The law requiring large employers to report their gender pay gap has been a resounding success, and pay transparency should be extended to cover the ethnicity and disability pay gaps, according to a new IPPR report.
The think tank calls for each employer to publish information on a wider range of pay inequalities in an annual Fair Pay Report, designed to spur further action against unfairness in the workplace.
After the most detailed assessment so far of the impact of the new rules, the think tank recommends that they also be extended to smaller employers.
IPPR conducted a survey, interviews and a focus group involving a total of 60 employers to assess the impact of the new rules. These required employers of more than 250 workers to calculate and publish the difference in average pay between men and women.
Compliance has been remarkably high, with more than 10,000 employers – 100 per cent of those within the scope of the new law – reporting within 10 weeks of the deadline.
The IPPR research found that the regulations have pushed the gender pay gap – and gender inequality more broadly – up the agenda, prompting a board-level focus on the issue for the first time in many organisations.
Most importantly, they have spurred action; four in five (81.3 per cent) large employers have considered or taken further measures to narrow gender pay inequalities as a result of the regulations. A similar proportion expect the regulations to incentivise more employers to reduce the gap.
The research also found that – despite initial unease – there was strong employer support for gender pay reporting, with four in five saying the regulations should be maintained. Employers were also willing to consider extending transparency to other areas including ethnicity, an option on which the Government is currently consulting.
Median hourly pay for women in the UK is nearly a fifth (17.9 per cent) lower than average pay for men. The UK’s pay gap is wider than in most advanced economies.
New analysis by IPPR found that over the last seven years, the gender pay gap fell by just 2.3 percentage points. At that rate the gender pay gap would not be eliminated until 2072.
However the IPPR report finds that, given early signs of the success of the gender pay gap reporting requirement, there is good reason to anticipate it will speed up closing of the gap – as was hoped when the new law was introduced. At the time David Cameron, then prime minister, said transparency would help “cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up.”
Government should now extend pay transparency in order to tackle these and other inequalities, IPPR says. Its report argues that each large employer should publish a new annual Fair Pay Report setting out:
- The gender, ethnicity and disability pay gap at the organisation
- The proportion of workers paid below the real Living Wage
- The internal pay ratio between the chief executive and the average employee
- A fair pay narrative, detailing the employer’s understanding of their pay gap, and their plans to tackle them.
It says the additional burden on employers who already collect pay data for the gender reporting requirements would be small, compared with the radical extension of pay transparency it would produce.
The report also calls for transparency to be extended beyond large employers to cover medium sized firms with 50 or more employees, though with a more limited and less frequent reporting requirement, and a transition period to allow time to adjust.
In order to tackle illegal unequal pay – where women are paid less for work of equal value – employers should also publish pay ranges by role to employees within their organisation. Workers should be given a ‘right to request’ comparison data of pay levels, and the right collectively to trigger an independent equal pay audit.
Joe Dromey, IPPR Senior Research Fellow said:
“Gender pay reporting has been a big success. Transparency has driven the gender pay gap up the agenda, and it is spurring employers to act.”
“We should build on this success with a radical extension of pay transparency. Broader transparency on gender, ethnicity and disability would help drive employer action to tackle these burning injustices. Requiring employers to publish the number of low paid staff would increase pressure for a fairer distribution of the wealth we all help generate.”
“While transparency will help, it alone will not tackle pay inequality. So we also need to see action from employers and from Government to address the structural drivers of inequality.”
Frances O’Grady, General Secretary of the TUC, said:
“Generations of women have been hit in the pocket by the gender pay gap, and we’re still more than half a century away from pay parity.
“New rules to make bosses reveal gender pay gaps have shone a light on the scale of the problem. However, to actually make progress we need to see tougher regulations which extend to smaller employers and include part time, disability and race pay gaps as the IPPR report suggests.
“IPPR also rightly identifies the importance of unions in closing the pay gap. I would urge anyone worried about their pay to join their union. Unionised workplaces offer better pay, fairer treatment and safer working conditions.”
Tess Lanning, Director of the Living Wage Foundation, said:
“The basic test of fairness for any employer is whether they are paying their staff, including sub-contracted staff, a wage they can live on. IPPR’s recommendation to ask employers to report on this issue could help encourage more of them to pay the real Living Wage, not just the government minimum, and in doing so tackle one of the drivers of the gender pay gap.”