ArticleFebruary 2, 2023by included

What’s the impact of pay gap reporting?

What is cultural intelligence? To be culturally intelligent is to adapt and operate effectively in a range of contexts. These can be across national, ethnic, organisational, generational, and departmental settings...
It’s that time of year again, when UK companies of 250+ employees are required to submit their gender pay gaps (GPGs) to the government. These will then be published by the UK government’s gender pay gap service – a publicly accessible website where anyone can check the salary or bonus gap of any company they’re interested in.


Impact of gender pay gap reporting

What does gender pay gap reporting mean for your employees?

At an individual level, it’s easy to see the benefit of having publicly available and accessible GPG data. Included’s own data collected from tens of thousands of employees from organisations across the globe has shown that if employees feel pay decisions are fair and transparent they’re more likely to stay at the company. . With publicly available GPG data, people are able to check how their own companies are doing and use that to decide if they want to stay at their current jobs, to advocate for themselves or for colleagues, or to negotiate for salary or bonus increases.

How does gender pay gap reporting impact your employer brand?

We also know that more than ever before, people applying for jobs are considering a company’s D&I initiatives when deciding whether to accept a job offer.  In fact, research from job search site shows that “86% of job seekers say they factor an employer’s reputation on D&I in their job search, [and] 62% of job applicants say they would turn down an offer from a company that did not support D&I.” While GPG may not be a perfect way to evaluate an organisation’s equity, it’s a readily available and comparable data point that can help applicants make those evaluations.

Can gender pay gap reporting change your industry?

At a higher level, this GPG data can also be useful to understand gender dynamics across entire industries.  Many industries have been decried for their gender biases in the past, such as finance, consulting, and tech. This GPG data allows the public, or any entity, to understand the extent to which those complaints are founded, and to identify firms that are performing particularly well or poorly when it comes to gender equity in remuneration.

Beyond compulsory gender pay gap reporting

Why should organisations go beyond just reporting on gender pay gaps?

While GPG reporting is a good starting point, we know that D&I goes well beyond gender. When employees and applicants are trying to understand an organisation’s level of equity or inclusion, they are also thinking about race, ethnicity, disability, sexual orientation, age, and other characteristics. GPG reporting is currently a requirement in the UK, as well in some US states like California and Illinois. But ethnicity pay gap (EPG) reporting is reportedly going to be required in both the UK and the US imminently.

Getting ahead of this requirement would ensure that companies are prepared to report on EPGs when required, but also show their employees that they are truly committed to ensuring equity across their organisation, including holding themselves accountable.  Broadening this reporting to other aspects of diversity would further demonstrate that commitment.

The UK government and US states where GPG reporting is currently required provides guidance on how to calculate those pay gaps, and likely will provide similar guidance for EPG reporting when it becomes mandatory as well.  However, this guidance – the way these governments ask companies to calculate their pay gaps – is imperfect.  As I and others have pointed out in previous articles, much of the pay discrepancy between genders measured using this governmental guidance can be accounted for by seniority level in an organisation and number of hours worked. That means we don’t necessarily know the source of these gaps; is it due to actual differences in pay for different people working the same jobs and hours, or is it due to discrimination in hiring, promotion, or client/account allocation practices?

For this reason, organisations should go beyond just the basic calculations the government is requiring of them. This Diversity 101 approach is compliance heavy and driven by obtaining a legal minimum rather than a maximum. Moving beyond this would help identify the sources of these pay gaps, leading to more effective and sustainable solutions. It would also likely help organisations provide more accurate information to their employees and prospective job applicants

How are prospective candidates looking at your pay gaps impact recruitment and employer brand?

As this article has already pointed out, applicants are looking at D&I initiatives more than ever before to decide whether to work with a given company. This is particularly significant for younger employees (Millennials and Gen Z), so it is likely that this is not a passing trend. But at a larger level, issues of equity and inclusion are becoming increasingly important across the global zeitgeist. Stories about people changing their names on job applications to appear white, or taking down photos of their Black families when getting their house appraised, or disabled employees not getting adequate support from their companies are commonplace these days, let alone stories about inequitable treatment from government agencies like the police.

By highlighting what they are doing to ensure their employees are supported in the way they need, to correct for and mitigate their biases, and help break down systems and patterns of discrimination, organisations can set themselves apart as a true champion of D&I.  This does not go unnoticed by employees or applicants – reviews on sites like Glassdoor or Mumsnet prove that.

Pay gaps are big part of that evaluation. An organisation that publishes pay gaps beyond just gender, with a comprehensive understanding of the drivers of those gaps, shows its commitment and accountability to D&I more than most others. Showing that commitment is no longer a choice for any company that wants to succeed in today’s world. It’s a matter of survival, and those who seem the fittest and who have adapted the most to the increasing demand for D&I transparency and action will be the ones to thrive.

Looking to take your understanding of your organisation to the next level? Get in touch to discuss how Included can help you harness your organisational data identify where D&I efforts need to be focused.