H E A L T H W E A L T H C A R E E R U K G E N D E R P A Y G A P

Transcription

1 H E A L T H W E A L T H C A R E E R U K G E N D E R P A Y G A P 2017

2 Welcome! Michelle and I would firstly like to thank those who took part in our recent survey on the gender pay gap. It is a very current topic for the UK reward community, leading to many conversations and new ideas on diversity, inclusion, talent and pay. It is always a privilege for us to hear your views and be part of that dialogue. Commitment to the principle of gender pay equality is clear, but the nature of the reporting is leading to significant focus on explaining findings beyond compliance. No wonder most will not be reporting before the autumn. We look forward to continuing the conversation if you have any questions or would like to discuss your strategy. chris.charman@mercer.com michelle.sequeira@mercer.com MERCER

3 E X E C U T I V E S U M M A R Y The aim of Mercer s Gender Pay Reporting Survey was to further the research conducted last year to gain insights from HR and reward professionals on their perceptions, reactions, concerns and plans surrounding the legislation. This report also seeks to understand where organisations are on their gender pay gap journey. Organisations have welcomed changes in the draft regulations and remain in favour of the legislation in principle although less than half think it will make a difference. However, it is clear that HR professionals are concerned about the complexity, difficulty and misleading nature of the measures used. Consequently, a lot of effort is expected to be made providing explanations internally and externally. Employers are saying they perceive risks regarding misrepresentation. 30% of organisations had completed the work by the end of May, but few have published their results. Most are looking towards the final quarter of this year to publish; 73% intend to publish a narrative alongside the results. Reported gender pay gaps of those in the study align to the national norm as expected; responses vary from 47% to -11%. From our own research (When Women Thrive) we recognise that making progress in closing the gap requires fair pay programmes, equal pay monitoring, a strong focus on female career progression and the work that men and women do, as well as attention to the broader diversity and inclusion agenda. The results show that although there are lots of examples of good practice, the typical organisation tends to be focused on compliance and shifting the emphasis to narrative building to explain the results. Half of our respondents are increasingly focused on ensuring pay programmes are fair, but UK organisations need to be looking more to female talent progression and inclusion, setting goals and promoting gender-equal flexibility to really drive a sustained change in their gender pay gap figures. On this, participants still have work to do. MERCER

4 S U R V E Y P A R T I C I P A N T S D A T A G A T H E R E D M A Y UK organisations took part in the survey in May For a full list of firms that permitted their names to be used, please see p18. Sector differences are highlighted with 29% of participating companies are in 870k the FTSE 250, with a combined employees from FTSE 100 companies are represented in our market cap of approx. 449bn survey Financial and Insurance 65% 7% 7% 15% 6% FTSE 30 FTSE FTSE 250 FTSE SmallCap Not UK-listed 3% 4% 8% 8% 15% 22% 16% Professional, Scientific and Technical Manufacturing Manufacturing Education Information and Communication Wholesale Wholesale and and Retail Retail Trade Trade Transport and Storage 10% 14% Public Administration and Defence Other Other Note: Other industries include: arts/entertainment; administrative and support services; real estate; water MERCER 2017 supply; construction; utilities and accommodation, and food services 3

5 THE RESULTS MERCER

6 M O R E T H A N 7 0 % O F R E S P O N D E N T S S T I L L A G R E E W I T H T H E P R I N C I P L E O F G E N D E R P A Y G A P R E P O R T I N G Overall, our participants agree with the notion of gender pay reporting: 74% either agree or strongly agree with the concept. This view is consistent with responses in Although opinions have become generally less extreme, there were frequent comments on the potential misrepresentation risk of the metrics. Of the 10% who disagreed with the principle of such reporting, the main concerns expressed were: That gender pay will be confused with equal pay The need to consider other variables, such as pay by career level Companies in the IT sector have a higher level of agreement with the principles (75%) To what extent to do you agree with the principle of gender pay reporting? 2017* Change from 2016 Strongly Agree 16% -7% Agree 58% +7% Neither 16% +5% Disagree 7% -7% Strongly Disagree 2% +1% A very complicated piece of analysis presented to companies as a must-do, which does not answer any of the questions regarding diversity, increased female representation at senior levels in organisations, and does not reflect in any way the different demographics/skill sets in the external market, etc. (e.g. males dominate technology roles). Not including the value of salary sacrifice is illogical as this is part of pay. Unlikely to provide an accurate view, and results could have a negative impact on firms that are genuinely being proactive in this area. MERCER 2017 * Total does not equal 100 due to rounding 5

7 Y E T L E S S T H A N H A L F O F O R G A N I S A T I O N S T H I N K T H E R E P O R T I N G R E Q U I R E M E N T S W I L L M A K E A D I F F E R E N C E 48% believe that the legislation will make a difference 25% are still unsure whether it will make a difference 27% think it will make little difference or no difference at all Retail: 75% believe the reporting requirements will make a difference MERCER

8 P E R C E P T I O N S O F R E G U L A T I O N S H A V E I M P R O V E D Since our last survey the regulations have been updated and are now final; for example, ordinary pay is after salary sacrifices, bonuses paid in April are adjusted, and those paid at a reduced rate or nil due to being on leave are now excluded. Generally, perceptions of the detail in the regulations have improved a little. M U C H W O R S E P E R C E P T I O N N E U T R A L M U C H B E T T E R P E R C E P T I O N 5% 20% 27% 44% 4% Gender pay gap reporting regulations were drafted in February 2016 and came into force in April Our results suggest that although organisations still have concerns, they recognise that some of the concerns previously raised have been taken on board. Organisations in the education perceive the regulations as a lot worse (19%) and somewhat worse (31%) Retail employers perceive the regulations as a lot better (17%) MERCER

9 B U T O R G A N I S A T I O N S S T I L L F I N D T H E R E G U L A T I O N S D I F F I C U L T, C O M P L E X A N D M I S L E A D I N G Only 8% of organisations which already completed the analysis described it as easy or very easy 82% of organisations yet to complete the analysis expect it to be difficult or very difficult Complex (41%), confusing (29%), misleading (28%) and burdensome (24%) were the most common words chosen by organisations to describe gender pay gap reporting requirements Comprehensive (7%), inclusive (3%), simple (3%) and thoughtful (1%) were the least common words chosen by organisations 100% of organisations in the IT sector expect to find it difficult, compared to 57% of those in manufacturing MERCER

10 3 0 % H A V E C O M P L E T E D A N A L Y S I S B Y E N D O F M A Y : M O S T P R E P A R A T I O N I S F O C U S E D O N C O M P L I A N C E, W I T H L I M I T E D B R O A D E R A C T I V I T Y S O F A R What activities and analysis has your organisation already undertaken? Reviewed legistlation in detail 75% Dry run analysis 68% Analysed pay by level 58% Prepared data Prepared data 56% Identified a director for sign off 45% Run formal April 2017 snapshot 30% Reviewed policies 22% Key message building for employees 12% Executed the narrative 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% Although nearly 70% have conducted a dry run analysis on the numbers, only 30% of the participating organisations had completed a formal analysis by the end of May Almost half have started an engagement process and identified a director for signoff. There has been limited focus on narrative and message building for employees and the public. 91% of high tech companies have conducted a dry run of the numbers 42% of retail employers have completed the analysis; in contrast with 24% of professional services MERCER

11 T H E Q U A R T I L E S A N A L Y S I S I S T H E M O S T H E L P F U L T O U N D E R S T A N D R O O T C A U S E B U T N O T A S H E L P F U L A S E X P E C T E D B Y R E S P O N D E N T S The regulations require companies to report on male/female representation by levels defined as quartiles of pay. How insightful did you find it/do you think it will be? 42/165 Organisations are yet to analyse quartiles 69% Expect it to be insightful 14% Do not expect the results to be insightful 125/165 Organisations have already analysed quartiles 52% Found the comparison insightful 25% Did not find the comparison insightful Is it appropriate to report on bonus awards separately? 64% Find this appropriate 17% Answered neither appropriate nor inappropriate 19% Do not find it appropriate Retail employers found the pay quartiles analysis the least insightful (44%) Manufacturing 71% think the quartiles will be insightful or very insightful MERCER

12 P R O V I S I O N A L G E N D E R P A Y G A P R E S U L T S S L I G H T L Y A B O V E U K N O R M, B U T S E C T O R D I F F E R E N C E S A R E V E R Y C L E A R 18.1% is the UK average gender pay gap (ONS, 2016)* Gender pay gap range: -11.4% to 47% Gender pay gap lower quartile: 14% Gender pay gap upper quartile: 30% 20.5% is the average gap in our sample Samples were small so sector results have to be treated as indicative. However, the numbers were broadly in line with expectations from prior research and ONS data Results came out worse than expected for many Finance 30% (N=7) High Tech/Scientific 25% (N=7) Education 18% (N=5) Retail 15% (N=5) 44/165 participants were able to provide a number for their gap * MERCER 2017 rsandearnings/2016provisionalresults#main-points; 11

13 M O S T O R G A N I S A T I O N S A R E P O S T P O N I N G T H E I R R E P O R T T O L A T E R I N T H E Y E A R When does your organisation plan to publish the gender pay gap results? EARLY MAY-SEPT 2017 MID OCT 2017-JAN 2018 LATE FEB UNKNOWN 8% 44% 28% 19% We have observed a lot of hesitation in our discussions with clients, and these figures reflect that many are undecided With a lot of early advice being to report late, it is interesting that less than a fifth say they will report late; we think this might reflect that most organisations want to engage positively with the issue and that leaving it until the last minute to publish does not reflect this commitment Organisations in the education sector most likely to report late (44%); with employers in the financial services sector at 31% Retail companies are most undecided 42% don t know when they will report MERCER

14 L O O K I N G F O R R O O T C A U S E S I N P A Y : A B O U T H A L F H A V E U N D E R T A K E N F U R T H E R P A Y A N A L Y S E S A N D T H E A C T I O N S T H E Y H A V E T A K E N H A S I N C R E A S E D D R A M A T I C A L L Y Has your organisation conducted any analysis of pay programmes for gender bias in the last three years? 54% Have conducted some sort of analysis within the last 3 years (46% in 2016) Activity performed 36% 80% Equal pay audit 22% 63% Analysed bonus awards 22% 51% Analysed performance appraisal scores 11% 34% Audited starting/hiring pay levels 9% 28% Analysis of pay on promotion increases 3% 16% Post-maternity analysis The increase in the number of organisations looking into their pay programmes to ensure that they are delivering gender-neutral outcomes has been modest compared to last year s. However, those that have taken action have done much more in the past year. Activity in these proactive organisations has focused on equal pay audits and bonus programmes. There is still a number of areas of concern that could be reviewed 100% of high tech companies looking at root causes conducted an equal pay audit associated with better gender pay outcomes compared with 71% in financial services Retail companies have done the least e.g. 40% analysed bonus awards; 0% pay on promotion increases MERCER

15 T H E G E N D E R P A Y G A P J O U R N E Y : O R G A N I S A T I O N S A R E T Y P I C A L L Y S T I L L F I N A L I S I N G D A T A P R I O R T O R U N N I N G T H E R E A L N U M B E R S ALREADY UNDERTAKEN INTENDING TO UNDERTAKE Analysed pay by level Prepared data 57% 56% 43% 43% Typically, organisations are still preparing their data just before running the numbers. 30% have completed the analysis by the end of May. Reviewed legistlation in detail Run formal April 2017 snapshot 30% 75% 61% 18% The next steps are preparing stakeholders and leaders and identifying an individual director to sign off the results. Prepared stakeholders and leaders Completed a dry run on numbers prior to formal analysis Identified a director for sign off Executed the narrative 4% 45% 45% 68% 69% 39% 44% 21% Few have already focused on the narrative and it is interesting to note that, in total, some 73% will accompany their figures with a narrative. Given the concerns about the metrics, this is not surprising. Key message building for employees 12% 50% 0% 20% 40% 60% 80% 100% Although 75% of high tech companies have prepared their data, only 25% of retail companies have The manufacturing sector is much less likely to build key messages for employees (32% vs 50% overall) MERCER

16 T H E L E G I S L A T I O N I S C L E A R L Y D R I V I N G A S T R O N G I N C R E A S E I N A C T I V I T Y T O A D D R E S S S H O R T - T E R M ( P A Y ) A N D L O N G - T E R M D R I V E R S O F T H E G A P Promoted family friendly policies, part-time working, etc. ALREADY UNDERTAKEN Developed the public narrative INTENDING TO Conducted an equal pay audit UNDERTAKE Created a working party for Gender Pay Gap Reviewed policies Conducted unconscious bias training Examined workforce / labour flows and female progression Reviewed effectiveness of pay progression Established D&I governance Set goals for female inclusion / representation Created a working party for broader D&I matters Engaged with the wider community to encourage women Undertaken work to understand the employee D&I The retail sector is much less likely to have undertaken any of these activities in the past or expects to do them in the future 12% 19% 14% 22% 25% 20% 28% 25% 36% 32% 39% 12% 48% 46% 30% 19% 35% 20% 10% 61% 30% 20% 27% 15% 27% 0% 10% 20% 30% 40% 50% 60% 70% 80% It is clear that the legislation is having a positive effect on encouraging activity around the topic. Many are looking to better understand the more deepseated causes of the gap: female progression, careers and occupational segregation. The number with a formal goal for female representation is due to almost double to 44%. Roughly half are either not yet engaging in the broader issues outside of compliance. For them, improvements in their gender pay gap will be long in coming. For many, gender issues are 19% associated with family-friendly and part-time working if these are aimed just at women rather than at all, this is not supportive of future female representation Finance, education and high tech sectors have undertaken more activities; high tech is the most dynamic MERCER

17 W H A T A R E E M P L O Y E R S C O N C E R N S? Which of the following are concerns for your organisation? Current staff perception 16% 26% 20% Reputation risk 26% 20% 12% Potentially undermines efforts on gender inclusion 13% 13% 6% Publication in league tables specifically 8% 4% 13% Attraction of future talent 6% 10% 9% Erodes focus on performance 5% 8% 8% Extra time and costs utilised 6% 4% 8% Primary concern Equal pay cases 5% 5% 6% Secondary concern Cost to address differences 4% 4% 4% Tertiary concern Retention of staff 3% 1% 4% Employers concerns have changed since 2016 as they have got to know the regulations better. Overwhelmingly, they are more concerned by current staff perception and how these data can conflict with efforts on gender inclusion often global initiatives to address pay equity. Conversely, employers are less concerned about equal pay risks, league table exposure and costs to address differences. Worries about reputational risk remain high indeed, this was the primary concern for a quarter of all organisations. We have no or few concerns 5% 3% 1% 0% 10% 20% 30% 40% 50% 60% 70% MERCER

18 W H A T A R E E M P L O Y E R S S A Y I N G A B O U T T H E R E P O R T I N G R E G U L A T I O N S? More than just a number Well-meaning but flawed The narrative and internal conversation are extremely important. Spirit and intention are good. However, methodology is flawed. FTE salary would be easier to run and as insightful. Some industries may come off worse The tech sector has a higher than average gender pay gap. This could undermine efforts to attract more women to work in technical roles, or conversely, make companies feel complacent about improving. Concern over confusion with equal pay We remain concerned that many people, both inside the organisation and externally, do not understand the difference between the gender pay gap and equal pay for work of equal value. MERCER

19 G E N D E R P A Y R E P O R T I N G S U R V E Y A P P E N D I X Below is the list of surveyed companies who have opted not to remain anonymous: Abcam Google Southern Co-op AECOM Howdens Spirax Sarco American Express Imperial College London Sthree Anglian Water IMS Health TalkTalk Associated British Foods Ladbrokes Coral University of Birmingham Assurant Landis+Gyr University of Exeter Atkins Global Leeds Building Society University of Leeds Avon LinkedIn University of Nottingham BAE Systems Metasphere University of Oxford Barnardo s Motorola Solutions VMware BAT Ornua Volkswagen Financial Services BNP Paribas Pearson Withers Worldwide BPP Penspen Xerox Caterpillar Petrofac Essex County Council RBC Capital Markets Fujitsu Sheffield Hallam University MERCER

20 MERCER S POINT OF VIEW AND SERVICES MERCER

21 M E R C E R S P O I N T O F V I E W Publicly visible Publicly visible Gender pay gap reporting Required set of statistics that provides limited insight into root causes Hidden, provide narrative Equal pay Pay processes Understand your exposure have a snapshot of current risk Understand the extent to which current pay processes potentially drive unequal pay Source of root causes Workforce/ Women s career Major causes of gaps are female progression, workforce profile and occupational segregation Diversity and inclusion A culture of diversity and inclusion is a key part of realising a long-term solution MERCER

22 EXAMPLES PURPOSE ACTIVITY O U R R A N G E O F S E R V I C E S R E L A T E D T O T H I S T O P I C Part 1: Gender Pay Gap Reporting Part 2: Equal Pay Part 3: Pay Drivers What is the pay gap? Are there any risks? What drives pay and can we explain risks? To determine the gender pay gap reporting statistics overall and their relevant employing entities To understand the picture presented by the results to current and future employees and other stakeholders To highlight potential areas of equal pay risk to be identified at the job family and level position To support the gender pay gap narrative by understanding whether pay is consistent and fair by level, allowing for market factors To identify unique drivers of pay through regression analysis To identify individuals whose pay level is sufficiently different from the justifiable norm to require priority attention. Mitigating justifications are based on UK equal pay legislation MERCER

23 ACTIVITY PURPOSE EXAMPLES Female M ale Female M ale Representation: % Female % M ale Female M ale Female M ale (0) (2) (0) (0) (0) (0) Female: Male: 31% (4) 11% (4) (0) (3) (1) (1) (1) (9) 17% (4) (4) (4) (3) (6) (3) (8) 13% (5) (6) (10) (8) (14) (14) (16) 15% (9) (16) (15) (10) (11) (14) (12) 16% (10) (10) (11) (16) (16) (22) (23) 10% (8) (12) (12) (11) (13) (17) (21) 6% (5) (17) (13) (17) (16) (22) (23) 0% (0) (11) (11) (10) (11) (14) (13) 0% (0) (1) (14) (0) (11) (0) (17) 0% (0) 0% (0) 1% (1) 0% (0) 12% (5) 7% (4) 6% (4) 5% (3) 7% (7) 11% (9) (14) (57) (6) (25) (7) (37) O U R R A N G E O F S E R V I C E S R E L A T E D T O T H I S T O P I C Part 4: Pay Programme Analysis Part 5: Workforce Analysis Part 6: Diversity and Inclusion Benchmarking Do I pay fairly? Do women progress? Is my D&I strategy aligned to best practice? To understand the operation of current programmes that may impact equal pay and gender pay data. Identify whether any of the current programmes contribute to inappropriate outcomes To provide a comprehensive understanding of the workforce by gender; the current state and future trajectory of women s representation and the greatest opportunities for change To provide world-class diversity and inclusion benchmarks for engagement, accountability and leadership; pay equity efforts, health benefits, financial wellness and talent management Identify the long-term drivers of improvement in women s careers and close the gender pay gap Career Level Total Hires Active Headcount, Total Promotions, and Representation (%) Voluntary Exits Total Exits 0% 20% 0% 0% 0% 0% Grade % 77% 0% 8% 8% 3% 8% 25% Grade % 73% 17% 9% 13.0% 14% 13% 19% Grade % 65% 15% 17% 21% 23% 36% 27% Grade % 61% 27% 21% 17% 16% 24% 17% Grade % 54% 16% 11% 26% 16% 36% 23% Grade % 62% 15% 19% 13% 21% 21% 34% Grade % 43% 21% 16% 21% 20% 28% 28% Grade % 51% 8% 25% 7% 25% 10% 30% Grade % 23% 8% 13% 0% 10% 0% 16% Grade % 89% 18% 22% 8% 10% 9% 15% Grade % 76% Overall 15% 17% Active Headcount: % 4% 41% 59% 14% 14% 19% 21% MERCER

24 NATIONAL NORMS KEY RESULTS C O M M U N I C A T I O N : P O S I T I O N I N G A N D S H A R I N G T H E R E S U L T S Gender pay gap reporting requires strong attention to the narrative to put the metrics in context and help stakeholders and employees understand the story behind the figures Data disclosed without context and explanation risk causing reputational damage, undermining D&I efforts and hindering the employer brand We support organisations in three ways: Readiness workshop How ready are you to communicate the gap? Stakeholder analysis, data and analysis checklist and scoping, short-term communications plan and engagement Communications strategy and storyboard development Workshop with HR, branding, communications, CSR, etc., to develop key themes, storyboard narrative, building communications strategy Materials development Graphics, design, copywriting and multi-media materials production MERCER

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