In Australia, a new mandatory gender pay gap reporting requirement has come into effect under the Closing the Gender Pay Gap Bill. The new law will require businesses with 100 or more employees to have their gender pay gap published publicly, starting with private sector businesses from early next year. The new law aims to drive greater visibility and accountability among organisations, encouraging them to take action to close their gender pay gaps.
More than half of the member countries associated with the Organisation for Economic Co-operation and Development (OECD) now require private sector employers to report on gender wage gap information; and in the UK, Austria, Belgium and France, certain companies must make their gender pay gap publicly available by law. This list now also includes Australia.
So what can organisations in Australia learn from countries like the UK?
Are mandatory gender pay gap reporting laws effective?
The gender pay gap is a many-faceted and complex issue, both domestically and internationally. Many contributing factors drive the gender wage gap, and each organisation will have its own set of obstacles and challenges to face when it comes to closing the gap.
Pay transparency is one way that organisations in the public and private sectors can use to identify and address the gender wage gap when it occurs in the workplace.
Recently, ELMO Software held our first ‘Voice of HR’ panel session at our HQ in Sydney. We were fortunate to have Dr Samone McCurdy, Executive Manager at the Workplace Gender Equality Agency (WGEA), join us as one of the panel’s special guests.
Dr McCurdy believes the new law will help to bring attention to the gender pay gap and stimulate dialogue around the need to close the gap.
“Publishing gender pay gaps, as we know from international experience, is one of the ways that not only brings that pay gap onto the radar of employers, but it’s also a catalyst for a meaningful conversation about what is a gender pay gap, and how we actually change it,” she said during the panel.
The UK’s gender pay gap reporting law
Every country that has gender pay gap reporting laws has a slightly different set of requirements and regulations. Australia’s new law differs from those of New Zealand, where gender pay gap reporting is mandatory for public sector organisations only, and this information is not required to be made public.
On the other hand, the UK has been publishing pay gaps since 2017. All private, public and voluntary sector employers with 250 or more employees in England, Wales and Scotland are required to publish their pay gap data annually. This covers all employees, including apprentices and some consultants.
Like Australia, the UK uses a few different ways to measure the gender pay gap. They calculate the median gross hourly earnings (excluding overtime) for all employees, full-time employees, and part-time employees.
In 1997, when the Office for National Statistics began recording the data, the UK’s national gender pay gap for all employees was 27.5%. It was 17.4% for full-time employees and 0.6% for part-time employees.
By 2007, the figures had dropped to 21.9% (all), 12.9% (FT) and -2.2% (PT). In the five years since public reporting was introduced, those figures have fallen from:
- 18.5% to 14.9% (all employees)
- 9.1% to 8.3% (full time employees)
- -5.3% to -2.8% (part-time employees)
It’s worth noting that the data collected during the pandemic may have been impacted by employees on furlough and by the government’s decision to relax the reporting requirement during the pandemic.
The consequences of public gender pay gap reporting
The UK’s adoption of public pay gap reporting offers a glimpse into what employers can expect from early next year. For many businesses, especially those with big brand names, their pay gaps will bring media attention.
In the UK, newspapers ran stories highlighting the worst offenders in each sector and highlighted highly profitable companies that had large gaps. Subsequent research found that just under three-quarters (71%) of employees had seen news stories on gender pay gap reports.
The researcher also looked at the impact of pay gaps on employee sentiment. “While men are insensitive to pay gap information, women exhibit a strong preference for employers with narrower pay gaps. This is particularly true for young women, for whom ‘glass ceilings’ at companies are likely to be most relevant,” he wrote.
Another study conducted in 2022 found that the public availability of firms’ gender equality indicators “spurs comparisons across employers, prompting the worst performing firms to reduce their gender pay gap the most, and magnifies the response of those sectors that are potentially the most exposed to the public scrutiny”.
As a result of the legislation, employers were 9% more likely to post wages in job vacancies, potentially in an effort to improve their gender equality at entry level. Interestingly, businesses that were more likely to post wage information in their vacancies also tended to have a larger percentage of women at the top end of the wage distribution and a lower gender pay gap.
However the study did question whether an “information shock” after the release of the data in 2017 might cause only short-term impacts.
“If the policy does not produce an actual change in the culture within firms, its effect may fade away over time as the strength of the information shock weakens”, the report said.
Which countries are leading the way on gender pay gaps?
The World Economic Forum (WEF) releases an annual report that benchmarks the current state and evolution of gender parity in 146 countries across four key dimensions (Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment).
According to the Global Gender Gap Report for 2023, Iceland, Norway, Finland, New Zealand and Sweden were ranked as the top five best-performing countries.
So, what can this show us when it comes to closing the gender pay gap around the world?
All organisations, no matter the size, should report on their gender pay gap
The top five countries listed in Global Gender Gap Report require a much wider range of organisations to report when compared to Australia. In New Zealand, there is no limit on the number of employees; while in Sweden all companies with more than 10 employees must report.
Public and private enterprises must be held accountable
Four out of the five countries listed in the top spots by the WEF require both public and private organisations to report on their gender pay gap.
The public sector gender pay gap is often smaller than that in the private sector; but it still exists and still favours men, which means that both private and public organisations need to be held accountable. Only then is it possible to get an accurate snapshot of a country’s national gender pay gap and begin to close the gap.
A government body is needed to monitor the results and progress
A 2021 study looked at six different countries and analysed their gender pay gap reporting. The study noted that to close the gender pay gap, reporting needed to be enforced, even if there was government legislation around gender pay equity. The study found that when reporting was voluntary or poorly monitored, compliance fell dramatically. It also recommended that organisations that fail to comply with legislation should be publicly named and face financial sanctions.
Preparing for publication
While we still have a long way to go in closing the gender pay gap, there are ample opportunities for positive change.
“I think some organisations will feel exposed and vulnerable because of the publication of the pay gap,” says Dr McCurdy. “So I think one of the big pieces of support that we’ll be doing [at WGEA] is actually trying to reduce that sense of exposure and really helping organisations to understand what’s driving the gap.”
Publishing a company’s gender pay gap should motivate employers to narrow the gap, as it could damage their reputation and cost them new and existing employees. In a talent-tight market, organisations should be wary of the cost of doing nothing.
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