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

24 November 2022

The ongoing cost of living crisis has prompted organisations to take a further look at their overall pay strategy, with a view of providing financial support where they can. 

Whilst analysing pay data, it is an opportune moment to also review Gender Pay Gap data in advance of reporting deadlines, and to consider voluntary Ethnicity Pay Gap reporting

April 2022 figures from the Office of National Statistics (ONS) show that among full-time employees, the gender pay gap was 8.3 per cent, demonstrating that there is still some way to go in narrowing the gap between male and female workers.

Whilst the government has now announced that Ethnicity Pay Gap reporting will be voluntary rather than mandatory, employers may still wish to review their ethnicity pay gap data as part of their overall pay strategy to highlight any potential areas or concern that need to be addressed.

How to tackle the gender pay gap proactively

Employers should review figures, analyse different functions of the business and look for patterns and trends that may be affecting the overall results, for example, a high percentage of males in more senior roles and more female employees in lower paid, part time roles. The potential need to implement a more interventionist approach across their businesses should be considered to tackle the gap. This approach could include, for example, introducing female-focused mentoring, empowerment, and leadership programmes.  

The greater move to hybrid working and discussions surrounding a 4-day working week may also be proactive and positive ways to narrow the gap. With more women taking the lead with caring responsibilities, initiatives aimed at supporting flexible working allow women to be present at home, whilst still being able to work in their substantive roles, rather than a lower paid part time alternative.

The House of Commons and the Women and Equalities Committee have each acknowledged that ‘flexible working for all lies at the heart of addressing the gender pay gap’. 

Preparing for voluntary ethnicity pay gap reporting 

The first step of the process is to start collecting ethnicity data from employees (if employers don’t already do so). Employers need to be mindful that this data is ‘special category data’ under the General Data Protection Regulation 2018 (GDPR) and so collection and processing of this data requires additional considerations.

A good Human Resources (HR) system can be used to store this information and keep it up to date in a safe and secure way, ready for analysis and reporting.  

The next step would be to start calculating gaps, deciding how information will be reported internally, and what to do with that data. Voluntary reporting is only a valuable exercise if employers intend to act, based on that data.

Good pay matters

A current, relevant, and robust pay strategy has a number of benefits for employers, employees and potential candidates. Employers want to be seen as ‘good employers’; attracting and retaining high calibre teams that understand that their employer has its finger on the pulse and cares about fairness and equity.

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 the decisions around pay and reward are made fairly and with consistency.  

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

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