Closing the gender pay gap

After years of financial crisis, many of the world’s economies have the battle scars to prove it. But imagine there was a way to boost growth by trillions of euro.

Well, actually there is. According to a report published earlier this year by professional services firm PwC, reducing the gender pay gap - the difference between the average earnings of men and women - across OECD countries could increase GDP by $6 trillion.

Already, a number of countries have introduced policies designed to close the gender pay gap. Now, Ireland is also taking a step in that direction, with a move towards greater transparency on who earns what.

A little over two months ago, draft legislation on gender pay gap reporting was published, having been proposed by Minister for Justice Charlie Flanagan and receiving the backing of the cabinet.

Under the proposals, employers with more than 250 employees will have to report the gender pay gap in their organisation. The draft legislation indicated that, in time, the measures would be extended to smaller employers too.

The proposed legislation comes soon after a similar bill was put forward by Labour Senator Ivana Bacik. And while the draft legislation was generally welcomed as a step in the right direction, concerns have been voiced in some quarters that a new bill represents an unnecessary delay.

The timing of any potential policy change off the back of the draft legislation is vague for now, and depends on how long it takes the latest bill to wind its way through the legislative process.

According to a spokesman for the Department of Justice, the draft legislation has been submitted to the Oireachtas Committee on Justice and Equality for pre-legislative scrutiny. “If the committee decides to proceed with scrutiny, publication of the bill will take place as soon as possible following that,” he said.

Ireland had a gender pay gap of 13.9 per cent in 2014, according to European figures, meaning there’s still a large gap to bridge.

Other countries

As Ireland prepares to introduce new rules, it doesn’t have to look too far for inspiration. A number of other countries have already introduced laws that compel companies to report on their gender pay gap.

For example, British employers faced their first reporting deadline in April, under gender pay reporting rules introduced there last year. The data submitted showed an average gender pay gap of almost 10 per cent, and revealed that almost 80 per cent of British employers pay men more.

Ailbhe Dennehy, a senior associate in employment law at A&L Goodbody, said that Irish policymakers will “have one eye on the experiences and learnings from Britain”, including recent British recommendations on how to improve the rules there.

Where British regulations have already been scrutinised having gone through the first reporting requirement, these recommendations could serve as guidance for Ireland. Given our legislation is still in its infancy, there may be regard for what Britain has learned since introducing its rules,” she said.

Some countries have gone a step further than simply compelling employers to report on their gender pay gap. Take Iceland, for example. Since January 1, companies in Iceland with more than 25 staff must have a certificate proving that they pay all employees in the same role equally. Those that fail to comply with the equal pay law face fines.

Equal pay

For employers, turning the magnifying glass on the gender pay gap could result in some tricky conversations with current staff, and make it harder to attract talent, a problem in a tight labour market.

But it’s important to recognise the difference between the gender pay gap and the concept of equal pay for equal work.

A company that pays men and women doing the same roles exactly the same salary could still face a gender pay gap, if, for example, more of the lower-paid roles within the organisation are carried out by women.

How employers can prepare

Dennehy said that for now it’s hard for Irish employers to get a sense of their likely future obligations. “We know that there’s legislation on the way, but it is still at draft stage and still broad and high-level,” she said. “We don’t have the granular details yet. So, for example, what will the exact calculation methods be?

There’s some concern among employers about what’s coming,” she said. “Clients have been asking us what they can do to prepare.”

In Dennehy’s view, employers need to look at gender pay gap reporting “against the bigger context of what needs to be done, both by employers and government, to ensure better female representation in the workforce”.

While detail is scant for now, companies can still take steps to prepare. These include practical considerations on how they will implement gender pay gap reporting rules and more strategic considerations on how they will address any gender pay gap that arises.

Stephanie Good, a senior manager in PwC’s consulting division, suggested that employers look at the British legislation, and the draft legislation here, as a start point to “get ahead of the curve”. “The key message to employers is to start preparing early,” she said.

Think about the data you have to report, and try to pull together a narrative on your gender pay gap, if you have one.”

Dennehy said: “Look at the software you might need. Consider who will be responsible for the process. Think about how you will communicate with staff around the findings of the reporting process as well as the external message.

“Companies can look at their broader action plan in advance too,” she said, suggesting that they review promotion and remuneration policies and review diversity policies.

The bigger picture

“There’s a positive economic impact on countries [on closing the gap],” Good said. “From a political perspective, the benefit it is clear.”

While employers might be a little nervous of the possible challenges of gender pay gap reporting, Good said it should be viewed as “a positive”. “They can understand if there is a gender pay gap and make a data-informed decision on how to deal with it,” she said.

She advised that employers talk to their employees about the gender pay gap, explain how it is calculated and lay out an action plan for tackling it.

And it’s not just employees who’ll want to know more about how a company is addressing its gender pay gap.

Other stakeholders, such as the board, investors and customers, will be interested too,” Good said. “One of the consequences of this is on the employer’s brand and how attractive you are to people in the marketplace. If a company is taking sizeable steps [to address its gender pay gap] and is proactive, it could emerge ahead.”

Robert Mac Giolla Phadraig, director of Sigmar Recruitment, said that if companies promote themselves as diverse and inclusive, but “don’t walk the walk”, they could find it harder to retain and attract staff.

According to Orla O’Connor, director of the National Women’s Council of Ireland, the gender pay gap needs to be tackled at a number of levels.

Transparency piece, making companies report the information, is one part of that,” she said. “But it also needs to be tackled on a number of other levels simultaneously with things like more flexible working options and paid parental leave. The government needs to see the bigger picture.”

Soon after the draft legislation on gender pay reporting was published, the government announced the launch of a new initiative to increase women’s representation in senior management.

A new group, featuring many senior Irish business people both male and female, has been tasked with carrying out a review and making recommendations on boosting the percentage of women on corporate boards and in senior management positions.

As well as reporting on their gender pay gap, employers need to be required to do something about it, O’Connor said.

“They should be required to produce action plans, and there needs to be some statutory enforcement of that.”

The plan

Under the proposals put forward by Flanagan, employers will be required to publish differences in hourly pay, bonus pay, part-time pay and pay of men and women on temporary contracts, as well as differences in pay by reference to job classifications.

The rules will apply to both public and private-sector employers with more than 250 employees. This threshold will gradually reduce, meaning employers with 50 or more employees will eventually fall within the scope of the rules.

For queries in relation to this topic or any other employment matter, please contact Ailbhe Dennehy, Senior Associate, or your usual A&L Goodbody Employment contact.

This article first appeared in the Sunday Business Post written by Emma Kennedy on Sunday 16 September 2018. 

Date Published: 18 September 2018