Bola Gibson is head of inclusion and corporate responsibility and Victoria Parry is an employment partner, head of the Advisory Practice Group, chair on the Diversity Champions forum and sits on the Executive Board, both at Osborne Clarke.

Bola Gibson and Victoria Parry examine the benefits of pay gap reporting, and how to get the most out of the exercise to make a real difference in your firm.

Gender pay gap reporting was brought into law in 2017 as part of the Equality Act 2010. The thinking behind this was that the requirement to publish these stats would encourage employers to focus on the issue. It mandates that all businesses with 250 or more employees must report their gender pay gap to the government on an annual basis. Employers need to report two figures – the mean gender pay gap, which is calculated as the difference between the average pay of men and the average pay of women in the organisation; and the median gap, which looks at the difference in pay between the midpoint of all men’s pay and the midpoint of all women’s pay.

What pay gap reporting does not tell you is whether men and women in an organisation are paid equally for the same work; although this is often misunderstood by many.

So, if pay gap reporting doesn’t give you that all important equal pay information, why is it useful? Pay gap reporting helps you understand the structural imbalances in your organisation. In the legal sector, it is often the case that men predominantly occupy the more senior, and therefore the higher-paid roles within the organisation, while women disproportionately make up the roles that attract lower pay.

Addressing imbalance

In addition to reporting the mean and the median, employers also have to report on the gender balance in each of the four pay quartiles. This can help better identify the quartile that might be driving the biggest differences in pay gaps. If, for example, you have 80% women to 20% men in your lowest pay quartile, and 50:50 in your upper pay quartile, you may want to concentrate your efforts to reduce the gender imbalance of that lower quartile. This is one of the potential anomalies about the process – you can reduce your gap by increasing the proportion of men who make up roles in your lower pay quartiles.

This leads to the question of why gender pay gap reporting is significant and whether it can be a useful tool. You’re not going to magically become more gender inclusive by reporting, but reporting any gender pay gap will pose a number of questions that you can try to answer, and highlight areas of weakness you can choose to address. For example, does your gender balance across the pay quartiles reflect the split of your overall population? Are women progressing into the higher pay quartiles at the same rate as men? If they are, and you still have an increasing gap, are you over-recruiting men into those senior roles – and is that the market, or a recruitment process that is delivering unequal outcomes? Is your gap due to occupational segregation – where men and women are overrepresented in certain occupations (for example, secretary = female, engineer = male)? If so, what are the tools you can use to address this?

Asking questions is one thing, but using the pay gap to educate your leaders about those imbalances can also encourage change. Some organisations produce and report the pay gap, without socialising it with their people or leaders. By sharing the report and building understanding around it you can engage more people in your D&I process, not to mention creating greater understanding.

Mind the ethnicity pay gap, too

While gender pay gap reporting is now seen as an essential element of many ESG strategies, ethnicity pay gap reporting has only recently been adopted, and only by larger organisations. They have the resources to collect the data, and a high enough proportion of ethnic minority employees to safely report without jeopardising the identity of individuals. When it comes to ethnicity you have several challenges: you have to solicit that information from staff and gain their permission to use it in this way. Smaller firms may find it challenging if they have few ethnic minority staff. Smaller numbers not only present risks around identifying individuals, it also leads to very volatile data; the departure of one senior ethnic minority manager might see your gap sky rocket, for example.

The same challenges that have been outlined with gender pay gap reporting continue to apply for ethnicity reporting. Added to that, there is no government guidance as to how to produce ethnicity pay gap reporting, despite business and interest groups calling for it. There is also an argument that the aggregation of a wide array of ethnic minorities into one category, to create the binary categories that exist with gender pay gap reporting, will hide glaring issues with specific minority groups.

Despite this, larger firms and businesses have adopted ethnicity pay gap reporting, modelling it on their gender pay gap reporting on the assumption that something is better than nothing.

Regardless of your personal views on this type of reporting, it’s a useful tool that can help you see structural imbalances in your organisation’s make up. If you do nothing with the data, however, it’ll have no teeth, no purpose and will have just been a rather expensive reporting exercise.

Note to reader: This article was originally published on The Law Society's Practice Management section on 19th April here: Closing the gap | Feature | Communities - The Law Society

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