Gender pay gap reporting and the impact of coronavirus (COVID-19)

Author: Jo Faragher

With penalties for failing to publish gender pay gap reports for 2019/20 suspended due to the pandemic, and a lack of clarity about reporting dates for 2020/21, Jo Faragher examines the data and fears that equality may fall off the agenda for some companies.

Less than a fortnight before the final deadline for gender pay gap reporting this year, the Government and Equalities and Human Rights Commission (EHRC) announced that there would be no sanctions for those companies that failed to comply with the Regulations.

Benchmarking data

Our benchmarking service has the full data from XpertHR's analysis of official government data for the 4,939 organisations that had reported their gender pay gap by 4 April 2020.

The decision, announced by Women and Equalities Minister Liz Truss and EHRC chair David Isaac, acknowledged that employers were facing "unprecedented uncertainty and pressure" due to the coronavirus and so would not be penalised if they did not report.

At that point, around 3,000 organisations had already published data for the snapshot date of 5 April 2019 (31 March for public-sector organisations). By the end of April, just over 5,300 employers - around just half of those required to report - had uploaded data to the gender pay gap reporting service.

What the data tells us

XpertHR's gender pay gap reporting service captured the headline figures the day after the original deadline, on 6 April. These showed that the average median hourly gender pay gap was 10.5%, and the mean gender pay 13.4% - both of which had gone up slightly by 0.3 percentage points and 1 percentage point respectively.

However, for a matched sample of employers that published both this year and last, the median reduced by 0.1 percentage point while the mean reduced further, by 0.5 percentage points. For the gender bonus gap, the median increased by 0.8 percentage points, and the mean decreased by 0.9 percentage points.

XpertHR research manager Ed Cronin believes the patterns in the matched sample figures show that progress - albeit moderate - is being made. "The two main causes for a gender pay gap are too many men in senior positions earning a lot of money, or gendered occupations that tend to be lower paid. We can infer from the increase in the number of women in the highest pay quartile that more are being promoted at the top of the pay range, which changes the more sensitive figure - the mean gender pay gap." The median figure is unlikely to move significantly in the short term as it is more robust.

Cronin adds that bonus figures showed little movement. "There was virtually no change on the median bonus gap - this is something we thought would be easier to change at a policy level and the gap could be narrowed quickly, but that has not happened," he says.

Lack of real progress

Ruth Thomas, co-founder of benefits consultancy Curo Compensation, agrees that the figures may seem disheartening, but argues that some employers are pushing the agenda more vigorously than others. "In the three years of reporting, if you look at the aggregate figures, they show very little difference," she says. "But what the figures don't show is the companies that are displaying best practice, actively addressing issues causing the gaps and looking at their talent pipeline - they're the ones reducing the gap by 1% to 2% every year. There are still many that don't have the resources or inclination to treat it other than a tick box exercise."

The main concern around suspending sanctions on businesses for not submitting their reports this April is that momentum - even if not yet reflected in the figures - will be lost. Beth Hale, employment partner and general counsel at law firm CM Murray, says: "Women and are likely to come out of [the virus] worse anyway, and as a nation we're already doing pretty badly on gender pay parity. The government ought to be sending a positive message, but instead it's giving employers an out." And while there has been criticism that the reporting framework has been too blunt or lacks teeth, it has raised awareness and forced employers to be accountable. "The reporting regime has brought gender pay inequality to public attention and shines a light on pay practices, which is important," Hale adds.

Cronin notes the correlation between the proportion of companies that reported on time in certain industries and those that have been worst affected by the pandemic. Central government and local government were among the highest reporters - 83% of central government departments reported by 5 April, while 71% of local government employers did so. Sectors with the lowest proportion of employers reporting include hotels, catering and leisure (33%), retail (36%) and construction (38%).

Some industry trends can be picked out from those sectors where a high number of employers reported: in finance, for example, the overall pattern reflected the wider employer population, with rising numbers of women in the top pay band and a 0.2 percentage point reduction in the mean gender bonus gap, and a 1 percentage point rise in the median. However, the gap itself remains high at 25% median gender pay and an almost 40% gap in bonuses. "Many sectors seem to be applying the same sort of interventions and getting more or less the same results," Cronin adds. "And the main intervention has probably been to help women become executives, judging by the pay quartile data."

Maintaining momentum

Dawn Moore, group people director at construction company J Murphy & Sons, published the organisation's gender pay gap report on deadline day. "Even in times of crisis you have to have a focus on the future," she says. "Many of the actions we mentioned in the report are still on the agenda." These include increasing representation in its Future Leaders Programme, which comprised 21% female employees this year, and promoting agile working practices, which has helped increase the proportion of women in the business over the last 12 months from 13% to 15%. "We started simply with enhancements to family-friendly policies, discussions on how offices are set up - the next phase is how we make that work on site," she adds. "We've slowed down on some of the smaller initiatives but the bigger ones are still going on. They're not as visible, but they're still there."

IT services company Fujitsu posted its report in January this year, and was one of the first 1% to report after the legislation was introduced in 2017. "For each subsequent reporting year, 2018 and 2019, we have consciously published ahead of the legally required deadline. It is really important for us to be transparent with our employees about the progress we are making and to use this reporting as a way of measuring the impact that our action plan is having day to day," says Kelly Metcalf, head of diversity, inclusion and wellbeing. "This is a sustained effort across the business and through our gender pay steering groups." The company uses six-weekly reviews of employee data to check the progress being made and identify any areas that need attention.

What happens now?

For the approximately 50% of companies that are still to report, the legislation remains unchanged - the implication from the Government Equalities Office is simply that it will not sanction them for being late. Furthermore, next year's reporting cycle - with a snapshot date of 5 April 2020 - will be problematic. Figures from HMRC in early May showed that 6.3 million, or 23%, of all jobs in the UK had been furloughed since the job retention scheme was launched on 20 April. "The issue is going to be comparing any form of statistical progress - this will be derailed," says Thomas from Curo Compensation. "There will be significant headcount changes, job losses particularly in sectors such as retail, people on unpaid leave. There are questions around what you might report - the salary you paid as an employer or the government furlough grant?"

Both the Government Equalities Office and EHRC were approached for comment on whether or not there might be changes to next year's reporting requirements, but were not able to clarify if this would be the case. One option might be for employers to use their February payroll date for the snapshot as this might better reflect "normal" pay. Sectors that retained or even hired more employees during the coronavirus period - such as retail or social care - would have little problem with the April snapshot date, others could have a very large number of employees being marked as "reduced-pay employees" and hence excluded from gender pay gap metrics.

John Petter, CEO of HR and payroll software provider Zellis and former CEO of BT's consumer division, suggests "the Government may choose to ask organisations to report their numbers next year on a pre- and post-furlough basis". He says: "This would give an underlying view of the overall progress made on the UK's gender pay gap, or the lack thereof. In any case, organisations should be conscious of any equality or bias issues when assessing the overall demographic profile of their furloughed employees."

Hale argues that, should the reporting cycle go ahead with no adaptations, it could be revealing, if not reflective of business as usual. She adds: "It might show us whether more women were furloughed, for example, but won't be that indicative of reality. The concern is that gender pay gap reporting will fall down the priority list after employers try to rebuild after Covid-19 and then deal with Brexit - it's not high on the list of priorities." Thomas fears that employees facing financial pressure due to job losses either caused by the virus or the economic fallout in the coming months could become more litigious, and urges HR professionals to take an equitable approach to decisions they make during this uncertain period.

"HR might not see pay equity as a high priority at the moment but I'd encourage them at whatever stage of the pipeline to keep an eye on numbers for balance," she advises. "So just as you would look at the numbers of men and women you hire, how many are you letting go or reducing pay for? Is this happening on an equal basis?"

Focusing on gender equality

There are also some practical ways employers can retain a focus on gender equality and the wider inclusion agenda during this time, according to Charlotte Sweeney from diversity consultancy Charlotte Sweeney Associates. "When leaders are talking about coronavirus they should be inclusive in their messaging. Are they communicating with all people who are on furlough, for example, and what is the representation of different groups who have been placed on the scheme?" she says.

Since furloughed workers are able to undergo learning this could also be an opportunity to step up diversity and inclusion training, or mental health first aid. As work has become more virtual, HR also needs to ensure that this is being done in an inclusive way, for example being mindful that many employees will have additional childcare responsibilities or be sharing offices with family members, so easing demands for video calls or compulsory attendance at virtual meetings.

Cronin concludes that, had it not been for the pandemic, the conversation about this year's round of figures would have focused on the lack of real improvement, and the Government might have pushed towards making company action plans on gender pay mandatory. While not all of the 10,000 or more employers that are obliged to report may survive to the next reporting date, redressing gender pay and bonus inequality remains on the agenda.