1Introduction
Gender pay gap reporting
1.The existence of a substantial disparity in the average pay of women and men is well established and stubbornly resistant to efforts to reduce it. The introduction of gender pay gap reporting is the latest such attempt. The publication of gender pay gap statistics on an organisational level shines the spotlight, for the first time, on individual organisations. They will now be subject to public scrutiny and will have to justify themselves when the figures do not look good. Increased transparency and accountability are essential tools in tackling an issue which for too long has remained in the shadows of public consciousness and the “too difficult” pile of too many businesses and organisations.
2.Across the UK economy, the median level of hourly pay is 18.4% higher for men than women. This difference does not sit comfortably with the Government’s aim of securing an “economy that works for everyone”, and has rightly been described by the Prime Minister as a “burning injustice”.1 Addressing the gender pay gap is not only necessary in the interests of fairness, it is essential to improving our economic performance. It serves the interests of individual companies and the economy as a whole. Influential studies have demonstrated a high economic cost to failing to secure and reward the contribution of women in the workforce.2 The country is simply wasting productive talents, as women work fewer hours than men and in less productive parts of the economy. It has been estimated that if the UK gender gap were to be closed, this could generate an additional £150 billion to Gross Domestic Product (GDP) up to 2025 and add 840,000 women to the UK workforce.3 Only if businesses are prepared to utilise to the full and promote the talents of women as well as men can our economy realise its true potential.
3.Social attitudes have changed enormously since the passing of the Equal Pay Act in 1970, and are still changing. But fifty years on, the role of women in the workforce is still very different to that of men and is reflected starkly in the gender pay gap. The causes of this gap can be found in the legacy of historic cultural attitudes to the role of women in society. The results are there to see in most occupations and most workplaces, with men dominating the upper levels occupations that are high paid, and women more prevalent in low paid sectors and in the lower paid roles in most sectors. Part-time jobs, which tend to be relatively low paid and apparently held not to be conducive to senior roles, are far more likely to be occupied by women.4 The full gamut of these causes was explored in detail by the Women and Equalities Committee in its report on the Gender Pay Gap in 2016.5
4.The gender pay gap statistics refer to the difference in the average hourly wage of all men and women across the organisation. It is important to note that gender pay is not the same as equal pay: the two are often conflated in media coverage of these issues. The gender pay gap indicates the difference between average pay between all men and women in a defined workforce at a point in time, regardless of the nature of the work; equal pay addresses the differences in rewards between men and women carrying out the same jobs or doing work of equal value. The latter is illegal and very rare; the former is not and very prevalent.
Our inquiry
5.In this inquiry, we focus on the adequacy and effectiveness of the requirements introduced by the Government for companies to report their gender pay gaps from April 2018, and on the measures that businesses need to take in order to reduce and eliminate this gap. This is more than a question of transparency; it is a challenge of corporate governance and of business leadership—the way companies choose to run their businesses in order to meet the legitimate expectations, not just of their shareholders, but of their employees and society in general. Businesses not only need to reflect the changing values and attitudes in society; they are also in a position to drive such change. They should grasp the opportunity to do so. Whilst our focus has been on business, in line with our remit, the reporting requirement apply to public and voluntary sector organisations too; many of our conclusions in this report apply equally to them.
6.This report is the first output of our inquiry into Corporate Governance: Delivering on fair pay, which we launched in March 2018. We invited evidence on the adequacy of the information required to be reported; the effectiveness of the sanctions for non-compliance; and on proposals for any additional requirements. As part of this inquiry, we received 22 submissions of written evidence from a range of interested parties and held two oral evidence sessions with some of them, and from selected companies. We are grateful to all those who submitted written evidence or who have otherwise contributed to this inquiry. This inquiry follows up some aspects of the previous Committee’s inquiry into Corporate Governance, which reported shortly before the 2017 election.6 We will continue with the second strand of this inquiry, examining progress of reforms relating to executive pay levels and structure, in the autumn of 2018.
1 Evening Standard, Gender pay gap: Theresa May vows to tackle “burning injustice” as firms race to report figures by midnight, 4 April 2018
2 McKinsey Global Institute study; How advancing women’s equality can add $12 trillion to global growth, September 2015; OECD Social, Employment and Migration Working Papers, Effects of reducing gender pay gaps in education and labour force participation on economic growth in the OECD, December 2012. EY, Women Fast forward, 2015. See also Business benefits of flexible working, Department for Business, Innovation and Skills and Jenny Willott, 2014
3 McKinsey & Company, The power of parity: advancing women’s equality in the UK, September 2016, See also, Why diversity matters, January 2015, Delivering through diversity, January 2018
Published: 2 August 2018