The Gender Pay Gap in Britain Gets Another Look: QuickTake

Mar 08 2019, 6:00 AMMar 08 2019, 9:07 AMMarch 08 2019, 6:00 AMMarch 08 2019, 9:07 AM

(Bloomberg) -- The U.K. is the biggest country yet to delve officially into the explosive topic of the pay gap between women and men via mandatory annual disclosures. For a second year, organizations with at least 250 employees in Britain are preparing to report gender wage disparities after the new reporting system that debuted in 2018 unleashed a wave of embarrassing information.

1. What have we learned from these numbers?

Last year, in a groundbreaking attempt by the government to understand the gender pay gap, more than 10,000 U.K. companies and public agencies submitted a blunt, uniform assessment of the gap between what men and women earned on average in their workforce. The figures highlighted that women are often under-represented in higher-paying roles. For example, at HSBC Holdings Plc, Britain’s biggest bank, women earned on average 59 percent less than men, a figure in part skewed by the fact that women made up only a third of senior managers. The numbers didn’t measure the pay of men and women in the same job.

2. What are we expecting this year?

About one-fifth of companies have reported their figures as of March 7. After much publicity and hand wringing over the last set of data, this second year of mandatory reporting could disappoint those hoping for signs of improvement. But that doesn’t necessarily mean firms have ignored the feedback. The figures they’re reporting now are based on a snapshot of their workforce on April 5, 2018. Any changes they’ve made since last year’s inaugural report won’t show up until next year -- and anyway, progress takes time. Still, some early reports have already raised eyebrows. HSBC’s gender pay gap, for instance, actually got worse.

3. What are companies required to report?

Any difference between the salary and bonus of all male employees and all female employees on a mean and median hourly basis, the proportion of each gender receiving a bonus and the proportion of men and women in each pay quartile. The findings must be published annually on both the government’s and the companies’ websites -- and kept there for at least three years. Publication of an “action plan” showing how companies will try to close any gaps is encouraged, but not mandatory. While some organizations filed late or submitted statistically questionable figures last year, the Equality and Human Rights Commission says all the firms required to participate eventually did so.

4. How far is the U.K. from ‘equal pay for equal work’?

That will be hard to say. The phrase refers to the idea that men and women doing the same job at the same company should receive the same salary. But the disclosures by U.K. companies don’t provide employee-to-employee comparisons. Reporting on an adjusted basis is more popular among U.S. companies that have chosen to disclose their pay gaps under pressure from activist shareholders.

5. What’s been the reaction so far in the U.K.?

There’s been something of an uproar over the lack of women in more senior -- and thus well-compensated -- positions. The pay gap in financial services was described as “astonishing” last year by Nicky Morgan, a member of Parliament and chair of its powerful Treasury Committee. She was also among politicians demanding that some law and accounting firms revise their figures after they classed their top-earning partners as owners, excluded from the calculations, which potentially understates the gender wage difference. Many high profile firms have pledged to improve their numbers but say it will take time.

6. At what point does a wage gap violate the law?

That remains to be seen. The data could potentially provide fodder for existing or future lawsuits under the U.K.’s 2010 Equality Act. The law gives women and men the right to equal pay for equal work, and there’s a framework for comparing jobs by effort, skill or decision making. Earlier this year, thousands of women working for Glasgow Council in Scotland reached a financial agreement over pay discrimination after fighting for more than a decade and staging what is believed to be the U.K.’s biggest-ever strike over equal wages.

7. What prompted the U.K. to disclose the pay gap?

David Cameron, who served as prime minister from 2010 to 2016, made addressing the gender-pay “scandal” part of the Conservative Party’s agenda. Eliminating the difference could add 150 billion pounds ($196 billion) to annual gross domestic product by 2025 by boosting female participation in the workforce, encouraging women to work longer hours and moving them into more productive jobs such as those in science and engineering, according to a 2016 study by McKinsey & Co. It’s also a question of fairness. The U.K.’s Office of National Statistics, which publishes its own analysis, says the gap is caused, in part, by more women working part-time, clustering in occupations with lower pay and taking time out to have children. The discrepancy widens with age, and women’s pay stops climbing at a younger age than male colleagues.

8. Are other countries doing this?

Yes. Australia requires firms with more than 100 employees to report on gender annually and publishes reports on their equality objectives, while Germany has implemented new rules around the issue. Austria and Belgium were other early adopters, though they don’t force companies to release figures publicly. Meanwhile, the U.S. has moved away from requiring more uniform or transparent disclosures to the federal government.

9. Where is this heading?

After last year’s report, a group of lawmakers suggested ways to make the figures less blunt, to bolster enforcement and to require remedial action, but the government rejected the recommendations in order to maintain consistency from one year to the next. The government has also declined to increase the number of organizations required to file reports. However, it is considering the possibility of mandatory pay reporting by ethnicity to expose the pay gap for citizens of “Black, Asian and minority ethnic,” or BAME, origins. A public consultation ended in January and already some firms, such as Deloitte, KPMG and broadcaster ITN, have voluntarily decided to release their own numbers, while others have pledged to follow.