Wage transparency needs to go further – but is it the only answer to the growing problem?
One benefit of the talent shortage in a competitive job market is that companies are jostling to attract more women to work for them. One enticement used by more enlightened organisations is to be more upfront about pay rates and directly address the gender pay gap. But does greater transparency narrow the gender pay gap? And, if so, how can companies be encouraged to be less secretive about what they are paying their staff?
What and why: the gender pay gap explained
Let’s be clear about what we mean when we refer to the gender pay gap. It isn’t about paying men and women differently for doing the same value work – that would be unlawful. The gender pay gap is the difference between men and women’s average earnings. The Workplace Gender Equality Agency’s (WGEA) 2022 report The Wages and Ages: Mapping the Gender Pay Gap by Age shows that men earn more than women across every generation, peaking at between the ages of 55 and 64 when there is an earnings difference of over $40,000 per year.
So while the gender pay gap is small for women and men who’re just beginning a professional career, it grows with employee age. Employment law expert Susan Price says that companies rarely acknowledge that a gender pay gap exists for them – until they are forced to confront their own data.
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“I don’t think organisations do this deliberately, but they do it unwittingly in ways that are more nuanced,” explains Price. “For example, Fred and Mary may start at the same company at the same time at graduate level, but at the first pay round, Fred gets a slightly bigger increase because he was assigned to a more senior project. If Fred and Mary are later headhunted by another company, Fred may say to his employer if he’s going to stay he wants a pay rise – and gets compensated; but Mary may have her eye on accruing time to qualify for maternity leave and simply turns down the offer without asking for an incentive to remain,” says Price. Add a year of missing out on a pay cycle due to maternity leave, and you can see how the pay gap starts to grow bigger.
The fact is men and women are getting very different outcomes on bonuses, out-of-cycle pay rises and men being promoted faster into senior roles where they are over-represented compared to women.
Impact of transparency
Hopeful signs that things may be shifting are heading over the horizon. Earlier this year, PwC Australia revealed details about its pay bands across divisions and across all ranks of staff, including partners. Accenture quickly followed suit, publishing minimum pay rates for a range of roles. These consultancy firms are particularly alert to the benefits of greater transparency around pay, following the lead set in the UK.
In a world first in 2018, all companies in Great Britain (but not Northern Ireland) with more than 250 employees were required to report their gender pay gap to the Government Equalities Office (GEO). Following the release of the figures, a Guardian analysis of the data showed that in companies where women are better or over-represented in the top pay band, the median gender pay gap shrinks relative to the composition of the company as a whole.
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What is more, companies profit in multiple ways when they take action to close the gender pay gap. The prestigious Credit Suisse 3000 report for 2021, showed “a positive correlation between increased gender diversity in leadership positions and superior returns on capital, Environmental, Social and Governance (ESG) and stock performance. The more pervasive diversity is within an organization, the stronger the relationship”.
Another study of 22,000 companies worldwide found that having at least 30% of women in the C-suite adds 6% to net profit margin.
Pay Equity Audits
The use of pay equity audits are an important way for a business to remedy gender pay gaps, says Price who was largely responsible for introducing these when she worked at PwC Australia.
“Payroll and HR teams did the analysis at PwC and took the results to the partners and the board. Following that the firm went public on it. My advice is to lift the hood and do the detailed analysis. Sometimes there are reasons why people are being paid differently, but you need to have arguments ready to explain that. But if people feel they are not being treated fairly, you will lose talent,” says Price.
The fear of cost or of being sued hangs over a policy of secrecy, says Price.
“In every audit I have done, there were things that could be fixed easily and they didn’t necessarily cost a lot of money. If you want to make out-of-cycle pay increases, you can still do that but don’t have individual managers making independent decisions. It has to go back to HR and the manager has to make a business case for it,” says Price.
When pay reviews and promotions come around each year, cast a gender lens over it and satisfy yourself that you haven’t unwittingly rewarded men more than women, she says.