Conclusions and recommendations
Lessons learnt from the introduction of new reporting requirements
1.In this first year of reporting, it is clear that many organisations had difficulty in producing the figures required, or were reluctant to devote the resources to doing so. The resulting set of figures published initially was therefore inaccurate, although to an unknown degree. We recommend that the Government works with the Equalities and Human Rights Commission, business groups and other stakeholders to clarify outstanding areas of ambiguity and to publish revised guidance accordingly. We also recommend that the Government reviews the gender pay gap reporting requirements with a view to aligning them with other business reporting requirements from next year. (Paragraph 9)
2.We recommend that organisations are required to provide some narrative reporting alongside their gender pay statistics and an action plan setting out how pay gaps are being and will be addressed, including objectives and targets. Subsequent report should report progress against this action plan, including targets set. The Equalities and Human Rights Commission and Government Equalities Office should work with stakeholders on developing suitable guidance as to content. (Paragraph 12)
3.We see no excuse for businesses of any size to have failed to engage with these well-publicised new requirements in good time. Whilst it should not require the threat of legal action to ensure compliance, the EHRC should have been much clearer and a much earlier stage about its intended use of sanctions against those who failed to comply. (Paragraph 14)
4.We welcome that full compliance has apparently been achieved, after effective dispute resolution by the EHRC. However, we need to be confident that full compliance can be achieved each year; and this can only be guaranteed if all qualifying organisations are known, and that the list is kept up to date. We recommend that the Government publish and maintain a definitive list of all organisations that fall within the scope of the Gender Pay Gap Regulations. (Paragraph 17)
5.Given the unwieldiness of its enforcement mechanisms, we support the EHRC’s focus on securing compliance by education and engagement. We welcome its success in securing full compliance relatively quickly after the deadline and without recourse to its investigatory powers. Nonetheless, the threat of legal action must be both clearly available and seen to be useable. The investigatory and enforcement mechanisms available to the EHRC are not suited to the relatively straightforward task of securing the submission of specified data by a required date. The then Government was remiss in failing to provide legal certainty as to the available enforcement mechanisms and sanctions for breaches of the Regulations. (Paragraph 20)
6.Next year, there should be no excuse for failure to submit accurate figures by the deadline and organisations should expect to receive a fine for not doing so. We recommend that the Government, at the next available opportunity, ends the legal uncertainty surrounding the ECHR’s enforcement powers by providing for specified fines for non-compliance. (Paragraph 21)
Gender pay gap: what the figures show
7.We recommend that when the Regulations are amended, the requirement for information on salary quartiles is changed to deciles. (Paragraph 32)
8.Businesses need to adapt to the growing prevalence of flexible working, more evenly shared caring responsibilities and multi-job careers by demonstrating that part-time workers can expect to be fairly rewarded and also can reach the top. Senior positions should not be the exclusive preserve of those that are prepared to work full time or, as is often the case, far more than full time. By publishing pay gap statistics for part-time and full-time employees, organisations would have to explain any substantial discrepancies, and begin to address them. We recommend that when the Regulations are amended that both part-time and full-time gender pay gap statistics are required to be published. (Paragraph 34)
9.The publication of bonus figures by gender will force organisations to look carefully at their policies on bonuses: they must check that their policies are not, however inadvertently, perpetuating inequality and unfairness. (Paragraph 35)
10.We recommend that when the Regulations are amended, the way in which bonus calculations are made is altered so that it is on a pro-rata basis and that this change is accompanied by the publication of clear guidance on the method of calculation. (Paragraph 36)
11.We recommend that the qualifying threshold remains at 250 employees next year, but the following year be reduced to organisations of 50 employees or more. We further recommend that the Government provides the necessary support, particularly in terms of guidance, to smooth this transition. (Paragraph 38)
12.The exclusion of the highest paid people in organisations makes a nonsense of efforts to understand the scale of, and reasons behind, the gender pay gap. The Government was wrong to omit the remuneration of partners from the figures required in the Regulations. It is disappointing that some of our leading providers of professional services initially sought to avoid revealing the true extent of the gender imbalance at the top of their companies and more disappointing that one—Allen & Overy—continues to delay publication. We agree with witnesses that the initial lack of clarity was unhelpful and we recommend that the Government uses the guidance to clarify how data on partner pay should be calculated and included in time for the publication of data next year. (Paragraph 43)
13.We recommend that the Government consults upon introducing requirements to collect and report pay gap data in respect of disability and ethnicity and, subject to this consultation, introduces this requirement in time for publication in 2020. (Paragraph 44)
14.We recommend that the Government works with relevant stakeholders and seeks to amend the information required by the Regulations in the way we have recommended, so that it can better help to underpin the main purpose of the policy: incentivising businesses and other organisations to address their gender pay gaps. (Paragraph 46)
Tackling the gender pay gap
15.We do not believe that this public naming and shaming on an annual basis will be enough, by itself, to remedy the situation in the long term. (Paragraph 47)
16.Increased transparency may be uncomfortable for some individuals, and needs to be handled with care for data protection reasons, but a cultural shift towards greater transparency on pay is a necessary part of long term efforts to remove the gender pay gap and should be encouraged. (Paragraph 49)
17.Organisations cannot rely on excuses about societal attitudes and trends to avoid examining their own contribution, conscious or otherwise, to their gender pay gaps and the effectiveness of their measures to address them. They must take responsibility for closing these gaps by taking effective action. We conclude that it is up to organisations themselves to identify which measures are most likely to work for them and, as indicated, earlier, to report on these steps in an action plan to be included as part of reporting on their own gender pay gaps. Businesses should recognise the business case for maximising the contribution that women can make and reform policies and practices, notably around rewards for part-time work and promotion, that contribute to perpetuating the gender pay gap. If organisations fail to act effectively, more intervention may be required. (Paragraph 53)
18.We recommend that sector representative bodies work with their members and other stakeholders, such as the Chartered Institute of Professional Development and the trade unions, to develop and publicise ambitious and stretching long term targets for reducing gender pay gaps. They should also develop practical guidance on what measures have been found to work most effectively in their sectors and encourage best practice in implementing such measures. If such stretching targets are not established, the Government should be prepared to step in and set mandatory targets on a sector by sector basis. (Paragraph 55)
19.We recommend that company boards introduce Key Performance Indicators for reducing and eliminating their pay gaps and that Remuneration Committees, in reporting on pay policy, should explain how this commitment to reducing the pay gap is being reflected in their decisions. (Paragraph 58)
20.We are not persuaded that all parts of Government are sufficiently joined up on this issue to ensure that policy decisions in different departments consciously are supportive of addressing the gender pay gap. We recommend that the Government Equalities Offices makes clear in its annual report the steps it is taking to co-ordinate government policy on this issue. (Paragraph 59)
21.We recommend that Government departments with significant gender pay gaps set ambitious targets for reducing such gaps and report on progress each year. (Paragraph 60)
22.We recognise that solutions are complex and involve, to some degree, cultural change which takes time. However, the fact that the road may be long must not stop companies starting down it at pace; the overall rate of change in society depends upon the ambition and commitment of the companies and organisations forming the backbone of the economy. (Paragraph 61)
23.We recommend that businesses and organisations in the public and voluntary sectors should make it standard practice to include a tangible commitment to diversity in any tendering exercise or other provision of services. (Paragraph 62)
24.We recommend that the Financial Reporting Council’s proposals for a revised Stewardship Code include reference to ensuring that gender diversity is properly reflected throughout the company, notably at board level. (Paragraph 65)
25.We support the provisions in the new Corporate Governance Code to improve reporting obligations on actions taken to increase diversity in the management pipeline and the broadening of its interpretation of diversity. But the revision could go further. We regret that the Financial Reporting Council has not included specific provision for reporting requirements to include measures to be taken to address any gender pay gap. We urge the Financial Reporting Council to monitor the quality of reporting on gender diversity and the pay gap in annual reports and to press for improvements where necessary. (Paragraph 67)
Published: 2 August 2018