David Cameron is warning big firms to have a better approach to their female employees – with a policy he nicked from a former female colleague. Kind of.
He plans to force companies with 250 employees or more to publish the pay gap between their male and female employees. Pay transparency to challenge the gender pay gap is a measure the Lib Dems were pushing through in the dwindling days of the coalition, championed by then Women & Equalities and Business Minister Jo Swinson.
The pay gap in the UK for all employees (full-time and part-time) is currently 19 per cent, measured by median gross hourly pay. You will also come across the assertion that the gender pay gap is 9.4 per cent, but this doesn’t count part-time workers (more of whom are women).
The government is always keen to point out that the gender pay gap is at its “lowest on record”, but it has shifted very little in the past five years, and actually widened in 2012-13 for the first time since 2008.
One former minister of the last government is scathing about the government championing its record on the subject: “yes the gender pay gap’s coming down,” they tell me. “But I think there can be a bit of a sense of complacency when we say it’s at its lowest ever – well yes, fine, that’s good, but there being a gender pay gap, let alone one that’s 19 per cent, is not acceptable.”
So is the Prime Minister really serious about tackling unequal pay?
Here’s his explanation of his policy – formulated at the end of the coalition and promised in the Tory manifesto – in an article in today’s Times:
We have already introduced equal pay audits for those companies that have lost employment tribunals. But today I’m announcing a really big move: we will make every single company with 250 employees or more publish the gap between average female earnings and average male earnings. That will cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up.
We want to see full, genuine gender equality. The gender pay gap is the lowest on record, but we want to reduce it further and will push business to do so: we will require companies with more than 250 employees to publish the difference between the average pay of their male and female employees.
And here’s Section 78 of the Equality Act 2010, which refers to equal pay but has never been enacted in a way that has forced companies to fix their pay gaps:
(Click to enlarge).
Swinson, who held the Business and the Women & Equalities brief in 2012-15, was at the forefront of persuading her Conservative colleagues to take the issue seriously.
“My first thought was ‘this looks familiar’!” is how the former MP reacted to Cameron’s re-announcement of the policy she and her colleagues managed to push through in March.
“It was very frustrating in government when, for the best part of five years, the Conservatives were opposed to taking these steps on the gender pay gap,” she reveals. “But nonetheless it’s always positive to see the Prime Minister and senior politicians recognising the importance of this, not just for fairness of women, but for our economy more widely.”
She decries the Conservatives’ “obsession that the voluntary approach was going to solve it . . . Back when the equality strategy was being negotiated at the beginning of the coalition, this was one of the issues that Nick Clegg and Theresa May were negotiating on, and we were pushing for our policy on pay transparency to be implemented, and in the end, the best we could achieve was that we would try the voluntary approach and if that didn’t deliver, it would be reviewed.”
Giving companies the option of voluntarily disclosing their gender pay gaps didn’t work; only five firms ended up publishing the information.
Although Swinson is in favour of Cameron’s move to make it compulsory, she stresses that the policy alone will not solve the problem. “It has to be looked at as part of a wider set of measures; this measure on its own is very, very valuable but it’s not a silver bullet, and there is no silver bullet, because the pay gap is very complex,” she says.
Swinson praises the current Equalities Minister, and Education Secretary, Nicky Morgan for being “passionate” about the subject, but also warns that “there are definitely voices within the Conservative party who don’t see this as a business issue, who don’t see this as something that is holding back the UK economy, and think that it is something of a distraction. You can only hope that over time those voices will diminish.”
There is a distinct lack of detail about how the policy will work, because it is under consultation. A government spokesperson tells me:
A consultation, launched today, will look at the detail of how the new gender pay gap regulations will be designed, including what, where and when information will be published.
And the “what” here is crucial.
“The devil is really in the detail,” says Belinda Phipps, chair of the Fawcett Society, a women’s rights campaign group that has long been campaigning for equal pay. “It doesn’t actually say anything specific at all in the actual law.”
Those who have published a pay gap voluntarily have taken employed people – excludes the partners – and have taken their basic salary – and that excludes bonus and overtime, which we know already is different for men and women – and they’ve calculated the median for women and the median for men, which is an odd average to choose, and the compared the two. It doesn’t actually tell you very much at all and it’s very easy for you to game it.
Comparing medians leaves room for a company to use the employment of low-paid men, or the awarding of more bonus than salary to highly-paid men, to reduce how wide its gender pay gap appears.
The Fawcett Society and other campaigners are calling for tight regulation requiring companies to publish specific data – not simply the gap, but the maximum and minimum salaries for each type of job by gender, taking into account bonuses and overtime, and looking at gaps in terms of mode, mean and median. “That tells you a different story,” says Phipps.
Phipps is optimistic that the government will respond to pressure from campaigners for such tight regulation, but others are not so sure. Shirley Wright, a partner at the Eversheds law firm who has specialised in equal pay cases for over ten years, predicts that the government will shy away from forcing companies to publish the data in great detail.
“My gut feeling is it will lead to an overall figure rather than details,” says Wright, who has conducted a number of contested equal pay matters for public and private sector employers.
They will I think keep the door open for employers to provide more detail than they have to . . . If I had to bet, I think businesses will be given the opportunity to do it, but I don’t think they’ll be forced to, I think the government will be alive to the potential burden on business . . . It could be quite time-consuming for particularly large employers to number-crunch and understand what the gender gap is at different levels, but it’s more meaningful if you do that.
Wright also suggests that if the government decides on fining companies who don’t comply, it won’t be a significant amount. “I don’t think the penalty would be very high. And a low fine in itself won’t achieve the objective. I have heard it said, definitely not amongst my clients, but I have heard it said that if it’s only going to be a £5,000 fine, better doing that than incurring the time to produce the data that could result in litigation.”
Other EU states are way ahead of the UK in terms of enforcing salary transparency. In some countries, like France, failure to comply with rules to regularly assess pay practices and pay differences and draw up an action plan for equal pay results in financial sanctions. And in Denmark, all companies with ten or more employees are required to conduct a gender audit to compare salaries of women and men and publish annual statistics, or they will potentially face a fine, or even criminal action.
Considering the Equal Pay Act was passed 45 years ago, and many fellow European countries have already legislated for gender pay gap transparency, it looks like Cameron’s announcement this week is the least he could do, and the longest he could have left the situation before intervening.
As Phipps concludes: “It’s hardly a cause for celebration because it is so long overdue.”