Closing the Gender Pay Gap

Posted on June 04, 2018
Written by Caroline Dutot

Why transparency and enforcement are equal partners in helping move the debate forwards

 

From actors to accountants it doesn’t matter what area you work in; there’s a good chance if you’re female, you will be paid less than a man.

 

Take Michelle Williams and Mark Wahlberg, two actors with the same initials … on very different pay grades. For re-shoots of ‘All the money in the world’ a Ridley Scott movie originally featuring Kevin Spacey, Williams was said to receive ‘thousands’, while Walhberg received ‘millions’.

 

The #MeToo campaign that began in Hollywood last year gave an insight into the sort of sexual harassment women face on a daily basis, opening the debate about discrimination at all levels – promotions, job roles, and ultimately, pay.

 

While Jersey doesn’t have many Hollywood stars, it has plenty of accountants and when it comes to pay gaps, the situation for women in professional services is more frightening than any horror film.

 

The gender pay gap for the Big Four firms ranges from 38.1% at EY to 43.8% at PwC. While PwC attributed its pay gap to differences in distributed profits, rather than differences in full-time equivalent pay, many will still be surprised by the size of the gap. And this can’t be fully explained by differences in working hours – only 24% of PwC’s female partners work less than standard hours, compared to 3.6% of male partners.

 

For banking, the gender pay gap ranges from 29% at HSBC to 54% at JP Morgan, where 78% of employees in the highest paid roles are men. Companies such as Apple, where 71% of its top earning employees are men, and Ryanair, which has a 72% pay gap – the worst in the airline industry – show how widespread the problem is.

 

Equal pay legislation took effect in the UK in 1975, however as the Fawcett Society’s Sex Discrimination Law Review 2018 shows, a lot more can be done if pay equality is the aim. The Review highlights issues over inadequacy and complexity in the laws, which mean that despite huge changes in attitude over the past 40 years, equality remains some way off.

 

The pay gap is not just about equality; it’s about economies. McKinsey estimates that if women achieved their full potential of equal participation in the workforce, it would add $28 trillion (US) or 26% to annual global GDP by 2025. This impact is equal to the size of the combined US and Chinese economies today.The World Bank put the cost of gender equality recently at $160 trillion in lost earnings globally.

 

So what can we do? It’s unlawful to provide less favourable terms on grounds of sex, but this can be very difficult to prove in practice, especially when most people are not aware what colleagues are paid. Indeed, some employment contracts in Jersey specifically prohibit members of staff revealing their pay to other employees. This means it’s up to the business to check pay grades for staff and ensure pay is fair. If there is a gender imbalance then companies need to justify this and document the reason for it.

 

In many cases it will be very difficult for a business to give a rationale for differences in pay when they are highlighted. According to analysis from the Office for National Statistics (ONS), 63.9% of the UK’s gender pay gap – two thirds – could not be explained by relative lack of women in senior roles or more women working part time. While the ONS suggested that some of the gap may be due to differences in academic qualifications, and domestic caring responsibilities, it acknowledged that pay discrimination could be part of the problem.

 

Responsibility for improving the situation effectively comes down to how seriously those with the strategic direction for a business think it is worth taking it. Many organisations only started paying proper attention to issues such as cyber security and data security when they required board level responsibility. Placing responsibility for gender equality and pay discrimination at board level is just one stage in the process. Accountability is just as important.

 

At a strategic level, businesses can start by adopting an equal pay strategy. Remuneration Committees should follow, conducting pay reviews and requesting a rationale for differences in pay if they find discrepancies within pay scales.

 

Much legislation around data privacy was in place before GDPR hit the news, but businesses only began addressing the issue once a clear date for enforcement (and tough financial penalties) were set. If the business community doesn’t have appetite for more legislation, more transparency on pay is required.  Companies that operate transparent pay scales tend to be ahead of their competitors both in terms of equality but also business profits.  Buffer has one of the lowest pay gaps of tech firms, while the Brazilian firm Semco Partners is even more radical – it lets employees see what everyone is paid and set their own salaries.

 

Whatever approach they choose, if #GenderPayGap gathers as much momentum as #MeToo, organisations may want to tackle the problem sooner rather than later.

 

 

Advocate Caroline Dutot advises on all aspects of corporate governance and employment law.

 

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