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Last week saw the release of Labour’s plan to make work pay. There were two sections that were of particular interest to us: Equal Pay and Pay Gap Reporting. It’s important to note that this document is obviously a summary document and we look forward to learning more about the detail behind the major points raised.

To start as we mean to go on, in this article we replace the existing term “Pay Gap” with the term “Representational Imbalance” because that’s what the current methodology shows you.

Equal Pay

To be 100% clear, the commitment to tackle the gender pay gap should not have been in the first paragraph of the Equal Pay section – the two phenomena are uncorrelated. Any given organisation could have: 

  • No equal pay or representational imbalances;
  • equal pay, but no representational imbalances; or
  • both.

Fig. 1 shows a fake company that has both an Equal Pay problem and a Representational Imbalance, but each are in favour of a different employee group. In this case, Equal Pay claims could be brought by the green employees at the same time that blue employees are experiencing Representational Imbalances. 

Figure 1. Equal Pay and Representational Imbalances

Paying people less due to a protected characteristic when it can be proved that there is no good reason to do so is illegal, but as Labour suggest, it’s a difficult process that takes time and effort to get through the justice system. This is why it’s critical that employers have robust pay/role evaluation mechanisms that are as free as possible from subjective amendment. 

Pay Gap Reporting

Ever the optimists, we are encouraged by the intention to require larger firms to develop, publish and implement action plans. However, the aim of an action plan cannot be to “close their gender pay gaps”.

This sounds pedantic, but it’s at the heart of this matter and is an assertion that has crept into this due to the lack of education on what a gender pay gap is. Firstly, we need to restate a much more robust term – representational imbalance. So what is a representational imbalance? As in fig.1, we can see that there are very clear representational imbalances at various levels within this simulated organisation. Simply put, in a balanced system, given a 2:1 ratio of green to blue employees (16 vs 8), we would see 4 green and 2 blue employees in each of these four areas. In fact, these four areas are also visually showing the pay quarter breakdown of this organisation. So the ultimate aim should actually be to ensure that the representation of blue employees is fair across the pay range of the organisation and in so far as reporting or narration, the organisation should provide commentary on why they have imbalances and what if anything they can do about them.

Just in case you’re sat there thinking: Tomato, Tomaaato – look again, this time at fig. 2. We’ve done it, we’ve “closed the pay gap”, it’s now zero exactly…

Figure 2. Median blue employees get a pay bump.

All we have done is pay the median blue employees more; we haven’t addressed the representation of blue employees throughout the pay range.

Hopefully this critical difference is acknowledged BEFORE any working group agrees on the content of the new legislation. Remember, this is not more complicated than gender pay gap legislation, it’s contained within the legislation, but the media have settled on reporting the binary pay gap figures because they honestly think these show a valid summary of how any given organisation is performing – you now know they don’t. 

Finally, on gender pay gap progression… The gender pay gap percentage is a binary metric of one aspect of a complicated system of sectors and roles. What we may be seeing in the changing data is the fact that the major disparities have been removed, so that the remaining differences in mean and median percentages are nearly all a function of the different roles performed by men and women across the entire employment landscape1.

So does this pay quarter breakdown have any limitations? Yes, unfortunately it has three.

  1. Time: This is just a snapshot of data taken at a specific moment in time; take the data in the figures above and consider how small changes in the blue representation could have a major overall effect on the organisation unless the narrative correctly covered these points. For example, the top earning blue employee gets headhunted to become the CEO of a rival organisation at the same time as the second highest-paid blue employee takes unpaid leave and is removed from this snapshot.
  2. Granularity: With the data shown above we only see green and blue, but ethnicity is much more complicated with different ethnicities who can have very different lived experiences. The answer may not always be to “zoom in” and show the detail due to the potential to personally identify individuals. Again, this is where a robust narrative can save the day – so much more than any single chart or worse yet, a single binary percentage.
  3. Progression: This point highlights the fallacy of the statement – “close the gap”. Everything we see or read about any organisation’s pay gap is effectively historical information (and not just because 9/10 employers submit their data a minimum of nine months AFTER they could have). The reach is very sector and/or societally-driven and it’s important to comprehend the fact that by the time employees are in this data, much of the imbalance has already taken place due to factors outside the control of an average organisation who doesn’t have societal/sectoral influence.
    1. Gender-specific roles at different levels within an organisation’s pay range.
    2. STEM-related differences.
    3. Geographical representational differences.

Just to name a few.

Do these limitations absolve employers from the responsibility to evolve? Absolutely not, it should actually drive them to ensure that their systems, culture and people are not barriers to evolution. The real work should be to ensure that their particular microcosm can be explained, barriers identified and appropriate action taken to improve the flow of different people into and through the organisation.

What’s missing?

We would strongly urge Labour to overhaul the current gender pay gap reporting legislation and bring it in line more closely with concepts such as the disability confident scheme. This is not about benchmarking employers by using a totally pointless, fallible, opaque percentage – it’s about each individual employer asking themselves:

  • What do we define as “fair” for our unique circumstances? (sector, geography, resources, etc).
  • Explaining this to their employees and getting honest feedback
  • Deciding how near/far they are from this definition and using this to better define their culture, strengths and weaknesses
  • 100% adoption of an amazing Labour-led robust legislated representation-focused pay analysis framework
  • Clear, concise education for all organisations so that the real purpose can be correctly conveyed
  • Statistically-robust support for organisations that are making mathematical errors in very simple legislated duties – this is currently ~1/10 employers in-scope of gender pay gap reporting
  • Administrative support for all organisations so that the colossal amount of non-compliant submissions is vastly reduced – currently 4/10 employers have one or more administrative errors in their gender pay gap process
  • Total overhaul of the submission system to correctly capture the multitude of silly errors that any organisation can make when typing in their metrics
  • Introduction of a robust investigative system to ensure compliance with the legislation and to challenge and compel organisations to ensure they are correctly executing their duties

Summary

Sounds like a lot? It is, but this is the valuable work that needs to be done to highlight what IS within the control of an average employer, what IS within scope of governing bodies, trade unions, etc and what else needs to be done by the Government to ensure that future generations have the ability to choose through nothing more than determination and hard work to be whoever they want to be and get paid fairly for doing so.


  1. Additional Information
    ONS Gender Pay Gaps 1997-2023
    It is critical to remember that this measure is just one indicator of progress and that these percentages are an outcome of all the great work that has been done across all sectors over the past few decades. Remember, this metric is NOT a single factor, but a mass of factors that eventually lead to one measure of progress within all sectors. Progress IS a generational issue because, as we saw at the start, we cannot go around simply paying women more for doing all roles – it’s more about the roles that women are doing and the access they have to the roles that pay more throughout an entire career.
    Given the fundamental differences in the representation of women in the NHS and STEM (to name just two highly visible areas), is progress slowing down because of bad actors or simply because the easy to highlight disparities have been removed over time?
    ↩︎

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