16 June 2016

United Kingdom, London

  • Most companies agree with the principle of reporting but majority think Government definition of pay is unsuitable
  • Hubris? Majority of organisations expect to perform well against UK average and their peers but detailed activity to understand issue lacking
  • Many think the reporting burden will have little or no impact

UK companies are sceptical about the impact the new Gender Pay Gap reporting requirements will have, according to a new survey by Mercer. The research found that although 74% of firms agree with the principle of gender pay gap reporting, over half (52%) are either unsure or think the current proposals will make little or no difference to the gender pay gap. Furthermore, amongst the 114 companies surveyed, only half deem the Government’s definition of pay as fit for purpose, describing it as complex (40%), illogical (31%) and burdensome (31%).

UK companies recognise, that through the new gender pay reporting requirement, the Government has not got the balance right between adding a burden on business and providing meaningful insights,” said Fiona Dunsire, Mercer’s UK CEO. “Importantly, this very high level single measure does little to show the way forward for organisations. We share the view of professionals and academics that pay programmes themselves are only one part to addressing the gender pay gap. Our recent When Women Thrive research shows that robust processes to address gender gaps in promotion and development and of active management of parental leave programmes also have a big impact.”

Chris Charman, Principal in Mercer’s Talent business, added: “The unclear way that pay is defined* in the proposed regulations is not appreciated by businesses as it is not only differs from existing equal pay legislation, but is quite alien to how companies actually manage and define pay, bonus, shift pay and other reward programmes.”

Many organisations are very concerned about their reputations and the potential increase in equal pay cases. It is more worrying however that many of these large employers – the listed companies alone representing some 3.8 million employees - do not seem to be getting to grips with the detail needed to understand how to tackle any gender pay gap in their organisations. For example, Mercer’s survey showed that only 11% have undertaken any analysis on the levels of starting pay for men and female performing the same work despite it being a basic analysis on a well-documented issue.

What companies are doing?
According to Mercer’s research most companies have undertaken some gender pay gap related activity. The most prevalent initiatives include analysing the gender pay gap (54%) and creating a diversity and inclusion strategy (54%). Much less common initiatives were setting goals for female inclusion (22%) or analysing labour flow and promotion rates by gender (27%).

Furthermore, Mercer’s research shows that few have investigated the potential drivers behind any pay gaps. Of those that have done some analysis, looking at pay differentials by grade or level is most prevalent (36%). However few have looked into whether there’s a gender pay gap on their promotion increases (22%), a mere 9% have looked at bonus awards and even less (3%) have done any post-maternity analysis.

Future expectations and plans
Over half (51%) of companies expect the new mandatory reporting to be ‘difficult’ or ‘very difficult’ however, 75% feel they are ‘ready’ or ‘somewhat ready’ for it. Respondents were also positive about how they expect their organisation to fare against national pay gap levels. Of those that expressed an opinion 65% expect their organisation to perform well against the UK norm, and 84% expect to perform well against their UK peers.

In the future, although almost all companies plan to do some work in this space in the next 18 months only under half will undertake any activity beyond the gender pay gap reporting requirement itself.  Examples of key substantive interventions (based on Mercer’s When Women Thrive gender research) and the percentage of organisations reporting they will be undertaking such activity include: benchmark workforce metrics (34%); improving the business case for diversity (22%); promoting family friendly policies (20%); set goals for female inclusion (20%); conduct unconscious bias training (19%).

“Most of the analysis and activity done by companies to date, and what they plan to do in the future, will not equip them to properly understand nor to address the gender pay gap in their organisation. Despite this most still think they will perform well,” said Mr Charman. “This disconnect is worrying and might cause some unpleasant surprises for organisations. More broadly, the goal of closing the gender pay gap in a generation appears a distant prospect.”

Mercer’s Gender Pay Gap Reporting Survey provides insights from reward professionals on their perceptions and their organisation’s views on the proposed gender pay gap reporting legislations being issued by the Government. Mercer received responses from 114 organisations, of which 55% are listed and include 40% of the FTSE30, representing a market capitalisation of more than £550bn.

Notes to Editors
The draft regulations were released by the Government on 12 February 2016 and will be mandatory for employers with at least 250 employees based in the UK; this reflects section 78 of the 2010 Equalities Act. They include requirements to report on overall mean and median gender pay gaps, number of men and women in each quartile of their overall pay distribution, the difference between the mean bonus payments paid to men and women in the 12 month period up to the end of each April as well as the proportion of male and female employees who receive bonuses during the year. Final regulations are due shortly with the legislation expected to be enacted 1 October 2016.Organisations will have to display the results of their analysis prominently on their website for three years.

*‘Pay’ is defined as: including basic pay, paid leave, maternity pay, sick pay, area allowances, shift premium pay, bonus pay [this includes short- and long-term incentives] and other pay (including car allowances paid through the payroll, on call and standby allowances, clothing, first aider or fire warden allowances). It does not include overtime pay, expenses, the value of salary sacrifice schemes, benefits in kind, redundancy pay, arrears of pay and tax credits.

Mercer’s When Women Thrive global research initiative is a call-to-action and platform featuring input from 600 companies representing 3.2 million employees. It guides companies on the key levers to pull that will drive their growth through women. Get the research summary here or read the press release.

About Mercer
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and careers of their most vital asset – their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries.  Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With annual revenue of $13 billion and 60,000 colleagues worldwide, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit Follow Mercer on Twitter @Mercer. In the UK, Mercer Limited is authorised and regulated by the Financial Conduct Authority.