Pay Gap Reporting: Why a robust pay strategy is fundamental to success

29 October 2021

There has been a lot of press that furlough has had a negative effect on gender pay parity, and that the gender pay legislation bought in to tackle it isn’t doing enough to close the gap. The suspension of gap reporting in year one of the pandemic, and the delay of the reporting deadline in year two, haven’t helped. As we emerge from the pandemic and employers begin reviewing their stagnant figures, we look at how to proactively assess gaps and tackle them.  

There have also been further calls for pay gap reporting to widen out and include ethnicity gap reporting. Currently it is only larger employers that report on this voluntarily to their stakeholders often as part of their diversity and inclusion strategies. The Chartered Institute of Personnel and Development (CIPD) has called on the government to address this and bring in mandatory ethnicity pay gap reporting by 2023. We consider how employers should best prepare for this.

How to tackle the gender pay gap proactively

Employers should review figures, analyse different areas of the business, and look for patterns and trends in figures that may be affecting overall results. They should then consider whether they need to implement a more interventionist approach across their businesses to tackle the gap. This approach could include, for example, introducing female-focused mentoring, empowerment and leadership programmes.

How to start preparing for ethnicity pay gap reporting 

The first step on the ladder is to start collecting ethnicity data from employees, before being required to. A good HR system can be used to store this information and keep it up to date in a safe and secure way, ready for reporting. 

A next step would be to start calculating gaps and reporting internally before mandatory reporting is introduced. A popular intervention is to set up a forum for discussion with employees to see how they would like to see pay reported, so that stakeholder views are considered ahead of the legislation coming in.

Good pay matters

The pandemic has meant many employers are experiencing what commentators have called ‘the great resignation.’ Many employees are reassessing their careers and lifestyles, making competition among employers for talent more intense. A strong, well thought-out pay strategy that aligns with business strategy and links to performance and the behaviours you are seeking to reinforce is an essential thing to get right ahead of any pay gap reporting. 

Interventions such as benchmarking and moderation also help to reinforce consistency and fairness across a business. Those that successfully marry up reward to performance can see greater engagement from their employees, in the process creating a powerful retention tool for themselves.  

One of the cornerstones of good HR practice is – and always has been – ensuring that an equitable process for appraising and measuring performance is in place, and that it aligns with pay, reward and recognition. This provides individuals with reassurance that decisions around pay and reward are made fairly.  

If you would like to have a conversation around pay strategy, salary benchmarking, or pay gap reporting please contact Kerri Constable.