as a percentage of men working full-time) shows that older women in particular experience a huge pay penalty—these are the women who missed out on the educational and career opportunities now open to younger women.

12. Decomposing the headline gender pay gap in this way suggests that the usefulness of the headline figure as a policy driver is now severely limited; a more refined set of measures would be more appropriate, and might serve to bring more of the key actors on board.

Recommendation

To develop a more nuanced set of measures of the gender pay gap.

13. We also need to take account, not only of the gender pay gap, but of the extent to which women are getting equal pay for equal work. Whereas the national statistics on the gender pay gap measure differences in average earnings, the right to equal pay means that there should be no difference in the contractual terms of a woman and a man doing equal work, who both work for the same employer.

14. Information about differences in contractual terms can only be derived from the employers’ payroll and human resource data. A woman’s employer is also the only source of information on whether the work being done by the woman and the man is equal, and what the reasons are for any differences in their pay. There is no obligation on employers to monitor the extent to which their female employees are getting equal pay for equal work, so, while there is official information on the gender pay gap, there is no information on the extent to which women are getting equal pay.

Recommendation

Policies on transparency should include a consideration of the extent to which employers could be encouraged to evidence the actions taken to ensure delivery of equal pay in the workplace.

15. Her Majesty’s Courts and Tribunal Service Annual Report shows the number of cases filed with the Employment Tribunal and their outcomes. In 2011–12, 28,800 equal pay claims (out of a total of 186,300 claims across all jurisdictions) were received. The success rate for equal pay claims is 1%, with some 60% of claims being settled or withdrawn. There is no published evidence on the reasons for settlement or withdrawal.

16. The figures for equal pay claims should be interpreted with extreme caution, as equal pay cases can take over a decade to reach a final determination and it is difficult to distinguish between individual and multiple claims. This not an academic question; European law on equal pay obliges Member States to ensure access to justice and with many equal pay claims taking over a decade to reach a final determination Britain is arguably falling short of what is required.

Recommendation

To improve the collection, analysis and presentation of statistics on equal pay cases, both to differentiate between individual cases (where there are at most two or three claimants) and multiple cases ( where there may be several hundred claimants) and to show the length of time each type of case takes to reach a determination.

Accessible Advice and Information

17. When looking for information about a complex issue, it is useful to begin by asking “who is the lead body?’, but in the case of equal pay there is no such body. This is in part a structural problem, and in part to do with the nature of equal pay, which unlike any other equality entitlement, is grounded in the contract of employment. The ensuing difficulty in accessing information has a number of consequences. It reduces the possibility of good equal pay practice becoming the norm. It makes it harder for women to find out if they are getting equal pay, and if they are not, what they can do about it. It drives both employer and employee into the arms of lawyers, thus potentially increasing the incidence of litigation. These issues are explored more fully in an article published in the October edition of Equal Opportunities Review.3

Recommendations

Government information sites to be linked to each other and to key agencies;

A designated lead department or agency to take responsibility for checking the information is accurate and that the links work and;

Where the relevant information is a sub-set of a broader report or dataset, it should be clearly indexed as being about equal pay.

Regular Monitoring of the take up of Advice and Information and of the extent of Good Practice

18. A recent Freedom of Information Request to the EHRC (see Annex A) revealed that the Commission is not carrying out any monitoring of pay by ethnic groups, nor is it monitoring the incidence of equal pay reviews more generally. This lack of information can only hinder the development of a more effective voluntary approach to closing the gender pay gap and may inadvertently lead to increasing pressure for tighter regulation.

An Effective Legal Framework

19. With one or two exceptions the Equality Act 2010 replicated the provisions of the Equal Pay Act 19070 (as amended), thereby missing an opportunity to modernise the legislation. In its current form the legislative framework (designed over 40 years ago when women’s presence in the labour market was marginal, discretionary bonuses made up only a small proportion of take-home pay, and rates of pay were generally centrally determined) does not work for employers, nor does it work for women. The law does not work for employers because it has the unintended effect of penalising those employers who commit to implementing equal pay by exposing them to immediate litigation; it does not work for women because an equal pay claim can take over a decade to reach a determination.

20. Legislation that is fit for purpose would provide women with redress within a reasonable timeframe and it would provide employers with a protected period (of say three years) within which to equalise pay without finding themselves in an Employment Tribunal. An effective legal framework would also provide a mechanism for dealing with systemic problems—a need, for example, to update a bonus scheme, or to respond to an equal pay claim brought by several hundred women all doing similar work.

21. While reform on the scale outlined above is unlikely to be put into effect so soon after the introduction of the 2010 Act, it has to be recognised that without a legislative framework designed with the needs of 21st century pay and reward structures in mind, implementing equal pay will remain an exercise fraught with risk for both employer and employee.

The Equality Act 2010

Do the Gender Equality Duty and the Equality Act go far enough in tackling inequalities, such as gender pay gap and job segregation, between men and women in the workplace?

22. The Gender Equality Duty acted as a prompt to public bodies to deliver good equal pay practice and research carried out by both the Equal Opportunities Commission and the Equality and Human Rights Commission showed that a far greater proportion of public than of private sector employers were actively engaging with the gender pay gap.

23. The Equality Act 2010 replaced the Gender Equality Duty with a generic public sector duty which encourages public bodies to look beyond gender to pay gaps across the protected grounds. This move is welcome, both of itself, and because of the intersectionality of pay disadvantage on grounds of gender, age, ethnicity and disability—the gender pay gap is wider for example, for older women, disabled women and women from certain ethnic groups. The 26% pay gap for Pakistani women relative to white British men [EHRC 2008] cannot be resolved by attending solely to the gender dimensions, it also requires action to tackle ethnic disadvantage. However, official statistics on the gender pay gap do not look at pay gaps across the equalities areas, but only at gender, and the equality duty itself is currently under review.

Recommendations

To retain the public sector equality duty

Closing the Gender Pay Gap

24. The gender pay gap is generally held to have four main causes: occupational segregation, pay discrimination, the fact that women still bear the main responsibility for looking after children, and the undervaluing of women’s work. For those working full-time, the gender pay gap is down mainly to industry and personal characteristics; for those working part-time, occupational segregation and the undervaluing of women’s work make the most significant contributions. Occupational segregation is sometimes put forward as a phenomenon which makes the gender pay gap inevitable, but the concept of equal pay for work of equal value—whereby different jobs can be deemed to be equally demanding and therefore deserving of equivalent reward—is intended to redress the inequalities arising out of men and women doing different types of work.

25. Because the gender pay gap has no one single cause, a number of levers need to be applied if the gap is to be closed. They include:

(a)Breaking down the segregation of women into lower-paying occupations and workplaces.

(b)Continuing the improvements to maternity and parental leave arrangements. This enables women to maintain their earning power and enables sharing of parental responsibilities, thereby lessening the pay penalty for motherhood.

(c)Opening up flexible working in senior jobs. This too enables women to maintain their earning power and facilitates the sharing of parental responsibilities.

(d)Implementing pay and reward practices which ensure that equal work attracts equal pay.

26. Improved maternity and parental rights are more effective when accompanied by opportunities for men as well as women to work flexibly; flexible working arrangements also help to break down occupational segregation, as does the implementation of measures to ensure equal pay for equal work. Good equal pay practices pick up, not just on any inadvertent pay discrimination, but also on low rates of return from maternity leave, or on flexible working being taken up only by workers in lower paid roles. Tackling the gender pay gap entails tackling all of its causes.

Greater Transparency

What steps should be taken to provide greater transparency on pay and other issues, such as workforce composition?

27. In the context of equal pay and the gender pay gap, the term “transparency” has two meanings. First, transparency of payment systems has a specific legal meaning deriving from European case law and written into the current and previous Code of Practice on Equal Pay.4 At paragraph 102 the Code states:

“The Court of Justice of the European Union has held that pay systems that are not transparent are particularly at risk of being found to be discriminatory. Transparency means that pay and benefit systems should be capable of being understood by everyone (employers, workers and their trade unions). It should be clear to individuals how each element of their pay contributes to their total earnings in a pay period. Where the pay structure is not transparent and a woman is able to show some indication of sex discrimination in her pay, the employer carries the burden of proving that the pay system does not discriminate.”

28. Most public and voluntary sector pay systems are at least in part transparent, in that the pay spines setting out basic pay are published, and it is noticeable that where cases have been taken they tend to involve the more opaque payments such as bonuses or additional allowances.

29. Pay transparency is much less common in the private sector and in some parts, most notably the investment banking sector, transparency is a rarity. Given that the gender pay gap is at its widest in this sector, and clarity over who gets paid what and why would undoubtedly prompt action to narrow the male/female earnings’ differential, it is regrettable that the actions taken to make remuneration in the higher echelons of the financial services sector open to greater scrutiny and accountability have not also applied a gender lens to the payments made, but that being the case, a voluntary approach can still be encouraged.

Recommendation

To invite Remuneration Committees to monitor the extent and structure of the gender pay gap.

30. Given not only the public policy interest in closing the gender pay gap, but also the risks of legal action, such an approach would be consistent with existing responsibilities to ensure remuneration policies, procedure and practices are consistent with and promote effective risk management.

31. The second definition of transparency has to do, not with payment systems, but with the gender pay gap at an organisational level, and efforts have been made to encourage private and third sector organisations to report publicly on their pay gaps. Section 78 of the Equality Act 2010 if activated, would enable government at some future date to compel companies to make their pay gaps public, and but for now the Think, Act, Report initiative attempts to do the same on a voluntary basis. However, a figure for a headline gender pay gap whether at a national or a workplace level is a measure that masks as much as it conceals. At an organisational level, for example, it is possible to have a headline gap of 8%, but within that, a substantial group of workers for whom the gender pay gap is 25%.

32. Much more useful is a hierarchical gender profile of the workforce, particularly if this also includes information on employees’ age and the number of hours that they work. Such a profile gives a strong steer, not only as to where pay gaps might be occurring, but also what the causes might be. A detailed gender profile can be used to target, underpin and monitor good equal pay practice.

Recommendation

To encourage organisations to profile their staff by gender, hours worked and earnings.

Conclusion

33. It would be useful to have an annual or bi-annual report to ministers which, in addition to the variables currently reported on, also examines the statistics on the gender pay gap across the protected grounds and looks at workplace characteristics, personal characteristics and hours and patterns of work and the relationship between these and the gender pay gap. The Triennial review, which the Equality and Human Rights Commission is obliged to produce, is quite simply not sufficiently detailed to enable accurate diagnosis of the most helpful interventions. The report should include the numbers and types of equal pay claims, and an account of how long these have been in the tribunal system. Such a report would enable us to track progress over time not just towards narrowing the gender pay gap but also the extent to which equal pay is being delivered in the workplace, and would eventually lead to the adoption of more effective strategies for redressing the imbalance between men’s and women’s lifetime earnings.

October 2012

Annex A

RESPONSE FROM THE EHRC TO A FREEDOM OF INFORMATION REQUEST

18 October 2012

Subject: Freedom of Information Request

Dear Ms Wild

Thank you for your recent email in which you make the following request:

“In the context of the above, I ask that you provide me with information as to the action the Commission has taken, or has committed to taking:

To monitor and make public information on the extent of pay gaps across ethnic groups for England, Scotland and Wales since the 2008 analysis was carried out.

To monitor and make public the incidence of equal pay reviews for gender, ethnicity and disability, across England, Scotland and Wales, since the 2008 study was carried out.

To work with public bodies across England Scotland and Wales to jointly agree and publish a standard format for data collection, analysis and reporting on pay gaps across gender, ethnicity and disability.

Where action has not yet been taken, but is intended, I ask that you provide me with a copy of the relevant minute recording the decision to initiate action.”

For clarity we have responded to each of your requests in turn below.

1. The action the Commission has taken, or has committed to take to monitor and make public information on the extent of pay gaps across ethnic groups for England, Scotland and Wales since the 2008 analysis was carried out.

Response

In 2009 the Commission published a review by Hilary Metcalf entitled Pay gaps across the equality strands: a review.5 This was a review of secondary sources and therefore did not produce new data.

In 2011 the Commission published the First Triennial Review and this contained some new data produced by the Policy Studies Institute’s analysis of 2004–07 Labour Force Survey data. The relevant extract from this review has been attached for your information.

At this time the Commission has not committed to any further monitoring on the extent of pay gaps across ethnic groups.

2. The action the Commission has taken, or has committed to take to monitor and make public the incidence of equal pay reviews for gender, ethnicity and disability, across England, Scotland and Wales, since the 2008 study was carried out.

Response

No further action has been taken by the Commission to monitor the public incidence of equal pay reviews, since the publication of “Equal pay reviews survey 2008” to which you refer.

At this time the Commission has not committed to any further monitoring on the incidence of equal pay reviews for gender, ethnicity and disability.

3. The action the Commission has taken, or has committed to take to work with public bodies across England Scotland and Wales to jointly agree and publish a standard format for data collection, analysis and reporting on pay gaps across gender, ethnicity and disability

Response

The Commission has not taken action (or at this time made future plans) to work with public bodies across England, Scotland and Wales to jointly agree and publish a standard format for data collection, analysis and reporting on pay gaps.

Finally, we note that in the contextual information you have provided alongside your request, you have referred to a report regarding the monitoring of compliance with the Public Sector Equality Duty; which was due for publication in Spring 2012.

Between February and May the Commission looked at the published equality information of almost 1200 public authorities to evaluate how they were performing against the new specific requirements. The report of the Commission’s findings (originally expected to be published in Spring 2012) is nearing its conclusion and will be published in due course.

Please note that whilst the evaluation enables us to say how many public authorities published employment information, we cannot extract any findings in respect to how many public authorities had included equal pay within their published employment information.

A second evaluation is currently taking place in the form of the “equality objectives project’. This includes scope for those completing the evaluations to include details of the employment objectives that they find. It is possible that this may generate information on equal pay, but at this time it is too early to tell.

The findings from both projects will be taken forward through the most appropriate form of regulatory activity; with the aim of improving public sector practice going forwards.

We trust this response has been of assistance to you. If you require any clarification please do not hesitate to contact us at the following address: Corporate Communications Team, Equality and Human Rights Commission.

If you are unhappy with our response and wish to request an internal review of our decision please write to the Corporate Communications Team at the address above.

During the independent review the handling of your information request will be reassessed by Commission staff afresh.

If following the review you are not content with the outcome you may apply directly to the Information Commissioner’s Office (ICO) at:

The Information Commissioner’s Office
Wycliffe House
Water Lane, Wilmslow
Cheshire SK9 5AF

Generally the ICO cannot provide a decision until you have exhausted the review process within the Equality and Human Rights Commission.

If the Commission can be of any further assistance please contact us using the details provided below.

Corporate Communications Officer
Equality and Human Rights Commission