Forcing the hand of fairness

In transforming workplaces there are two options: the carrot or the stick. Winning ‘hearts and minds’ (the carrot) – through activism and internal diversity, equity & inclusion efforts – has had limited success.

While some companies have made great strides, others have been too slow, or are altogether unwilling to adopt measures that will get us closer to fairness. Which is why new legislation requiring EU companies to disclose salary information and gender pay gaps is being warmly welcomed amongst DE&I practitioners and progressive business leaders alike as good example for us in the UK.

On 30 March, the European Parliament adopted the pay transparency directive. It is said that sunlight is the best disinfectant. Well, these measures seek to expose – and in doing so close – gender pay gaps, by requiring much greater transparency. Employees will gain access to the information they need in order to establish whether they are being paid fairly, and mechanisms will be put in place that push companies to close any gaps.

Women in the EU earn, on average, 13 per cent less than men for doing the same job. Under the new legislation, companies with over 100 employees will also have to report their gender pay gap, every three years (in the UK, only companies with more than 250 staff are required to do so). And they will have to act if their gender pay gap is more than 5 per cent or face penalties, including fines. The fines are one thing, but the reputational risk this carries will be far more damaging in the long run.

Knowledge is power, and, crucially, the legislation puts an end to secrecy. Workers will have the right to know the pay rate for their category of work. And there can be no contractual terms that restrict people from disclosing their salary. For the first time, intersectional discrimination and the rights of non-binary individuals will fall into scope. In addition to gender equality, companies will also have to strive for workplace DE&I policies. These new obligations all fit into a larger framework.

The burden of proof now shifts from the employee to the employer in a measurable and sustainable way. If a company fails to meet its transparency obligations, it will be down to them, not the employee, to prove there has been no wage discrimination. It’s no silver bullet: work culture still has a pivotal role to play in delivering fairness. But transparency and reversing the burden of proof will go a long way towards closing persistent gaps.

In the UK, eight out of ten UK employers still pay men more than women, with banking and finance amongst the worst offenders. Despite efforts to narrow it, including mandatory gender pay gap reporting since 2017 in the UK, the dial is just not shifting. Certainly not at the pace that will deliver meaningful progress in our lifetimes.

The resilience of pay gaps is the result of many features of the labour market, some of which are not necessarily obvious. While being asked to provide a salary history makes everyone less confident when negotiating pay, for women and other groups who are systematically paid less, it propagates existing inequalities. Recruiting managers may pat themselves on the back for striking a ‘good deal’, but all they are effectively doing is maintaining those pay gaps.

In the UK we could also benefit from greater transparency – that ‘sunlight disinfectant’. Last year, the minister for women, Baroness Stedman-Scott, launched a series of initiatives to level up employment opportunities for women. One of those (pilot) initiatives is aimed at improving transparency during the application process. By listing salary range on job adverts, the hope is that this will provide women with a firmer footing to negotiate pay.

Race and ethnicity are also important factors. While all women of colour earn consistently less per hour than white British men, the gap can be as high as 28 per cent for Pakistani women. That is an eye-watering differential.

And ethnic minority candidates still have to send 60 per cent more applications to receive as many call-backs as white British people. So it’s not just pay, but opportunity gaps that need fixing.

What is still left out of the equation is the mandatory reporting of pay gaps related to ethnicity and other key characteristics. Despite the lobbying for mandatory ethnicity pay reporting after the Women and Equalities Committee report on the topic in early 2022, the current Conservative government does not plan to legislate. What is more, while socio-economic background is not a protected characteristic, it too has a significant impact on opportunities and career progression.

It’s also worth remembering that gender pay gaps are averages, unevenly spread. They are not necessarily a major consideration for young workers – rather, it is amongst older employees that we see the biggest pay divides. While ageism impacts everyone, for women and other groups that face structural barriers in the workplace, age represents an accumulation of disadvantage.

With a lot of noise in the British press around coaxing over-50s back into employment, ageism – an oft-neglected aspect of DE&I – is receiving growing attention. The House of Lords committee found that a significant number of professionals over 50 have not returned to the workforce since the pandemic, causing a major labour shortage. But here is the rub: not all will require ‘coaxing off the golf course’. Many employers are still reluctant to employ older workers. In fast growth and hugely profitable sectors like tech, ageism is rampant. And such sectors are where tomorrow’s jobs lie.

With a rapidly ageing population across Britain and the EU, this is, I believe, where legislation could be tightened next. We may well see more ‘sticks’ in future.

If we’re out of carrots, the last resort may well be legislation – but one that goes beyond mandatory gender pay gap reporting to capture other characteristics, such as ethnicity and socio-economic background. And since mandatory reporting alone is not delivering the pace of change we need, we should legislate for greater transparency around salaries – listing a range on job ads, and discouraging questions about salary history. It’s a thorny issue, as not everything is about money and the third sector may struggle to compete – but this is not about all things being equal. It is about fair access to opportunities, and ensuring people are not paid differently for doing the same job.

Labour should certainly watch closely as the EU legislation feeds through and use it as a ‘test case’ in deciding where to steer next.

Image credit: Suicasmo, CC BY-SA 4.0 via Wikimedia Commons