What We’ve Learned So Far About U.K.’s Gender Pay Gap: QuickTake

(Bloomberg) -- The U.K. is the biggest country yet to delve into the explosive topic of the pay gap between women and men. The April 4 deadline has now passed for firms with at least 250 employees in Britain to report wage disparities, and what’s been published is a wave of embarrassing information.

1. Why does the pay gap look so big?

More than 10,000 companies have completed a blunt, uniform assessment of the gap between what men and women earn on average in its workforce. The figures highlight that women are often under-represented in higher-paying roles, which is a big reason for the headline-grabbing numbers. For example, at HSBC Holdings Plc, Britain’s biggest bank, women earn on average 59 percent less than men, a figure skewed by the fact that less than a quarter of senior managers are female. The numbers aren’t measuring the pay of men and women in the same job.

2. What have we learned so far?

Financial services firms are showing large gaps, providing stark examples of the entrenched gender imbalances in the richest corners of the global economy. Goldman Sachs Group Inc. pays its female staff on average 56 percent less than men at the bank, while Lloyds Banking Group Plc pays women about a third less than men. The gap is wider when it comes to year-end discretionary bonuses -- women at Goldman receive average bonuses that are 72 percent lower than male employees. The U.K.’s Office of National Statistics, which publishes its own analysis of the nation’s pay gap, says it’s caused, in part, by more women working part-time, clustering in occupations with lower pay and taking time out to have children. The discrepancy widens with age, and women’s pay stops climbing at a younger age than male colleagues.

What We’ve Learned So Far About U.K.’s Gender Pay Gap: QuickTake

3. What are companies required to report?

Any difference between the salary and bonus of all male employees and all female employees on a mean and median hourly basis, the proportion of each gender receiving a bonus and the proportion of men and women in each pay quartile. The findings must be published annually on both the government’s and the companies’ websites -- and kept there for at least three years. Publication of an “action plan” showing how companies will try to close any gaps is encouraged, but not mandatory. About 1,500 companies have failed to meet the reporting deadline, according to the Equality and Human Rights Commission.

4. How far is the U.K. from ‘equal pay for equal work’?

That will be hard to say. The phrase refers to the idea that men and women doing the same job at the same company should receive the same salary. But the disclosures by U.K. companies don’t provide employee-to-employee comparisons. Reporting on an adjusted basis is more popular among U.S. companies that have chosen to disclose their pay gaps under pressure from activist shareholders, including U.S. banks Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. Their in-house figures compensate for factors such as job title and geography and show only a 1 percent gap.

5. What’s been the reaction so far in the U.K.?

There’s been something of an uproar over the lack of women in more senior -- and thus well-compensated -- positions. The pay gap at Barclays Plc’s investment bank was described as “shocking” by Nicky Morgan, a member of Parliament and chair of its powerful Treasury Committee. She is also among politicians demanding some law and accounting firms revise their figures after they classed their top-earning partners as owners, excluded from the calculations, which potentially understates the gender wage difference. There’s also a risk some companies will face public censure and legal action for failing to report their pay gap data at all.

6. What could be the impact inside companies?

Consider what happened at the British Broadcasting Corporation. It released a pay report in July 2017 that went beyond the government requirements and revealed the names and salaries of top stars and executives. It showed that, of the highest-paid employees in 2016-2017, just under a third were women. The disclosure prompted the news organization’s high-profile China editor, Carrie Gracie, to resign from her post in protest at what she called the “secretive and illegal” pay culture at the publicly funded broadcaster. She also called the salaries of some BBC staff “unacceptably high,” prompting some of her male colleagues to agree to pay cuts in an attempt to bring them closer to parity. The report caused an outcry that has led to parliamentary hearings. The BBC’s director general, Tony Hall, says the BBC’s overall pay gap was 10 percent.

7. At what point does a wage gap violate the law?

That remains to be seen. The data could provide fodder for existing or future lawsuits under the U.K.’s 2010 Equality Act, which codified earlier laws. It gives women and men the right to equal pay for equal work, and there’s a framework for comparing jobs by effort, skill or decision making. The country’s biggest private employer, supermarket giant Tesco Plc, has been presented with claims that law firm Leigh Day says could eventually total as much as 4 billion pounds ($5.6 billion). The firm contends that female shop-floor workers are unfairly paid less than their majority male counterparts in warehouses, even though the work is comparable. Tesco says it hasn’t received the claims and says it works hard to ensure employees are paid fairly.

8. What prompted the U.K. to disclose the pay gap?

David Cameron, who served as prime minister from 2010 to 2016, made addressing the gender-pay "scandal" part of the Conservative Party’s agenda. Announcing the new disclosure rules in 2015, Cameron said they would “cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up.” (By the time the rules took effect this year, Cameron was out of office, replaced by the U.K.’s second female prime minister, Theresa May.) Eliminating the difference could add 150 billion pounds ($196 billion) to annual gross domestic product by 2025 by boosting female participation in the workforce, encouraging women to work longer hours and moving them into more productive jobs such as those in science and engineering, according to a study by McKinsey & Co.

9. Are other countries doing this?

Yes. Australia already requires firms with more than 100 employees to report on gender annually and publishes reports on their equality objectives, while Germany is implementing new rules around the issue this year. Austria and Belgium were other early adopters, though they don’t force companies to release figures publicly. Meanwhile, the U.S. has moved away from requiring more uniform or transparent disclosures. Last year, President Donald Trump’s administration scrapped an Obama-era rule change that would’ve required companies to include pay information with the gender and race data they report annually to the U.S. Equal Employment Opportunity Commission.

The Reference Shelf

  • The government website with each company’s pay gap disclosure.
  • A Bloomberg Businessweek article asks why companies can’t just fix the wage gap.
  • The U.K. government’s website on the rules for reporting and its page explaining the wage gap
  • A research paper and Freakonomics Radio episode on "What Can Uber Teach Us About the Gender Pay Gap?"
  • A QuickTake explainer explores whether salary shaming will rein in CEO pay.
  • The McKinsey report, "The power of parity: Advancing women’s equality in the United Kingdom."
  • A report by the Center for American Progress on approaches to closing the wage gap.
  • Data on the global wage gap from the Organisation for Economic Cooperation and Development.

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