Flatlining – why gender pay gap reporting needs a new lease of life

Since 2017 public and private sector employers in the UK with 250 or more employees have been required to publish annual statistics on the gender pay gap within their organisation.  The obligation is derived from regulations made under a power in the Equality Act 2010 and was implemented with the aim of improving gender equality.  When the UK introduced the gender pay gap reporting regime in 2017, it was at the forefront of tackling the gender pay gap.  However, seven years on, the most recent statistics show that the reporting regime has had a minimal impact on closing the gender pay gap.

 

 

Gender pay gap reports for the 2022-23 reporting period fell due on 4 April 2024.  Analysis of these reports shows the median pay gap to be 9.1%.  Officially, this makes the pay gap the smallest since the mandatory reporting regime began.  However, the statistics show minimal change since last year (when the median pay gap was 9.4%) and little overall progress since the duty to report was introduced (when the median pay gap also sat at 9.4%).

 

 

Since gender pay gap reports were first published in 2018, there has been some positive movement but this has been slow and does not represent a consistent direction of travel.  Instead, the pay gap rose gradually over the first three years, spiking in 2020, the third year of reporting, before beginning to trend downwards.  The 2020 spike coincided with a temporary change in reporting parameters, introduced in response to the covid-19 pandemic (see Mixed messages: Gender Pay Gap Reporting in 2021 for more information).  This introduced variability into the reporting requirements such that the year-on-year statistics fail to tell a story about progress, or lack of it, over time. A clearer picture can be seen from the ONS statistics which show a more consistent, albeit very gradual decline since 1997, apparently uninfluenced by the introduction of the requirement to report pay gaps.

 

Overdue for review

Built into the gender pay gap regulations is a provision for review within five years of their introduction.  This provision acted as a catalyst for debate on possible changes to render the regulations more effective.  Proposals for reform included:

 

However, the April 2022 deadline for the review passed without any apparent action being taken to review or amend the legislation.  

 

However, reform may be on the horizon. A general election due to take place in the UK later this year could lead to a fresh approach to gender pay.  The Labour party have made a number of commitments on equalities (see our blog Double or nothing. Would protection against dual discrimination improve the odds for claimants?) and, in relation to gender pay gap reporting, they have indicated that they would:

 

These proposals have the potential to shine new light on pay disparities and to reinvigorate the discussion about how to address the persistent gap.  However, much would depend on their detail and whether non-compliance would lead to sanctions.  

 

Across Europe a more radical approach is being taken to pay transparency and pay gap reporting.  From 2026, employers with 250 or more employees will be subject to obligations under the EU Pay Transparency Directive.  Not only will they be required to publish gender pay gap reports (which must be broken down by category of workers, thereby providing a considerably more detailed picture than that required by UK gender pay reports), they will also be subject to a raft of additional transparency provisions including:

 

Crucially, pay gap reports showing a differential of 5% or more will lead to a compulsory pay audit and a requirement to remedy any unjustified gender pay discrepancy.  For more information, see The EU Pay Transparency Directive: What do UK employers need to know.

 

The latest gender pay gap reports paint a disheartening picture of stagnation, with the UK now conspicuously trailing behind Europe in tackling pay inequalities.  More decisive steps are required to create a shift in approach.  The Pay Transparency Directive is a readily available blueprint which could be adopted within the UK to address the persistent lack of progress.  Without a toughening of the current regime, it could take decades before the UK’s gender pay gap fully closes.