The Gender Pay Gap refers to the difference in the average hourly pay of women compared to men in a particular organisation and is designed to capture the extent to which women are evenly represented across an organisation. Employers need to be aware that where a gender pay gap exists, this may negatively impact their brand, employee relations, public reputation and their ability to attract and retain talent.
In the UK, organisations with more than 250 employees are now legally required to provide annual reports on their gender pay gaps. In Ireland, two separate Bills have been initiated in the Houses of the Oireachtas. In May 2017, the Labour Party initiated a Private Members Bill entitled “The Human Rights and Equality Commission (Gender Pay Gap) Information Bill 2017” which is making its way through the legislative process. Separately, the Government has published the Gender Pay Gap (Information) Bill 2019 (the “Government Bill”) which is also making its way through the legislative process.
Consequently, mandatory gender pay gap reporting is likely to be introduced in Ireland in the near future and it is important for Irish employers to commence preparations at an early stage.
Early preparations may provide an opportunity to address any imbalance well in advance of any reporting deadline and will allow organisations to promote themselves as forward-thinking and progressive. On the other hand, organisations which leave preparations too late will find themselves addressing any issues in the public domain, under the watchful eye of the media, trade unions, their employees and customers. Organisations reporting a high gender pay gap, may be considered to be less than fully committed to fair pay, promotion and development opportunities for women.
The Government Bill, as currently drafted, proposes most of the current UK reporting requirements together with further Irish requirements, as follows:
Requirements: UK & Ireland
In addition, where any pay gaps are identified, employers must set out the reasons for this and the measures (if any) being taken, or proposed to be taken, to eliminate or reduce any such pay gaps.
The Bill further provides that the regulations to be introduced may also require the publication of information in relation to the mean and median pay gaps for temporary employees; the respective percentages of men and women in each of the four pay quartiles; and information by reference to job classifications.
The Mean Pay Gap
The mean gender pay gap is the difference between women’s mean hourly wage and men’s mean hourly wage. The mean hourly wage is the average hourly wage across the entire organisation.
The Median Pay Gap
The median gender pay gap is the difference between women’s median hourly wage (the middle paid woman) and men’s median hourly wage (the middle paid man). The median hourly wage is calculated by ranking all employees from the highest paid to the lowest paid, and taking the hourly wage of the person in the middle.
Pay quartiles are calculated by splitting all employees in an organisation into four even groups according to their level of pay. Looking at the proportion of men and women in each quartile gives an indication of the gender representation at different levels of the organisation.
Get your data ready
Check your reporting systems can deliver the data you require. How much human intervention will you need to compile your report? Make sure you set up systems so they can report according to the proposed procedures and pay periods.
Involve key stakeholders
You will need support from across the organisation to calculate and explain your gender pay gap. Engage with other departments early to address challenges you may have with the IT systems for example, or in dealing with employees’ concerns once you publish the figures.
Perform a trial run
You should carry out a trial run of your gender pay gap report. This helps in two ways: first it lets you check that your systems and processes are ready to report in a way that is compliant with the proposed new reporting requirements and secondly, it provides you with an early and private snapshot of the current gender pay gap in your organisation.
Understand your Pay Gap
Understanding the reasons for your gender pay gap as early as possible gives you time to workout how to explain them (if the reasons are fair and valid) or to take professional advice on how to address them and to take action before you publish your first gender pay gap report.
Build your narrative & plan your communications strategy
Your organisation needs to own the narrative around your report. This is particularly important given that gender pay and equal pay are often confused. Prepare for challenges to your report from third parties, time your communications strategy carefully and put plans in place to control your message.
Implement proactive change
How you respond when you identify a gender pay gap could come under as much scrutiny as your gender pay gap itself. Failing to demonstrate positive change could put you at a disadvantage. Think now about how changing policies and practices in key areas, including recruitment, talent development, training, remuneration and retention, could help reduce your gender pay gap.
Preparing to publish the data is one thing, but explaining why any pay gap exists and how you are dealing with any identified pay gap will be crucial to comply with the proposed regulations.
Set your figure in context. Your figure may be skewed by a number of factors, such as your industry sector or historical patterns of progression. We can prepare the narrative to explain the factors that influenced the calculation.
Look at policies and practices. Your response to your gender pay gap could attract as much scrutiny as the data itself. Failing to demonstrate positive change could negatively impact your business. Look at policies and practices in these key areas, could they be improved?
KPMG can assist your teams in preparing for the likely introduction of Gender Pay Gap reporting (“GPG”) in Ireland. We can make your stakeholders aware of the issues, prepare a current “As is” analysis of your payroll to assess the current status of your organisation and provide a communication and action plan to address and explain any gaps arising.
KPMG can host a workshop/meeting with your stakeholders, to share insights on the practical challenges of GPG, how organisations in the UK are dealing with it, and what next steps they are taking to communicate and take action to reduce their GPG.
Our KPMG Data analytics tool can analyse your organisation’s payroll data and prepare a detailed review and report by age, location, seniority of employees, functions and / or job titles. It can also assist with identifying the potential root causes of any GPG and KPMG can then advise on actions to address the GPG.
Develop practical communications or guidance for your stakeholders on GPG reporting, taking action to reduce the GPG and feeding in to other gender, inclusion and diversity initiatives. Gender pay gap reporting is likely to generate ongoing and evolving issues to discuss (e.g. diversity reporting, equal pay auditing etc.)