The much-anticipated deadline for gender pay reporting has passed and more than 10,000 large firms have provided their results, with over three-quarters (78%) of employers paying men more than women.
According to the Office for National Statistics, the gender pay gap at chartered and certified accountant level currently stands at 11%: not great, but below the national median average of 18.4%.
At financial manager and director level, however, the gap increases to 36.5%, with women earning, on average, £40,000 compared to their male counterparts’ £71.594. This is despite women accounting for almost half (41%) of roles at this level.
Clearly, there is an issue to be addressed here, with significant disparity between the salaries of the most senior finance professionals according to gender. However, while finance functions must do more to level the playing field with regards to their own female talent, they can also play a part in increasing pay equality across their entire organisation.
Although the process of gender pay reporting is largely the domain of HR, we cannot escape the fact that remuneration is an essential element of financial planning, and pay policies are intrinsically linked to resource allocation.
When we talk about the gender pay gap, we are actually addressing two quite separate issues. The first is women who are paid less than men for doing the same or similar roles. The equal pay provisions in the Equality Act 2010, like The Equal Pay Act 1970 which came before it, prohibit any less favourable treatment between men and women in terms of pay and conditions of employment. This isn’t confined to individuals doing the same job, but is extended to ‘work of equal value’ which can be determined through an analysis of demands made on the employee.
This, of course, is a huge concern, but an issue which can be addressed through proactive benchmarking across entire companies and markets. Employers, and accounting teams specifically, must recognise and respond to this as it will directly impact what is often the largest fixed cost line in their budgets – but it can’t be ignored.
On the board level
The next major issue is the fact that the gender pay gap across business is significantly impacted by the imbalance of men and women in senior positions. It’s a sad fact that glass ceilings, because of historical biases, have left women massively under-represented at a senior level across most industries. According to official figures, just a quarter of FTSE 350 board positions are currently filled by women. Within companies with fewer than 250 employees, which fall outside the gender pay gap reporting threshold, this figure falls to just 13%, according to figures from DueDil.
A whole host of factors contribute to this disparity. While we’d like to think that institutional biases are diminishing, it’s well-documented that women’s careers have suffered because some companies can feel reluctant to promote them in case they decide to start a family, or have to have persistent absences for family reasons. While I’m pleased to say that I haven’t encountered that prejudice directly in any of the clients we work with, the lack of women in senior positions indicates we’re still suffering the aftermath, if not the actual bias.
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There is also research that suggests women are less likely to apply for a promotion or a new role if they don’t have the majority of the skills, whereas men are far more likely to speculate. This definitely had an effect on the number of women in senior positions and therefore the pay gap. Education also plays a part, certainly historically, if not still today. You only have to look at the poor female talent pipelines across the STEM sectors to see the root of the problem. Figures released by the Department for Education this year, for example, show that just 0.4 % of female pupils choose to study computer science at A-level, compared to nearly 5% of boys.
The upper benchmark
What’s more, from a personal experience, I believe the institutional practice of basing new job offers on incremental increases from existing pay prevents women catching up as quickly as they perhaps could. Job offers should be made on where a candidate benchmarks and on what their value is to the business, not as a percentage increase on existing salary.
Ultimately, if organisations are to help diminish their own gender pay gaps, budgets should allow base salaries to be set in line with internal and external benchmarks, not on the historical pay of an individual. We have several clients who routinely offer a 10% increase on existing pay when hiring, and this is a practice that will impact the ability to address the pay gap issues. Senior finance professionals may need to review how staff expenditure is allocated and reviewed if they are to play their part in narrowing the gap.
While the first deadline to report gender pay differences has now passed, there is no escaping the spotlight which continues to beam on the issue. And while finance directors can’t change the tide of inequality alone, they can certainly play their part in finding a solution – perhaps they could even start by renegotiating their own salary, or applying for a role where they don’t hit 100 % of the criteria.