Gender pay gap reporting: its impact and possible future Gender pay gap reporting: its impact and possible future

Mandatory gender pay gap (GPG) reporting was introduced in 2017 with the aim of narrowing and eventually eliminating the pay differential between men and women. At first glance the reporting regime appears to have had a limited but positive impact, with the gender pay gap among full-time employees dropping from 9.1 percent in 2017 to 7.9 percent in 2021, and from 18.4 percent to 15.4 percent for all employees over the same period.

But did the regulations make a difference? Figures produced by the Office of National Statistics (ONS) show the gender pay gap fell by almost a quarter for full-time employees between 2011 and 2021. Reviewing all ONS figures over the past decade suggests the gender pay gap was already in decline when the reporting regime was introduced in 2017, and that any positive change directly driven by the GPG regulations has been statistically modest so far.

Why has GPG reporting not achieved more? Partly this is because the framework is a blunt tool for a complex issue. It does not take account of full- and part-time working arrangements, or of differences in occupation, grade and location. Neither does it factor in family structures, caring responsibilities, education, career aspirations and social mobility, or personal choices employees make in their employment and pay packages.

Despite these issues, GPG reporting has successfully drawn attention to the importance of narrowing the gender pay gap. Corporate leaders have starting taking the issue more seriously, with employers across the board taking steps to report on and address their situations. The result is that the gender pay gap has fallen in most sectors since the regulations were introduced.

We’re seeing the most progressive businesses take a couple of steps further than the GPG regulations require.

Firstly, they are taking the opportunity to see their GPG reporting as a valuable tool, scrutinising their data and using it to inform decisions about pay structures and broader diversity and inclusion matters.

These employers typically use enhanced GPG analysis and reporting to delve into their pay to identify the underlying causes of gaps so they can plan how to address them. Some have gone further and prepared voluntary additional pay gap reporting in relation to ethnicity, disability and social mobility.

Secondly, they are publishing their GPG action plan giving a strong signal that they are keen to demonstrate their commitment to closing their gender pay gap and supporting their reputation as a fair and ethical employer.

But publishing alone is not enough. Employers whose narratives evolve over the years tend to be those who are most serious about addressing their gender pay gap and who integrate their GPG reports into broader reviews on diversity and inclusion.

A combination of data analysis and high level evaluation and monitoring is a good gauge of genuine intent. Companies with buy-in from senior leaders in the organisation typically draw up plans which drill down into specific actions, with activities embedded into existing working practices and a systematic approach to diagnosing the causes of the gender pay gap within the organisation.

At the other end of the scale are employers who have done the bare minimum GPG reporting as they know they face minimal consequences for non-compliance. The GPG regulations do not contain any enforcement mechanism and do not include any sanctions for failure to comply with the reporting obligations or publishing inaccurate or misleading reports.

The “unlimited fines and convictions” threatened by the Equality and Human Rights Commission, which is responsible for enforcing the reporting rules, have failed to materialise. No companies have been fined, despite hundreds failing to accurately file their GPG figures on time. Enforcement to date has focused simply on whether or not a report has been published rather than considering the quality and validity of the figures reported and assessing any plans for action.

Against this background, enthusiasm and focus for reporting appear to be waning. By January 2022 only 1,346 employers have reported GPG figures for the 2021-22 reporting period, while 10,000 employers reported for 2020-21.

As the UK economy starts to recover employers should consider the impact GPG reporting might have on their workforce. Companies currently face a highly competitive human resources landscape in which attention to pay practices and action to narrow their gender pay gaps could give them the edge in recruiting and retaining employees.

Meanwhile a number of factors have led to a widening of the UK’s gender pay gap. Excluding furloughed staff from GPG report data and reductions in allowances reducing certain employees’ earnings skewed the data for 2020 and 2021. As the economy grows in 2022, pay inflation within the core business, particularly in male senior and operational positions, is helping widen the gender pay gap.

When the Gender Pay Gap Regulations were first published the government said they would be reviewed within five years to assess their impact. This review is currently underway and the results should be published by the end of March 2022.

While the review may deal with compliance matters, employers have other concerns. Many feel unsupported in tackling an issue which goes beyond pay. They would like to see more government support and investment to address social mobility, education and support as this directly impacts career decisions and patterns of work, which in time will affect their rates of pay and help narrow the gender pay gap.

Ethnicity pay gap reporting (EPG) regulation has been on the cards for a while but has not yet made its way into new regulations. Only 13 percent of FTSE 100 employers voluntarily published their ethnicity pay gaps in 2021 so it appears most are waiting for mandatory EPG reporting to be introduced.

Meanwhile, KPMG has seen an increase in equal pay auditing by employers and are working with companies undertaking periodic equal pay audits to try to establish equal pay concerns or risk areas. A factor behind this has been the notable increase of equal pay-related Employment Tribunal decisions in England and Wales, from just over 3,000 in 2017, the year in which the GPG Regulations came into effect, to just under 6,500 in 2021.

More generally, there will be continued and more sophisticated use of collated employee data to drive decision-making by employers who are invested and proactive when it comes to workforce pay equality.

KPMG has developed a sophisticated pay reporting tool to help. This supports all aspects of Fair Pay including GPG, EPG and CEO pay reporting, enabling clients to complete mandatory compliance as well as to conduct enhanced analysis on dimensions and metrics. This aids understanding of the data, potential causes of any pay gaps and forms the basis of actions to address this. For more information, please get in touch with Donna Sharp or your regular KPMG contact.