BRIDGING THE GAP - Equileap
BRIDGINGTHE GAPHow governments, companies andinvestors can tackle gender pay inequalityRESEARCH PAPERMAY 2018
Equileap is a not-for-profit organisation that aims to accelerate gender equality in the workplace.It sees this as a powerful, but neglected, lever to tackle global poverty and inequality. Equileap hascreated a global database, ranking over 3,000 public companies on 19 criteria to assess their progresstowards gender equality, including gender pay parity. Equileap’s Database was created and is regularlyupdated by collecting publicly available information, as reported by listed companies themselves intheir most recent annual reports, sustainability reports, code of conducts, websites and other publicfillings. Equileap’s unique scoring and ranking methodology offers clear and detailed insights on whichcompanies are successfully working towards greater gender parity in their workforce and supplychains.For more information, please visit www.equileap.org.
CONTENTSIntroduction.5Key conclusions.6Background.7Legislation addressing pay inequality.8Reasons behind the gender pay gap.14Reasons behind unequal pay for equal work.15Key findings on corporate pay parity.16Common practices in corporate pay reporting.18Recommendations.22Appendix.24Footnotes & References.26About the Authors.29Acknowledgments.30We have reached one of those incrediblyimportant moments that don’t come oftenin a lifetime, where you can almost see andfeel genuine social change under way.Diana van Maasdjik,Executive Director of Equileap
INTRODUCTION2017 was a turning point in public and political attitudes towards gender pay inequality.Revelations of huge pay differences betweenmen and women in Hollywood and at the BBCcreated international media headlines, social media campaigns adopting the hashtag#EqualPay have exposed workplace inequalities around the globe.Most people now accept that the lack of gender pay equity is, in the words of the UK PrimeMinister, ‘a burning injustice’. What has beenless well understood is that accelerating gender pay equity is a smart strategy to tackleinequality and contribute to the stability andprosperity of families, communities and countries.This Equileap research paper and its recommendations come as investors, companiesand governments are exploring what theycan do to promote greater gender pay parity. In particular, governments are beginningto act. Iceland, the UK and Germany all havenew laws demanding greater transparency,both France and The Netherlands are embarking on discussions about new legislation,and we expect others to join them this year.A growing number of ma jor investment fundsare now specifically focusing on companieswith a gender balanced leadership. According to the Veris Wealth Partners analysispublished in the autumn of 2017, the currentmarket for “gender lens investing” - selectingfinancial products with the expectation ofachieving a profit while dismantling genderinequalities– is currently just under 1 billionUSD, but is expected to grow strongly overthe next decade. Equileap also expects to seestrong growth in the practice of shareholderengagement on the topic of gender balanceand inequality.Both these trends are compelling companiesto be more transparent around gender balance and gender inequalities in their workplaces. Many of them realise that they will bepublicly judged on how well they do in thisarea.The aim of the research paper is to help localand national governments, financial organisations, investors, shareholders, companies andemployees understand the concepts behindgender pay inequality in the workplace and tohelp them tackle it effectively. The paper explores the causes of pay inequality and summarises new legislation designed to increasegender pay equity. It looks at informationfrom more than 700 companies researchedby Equileap in the past six months, providesexamples of how companies measure, monitor and address gender pay differences, andgives an overview of best practices.In 2017, the World Economic Forum estimatedit would take 217 years to achieve genderequality in the workplace at the current rateof change. Given the events of 2017-2018,Equileap believes that if this momentum ismaintained, change can come sooner thanpredicted.DR ELLI SIAPKIDOUDirector of ResearchDIANA VAN MAASDIJKExecutive DirectorBRIDGING THE GAP - MAY 2018How governments, companies and investors can tackle gender pay inequality5
KEY CONCLUSIONSThe overall conclusion of this research paper is that investors, companies and governments that genuinely want to achieve genderpay parity, rather than window-dressing, nowhave significant levers to use that can bringabout ma jor improvements.GENDER PAY INEQUALITY ENCOMPASSES TWO DIFFERENT ISSUES:1. Gender pay gap, the difference betweenthe average salary for women and for men,which can be caused by factors such asunconscious bias, higher numbers of menin top management and higher numbers ofwomen working part-time.2. Unequal pay for equal work, the differencein salary between a woman and a man doingthe same job or a job requiring the same skills,which can be caused by factors includingimplicit bias or looking at previous salaryhistory.COMPANIESINVESTORSToo few companies communicate adequately on gender pay inequality. Transparencyis the key to tackling pay inequality and itneeds to become the norm rather than theexception.Investors have an important role to play inincreasing the pressure for gender pay parityby choosing to screen their existing portfoliosor to invest in new gender equality productswhich have been launched recently.Equileap researched 747 companies from23 developed countries in detail: only 18% ofthem (138) publish gender segregated information on pay, and only 4.4% (33) claimed agender pay gap or 3% or less.Those companies that do report their gender pay figures use a number of differentmethods. For disclosure to have maximumimpact, there needs to be a commonly adopted standard, which includes annual, publicreporting of gender-segregated pay in different employee levels, rather than issuing oneoverall figure, which can be misleading.A number of companies claim that theyhave achieved gender pay parity, but withoutproviding further detail or evidence to backthis up, even when questioned. This makesverification impossible and raises questionsabout some claims.They have another powerful tool to bringabout change by engaging with companiesthat have a poor record, through proxy votingor investment stewardship engagements.GOVERNMENTSThere are a wide variety of approachesbeing taken by governments to tackle this.Governments, such as Australia and the UK,have legislated for greater transparency, requiring companies to report annually. Others,such as Germany, have tackled this by enabling employees to request internal information on colleagues’ pay, others have criminalised a failure to provide evidence evidence- such as Iceland. At the other end of thespectrum, the US government has blocked anequal pay initiative which would have takeneffect in March 2018.BRIDGING THE GAP - MAY 2018How governments, companies and investors can tackle gender pay inequality6
BACKGROUNDEqual pay for equal work and the gender paygap are two very different things, althoughthe former is a contributing factor to thelatter.THE GENDER PAY GAPThis refers to the difference in the averagepay of men and women across an organisation.3 This is what the media usually refer towhen discussing issues of pay parity.At EU level, the gender pay gap isdefined as the relative differencein the average gross hourly earningsof women and men within the economyas a whole.2EQUAL PAY FOR EQUAL WORKThis consists of ensuring that women arepaid the same as men for doing the samework or work of equivalent skill. For example,according to the Equality Act 2010 (UK), it isillegal in the United Kingdom to give different wages to people who do the same work.In this context, equal pay refers not only towages but also to holiday entitlement, bonuses, pay and reward schemes, pensionpayments and other benefits.4It is possible, therefore, for a company to giveequal pay for equal work throughout the organisation and still have a gender pay gap.The European CommissionBRIDGING THE GAP - MAY 2018How governments, companies and investors can tackle gender pay inequality7
LEGISLATION ADDRESSINGPAY INEQUALITYLegislation designed to combat pay inequalityvaries widely across developed economies.Many laws are currently too new to form ajudgment about their effectivenessICELAND: EQUAL PAYCERTIFICATIONA new law aiming to enforcepayequalitybetweengenders was introduced inIceland in January 2018. Ithas been described as theworld’s toughest law in thisarea and makes unequal pay forequal work a crime. Interestingly, Iceland hastopped the World Economic Forum’s GlobalGender Gap rankings since 2009.5 Icelandhas had legislation on equal rights of womenand men for decades, but concerns remainedthat these did not translate into full genderpay equality in the labour market.The new law requires companies andinstitutions employing more than 25employees to acquire an equal paycertification. Organisations have to offerequal pay not only across the same job levels,but also equal pay for work of the same value.Iceland is aiming to eradicate the country’sgender gap by 2022.6In the same way that companies mustpublish annual reports, Icelandic privateand public organisations will now be subjectto a governmental audit to attain thiscertification of equal pay. If they fail to obtainthis, companies may be subject to fines andreputational damage in a country where 50%of law-makers are female.In order to obtain the certification, organisations have to fulfil the requirements set by theEqual Pay Standard, “a management requirement standard and an administrative tool designed to establish and maintain gender equality in wages within a workplace”.7 The equalpay certification is awarded by “accreditedauditors, following an examination, stating thattheir equal pay management systems and theway they are implemented fulfil the requirements of the Equal Pay Standard”.8Organisations which employ more than250 employees must acquire the equal paycertification by the end of 2018. More timehas been allowed for smaller organisations.Those employing 150-249 workers mustobtain the certification by the end of 2019;those with 90-149 employees must complyby the end of 2020; workplaces with 25-89employees have until the end of 2021. Verysmall organisations, e.g. those that employfewer than 25 employees, may also apply toacquire the equal pay certification.9 Icelandicgovernment ministries need to receive thecertification, for larger companies, no laterthan 31 December 2018. After obtaining theirfirst equal pay certification, companies willhave to renew it every three years.Companies which fail to obtain or renew theequal pay certification by the deadline canbe fined by the Centre for Gender Equality.There is an appeals process10 and the Ministryof Social Affairs and Equality retains anoversight role. Every two years, the Ministerwill assess how well the equal pay system isworking.11BRIDGING THE GAP - MAY 2018How governments, companies and investors can tackle gender pay inequality8
UNITED KINGDOM:TRANSPARENCYOn 3 March 2017, the UKgovernment brought intoforce legislation whichrequired all organisationswith 250 or more employeesto report annually on theirgender pay gap.12 Whereas Iceland’s lawfocuses on equal pay and provides aspecific way (certification) for companies toevidence this, the UK legislation is essentiallyan initiative which focuses on transparencyand aims to make companies self-reporton the gender pay gap. Although it can beassumed that public exposure might pressurecompanies to address large gender pay gaps,no sanctions are set out at this stage. Thepresent UK law simply demands disclosure ofthe information.The current legislation is the “Gender PayGap Regulations”, building on the EqualityAct 2010. According to the legislation, allrelevant employers, both in the private andpublic sector, “must calculate and publish for2017 and each subsequent year the followingmetrics: the difference between the mean13and the median14 hourly rate of pay of malefull-pay relevant employees and that of femalefull-pay relevant employees, the differencebetween the mean and the median bonus paypaid to male relevant employees and that paidto female relevant employees, the proportionof male and female relevant employees whowere paid bonus pay and the proportions ofmale and female full-pay relevant employeesin the lower, lower middle, upper middle andupper quartile pay bands.”15UK organisations are encouraged by thegovernment to calculate the data on theirown. There is no obligation for externalauditing. The results must be published onthe employer’s website and on a designatedgovernment website.16 Relevant employersare legally required to publish their genderpay gap report and failure to do so withinone year of the snapshot17 date (5 April 2018)is considered unlawful. The Equality andHuman Rights Commission has the authorityto enforce18 “any failure to adhere to theregulations”.19At the time of writing, over 10,000 companieshad published the required informationon the government’s website.20 Accordingto the Financial Times some companieshave, so far, failed to publish a link with therequired statement explaining their figures,while others have repeatedly changed theirnumbers.21Although this legislation is a step in the rightdirection and is generating extensive publicdebate and digital campaigning, it lacks detailand remains a disclosure or transparencyinitiative. No action is currently required fromthe companies to close any gap reported.(For data on the UK gender pay gap, SeeAppendix).BRIDGING THE GAP - MAY 2018How governments, companies and investors can tackle gender pay inequality9
GERMANY: THE RIGHTTO KNOWIn an effort to tackle itslarge gender pay gap,Germanybroughtintoforce the Transparency ofRemuneration Act on 30 June2017.22 The legislation aims toclose the gender pay gap which stood at 21%in 2016. 23FIGURE 1 / UNADJUSTED GENDER PAY GAP INEU MEMBER STATES IN %, 2016ESTONIACZECH REPUBLICGERMANYUNITED ANUNION 16876The German Transparency of RemunerationAct (Das Entgelttransparenzgesetz) consistsof four main points: 251. The regulation for paying women and menequally: the law explicitly mentions andclearly requires employers to pay women andmen equally for equal and equivalent work.2. The individual entitlement to information: Asof 6 January 2018, all employees, regardlessof gender, who work in companies with morethan 200 employees, can request informationabout comparable remuneration, for jobsequal or equivalent to their own.26 Employeescan request this information only if thereare at least six employees of the oppositegender doing the same or equivalent work inthe same company. Similarly, the informationprovided will not specify the pay of individualcolleagues, but rather the median pay of thesix employees of the other gender in the sameor comparable employment. Employers mustprovide the requested information within 3months.27 The law does not mention penaltiesin cases where gender discrimination in paydoes exist within an organisation.28655Source: Federal Statistical Office of Germany, Gender Pay Gap2016: Germany remains among EU states with highest disparity,accessed 9 March 2018Germany has one of the worst records inEurope when it comes to pay equity (Figure 1)and has made minimal progress in improvingit. According to data published by the FederalStatistical Office of Germany, the gender paygap has closed by only 2% since 2006 and byonly 1% since 2015.24 (For more data on theGerman pay gap, See Appendix).3. The invitation to private employers toreview their pay structures: organisationswith more than 500 employees are invitedto review their pay structures. This remainsat the employers’ discretion. There is noenforcement mechanism or no obligation tomake the information publicly available.4. The obligation to report on the status ofequality and equal pay: employers withmore than 500 employees are required toproduce a management report, describingthe measures and actions they are taking toachieve equal pay for women and men. If theemployers have not taken any action, theymust justify it. Companies are also requiredBRIDGING THE GAP - MAY 2018How governments, companies and investors can tackle gender pay inequality10
to attach gender-segregated information forthe last calendar year to the managementreport. The gender-segregated informationshould include the number of full-time andpart-time workers and should be published inway that ensures it is publicly available.29The German legislation is a step in the rightdirection, putting the onus on companies totake measures towards equal pay and onpublishing pay information. However, it doesplace significant responsibility on individualemployees to seek out pay information, andit remains unclear whether employees will beable to practice this right in their workplaces,without risking being stigmatised.AUSTRALIA: COMPANIES’SYSTEMATIC SELFREPORTINGAustralia has a longtraditionofaimingfortransparencyincompany reporting andequalopportunitiesforwomen in the workplace, but the nationalgender pay gap in 2018 still stands at 15.3%.30Legislation has existed in Australia sincetheWorkplaceGenderEqualityActwhich was approved by Parliament on22 November 2012. The 2012 Act followsprevious legislation, such as the AffirmativeAction Act 1986 and the Equal Opportunityfor Women in the Workplace Act (1988).31The focus of the 2012 legislation is genderequality in the workplace, with an explicitemphasis on remuneration parity betweenwomen and men and supporting caringresponsibilities.32FIGURE 2 / AUSTRALIA’S GENDER PAY GAPSTATISTICS 2018Source: Australia’s gender pay gap statistics, accessed 9 March2018The legislation requires all non-public sectororganisations in Australia with over 100employees33 to provide data to the WorkplaceGender Equality Agency (WGEA) on sixGender Equality Indicators.34The six indicators are:1. Gender composition of the workplace.2. Gender composition of governing bodies ofemployers (e.g. board of directors).3. Equal remuneration between women andmen.4. Availability and utility of employment terms,conditions a
BRIDGING THE GAP - MAY 2018 How governments, companies and investors can tackle gender pay inequality INTRODUCTION 2017 was a turning point in public and politi-cal attitudes towards gender pay inequality. Revelations of huge pay differences between men and women in Hollywood
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