As soon as employers with over 250 employees or more run their Gender Pay Gap ("GPG") calculations, the focus switches to preparing the GPG report and its accompanying narrative.
Over the course of December, we are publishing a series of insight bulletins as part of our GPG Reporting Countdown Series. We recently published our first GPG insight bulletin Crunching the Numbers! In this bulletin, we look at the questions that frequently arise for employers when reporting their calculations and drafting the statement.
The key message for employers is that although running the calculations is a crucial first step in the process, the accompanying statement provides an invaluable opportunity for employers to contextualise the existence of a GPG and set out their roadmap for reducing that gap.
We have run the numbers, what next?
The next step is to consider how best to present the specific calculations to ensure that it accurately reflects the company's position.
We have seen many clients present their figures by way of graphs, charts and diagrams. We consider these visual aids, and particularly where a mix of such aids are utilised, to be the best way of presenting the data.
The real value is, however, not only understanding what GPG exists within the organisation but in undertaking a deep-dive as to what factors are driving that gap to better understand why that gap exists. An employer cannot address a GPG until it understands the various factors causing it.
This review will assist you in understanding what internal factors contribute to the gap which, in turn, will inform the narrative about implementing change to the inherent or structural factors driving that gap, if applicable.
Crucially, the review should also consider whether the existence of the gap is driven by external elements that are simply beyond even the most proactive employer’s control. In a previous publication: What Drives the GPG? Lessons from the Uber Study, we considered the Stanford University study which revealed a number of unexpected gender related explanations contributing to the GPG within Uber. In that case, the overall conclusion reached was that the main drivers were external and simply beyond the employer's control. Drilling into these external factors is crucial to contextualising the existence of a GPG.
This is an area that we are currently assisting many of our clients with. Although it is a time-consuming exercise, once completed, employers will be significantly better equipped to take steps to address the gap going forward.
Can you give another example of external factors driving a GPG within an organisation?
Another example would be where a software company employs a significant number of software engineers whose skillset is in very high demand and, as a result, yields very generous remuneration packages. This could result in the existence of a GPG because there are more men than women in these roles who are paid more based on competitive market rates.
Traditionally, although time has now moved on, the vast majority of students graduating from university as software engineers were male. The greater number of male software engineers in the talent pool is an example of an external factor that is driving a GPG which is outside of the employer's control, ie the shortage of women in STEM creates gender representation issues as there is a smaller female talent pool from which to recruit. In turn, the statistical likelihood of an equal number of male and female employees reaching senior management positions from this talent pool is quite low, and so a high GPG in such companies is almost inevitable.
In drafting the narrative to accompany this GPG, we would expect the company to acknowledge that the lack of representation of women in such technical/software engineering roles is a systemic and industry-wide problem. This does not, however, exonerate the company from taking any action and we would expect the organisation to also commit to doing more to bridge the gap, despite this external factors at play. A successful employer will, however, be able to point to whatever steps it is taking to attract, promote and retain a more balanced number of male and female graduates with this skill set.
Should we expressly reference and explain any applicable internal and external factors in the accompanying statement?
Employers are required to explain the reasons for any gap and set out the measures being taken or being proposed to eliminate or reduce that gap.
In addition to complying with these legislative requirements, the narrative is the employer's key tool to contextualise and explain itself to both external stakeholders (e.g. the media and prospective employees) and internal stakeholders (e.g. existing employees).
So, what form should our report take?
The Gender Pay Gap Information Act 2021 ("Act") or the Employment Equality Act 1998 (Section 20a) (Gender Pay Gap Information) Regulations 2022 ("Regulations") do not stipulate the form the report is to take. We have set out below the key sections that should be included in a best practice template.
- Introduction to the organisation with an overview of the company and its size, people, locations, sector, culture and values.
- Introduction to the GPG reporting obligations in Ireland.
- Explanation as to what a GPG is, and a clear explanation of the difference between a GPG and unequal pay for like work.
- Overview of the GPG reporting requirements and the key definitions that are used throughout the report.
- The GPG results in graph or chart form. Some clients are also considering appending their calculation methodologies and pay components to their report.
- A clear narrative contextualising the reasons for the existence of a gap.
- A roadmap of the measures being taken or being proposed to be taken to eliminate or reduce that gap going forward. Employers will be held to, and assessed against, what they report and commit to do on a year-by-year basis so it is crucial to consider this in the context of drafting this section.
How are you seeing clients address a wide GPG in their reports?
We are typically seeing clients and companies address the existence of GPG, even where such is very wide, head-on. There is a level of expectation that organisations will have some form of GPG. The key focus is on what is being done and what more the employer proposes to do in order to tackle that gap.
Employers should also be ready to highlight the positives within their numbers as may arise. This may be to point to a year on year improvement of a particular metric, a "technical negative" where it does arise (where the female employees fare out more favourably than the male employees on a given metric) or to explain how a particular variable factor disproportionately influences the reporting numbers by running the same calculations but controlling for that specific variable factor.
By acknowledging the existence of a gap and explaining the driving factors, including taking accountability for internal elements and / or contextualising any external drivers, employers will have more credibility in presenting their plan of action for reducing the gap over the coming years.
Please get in touch with your usual Matheson contact should you require further information in relation to the material referred to in this update. Visit our Employment, Pensions and Benefits page to stay up to date with the latest updates, articles and briefing notes.
Keep an eye out for our next insight as part of this GPG Reporting Countdown Series which will be published in the coming days.