What is the new law and who will it impact?

From April 6th this year, all businesses with over 250 employees must publish the average pay that their male and female workers receive. They have a year to comply. The new requirement will impact over 9,000 employers and cover 15 million employees: nearly half of the UK’s workforce.

It will be an interesting development for the legal industry, particularly firms that have been rather more secretive about their pay structures. However the data may not give a wholly accurate reflection of the overall picture of a gender pay gap in law as LLP members, or equity partners, do not need to be included in the data. All other employees and fixed-share partners are to be counted.

Many law firms across the board have struggled with ensuring a gender balance at the top of the firm – but those that have to include fixed-share partners in their overall average may show a larger gap than those who don’t have to count their equity partners.

Business services functions may too have an impact. As these have grown significantly over the past decade and more, it will be interesting to see how these roles impact any pay gap – particularly if men still tend to dominate the more senior business leadership positions (‘head of’ and director level roles). With more ‘employees’ as opposed to ‘equity partners’, there are fewer places for law firms to hide…

What information must organisations provide?

 

Businesses must report the following information annually on their own website and on a government website:

Their median gender pay gap figures.

By identifying the wage of the middle earner, the median is the best representation of the ‘typical’ gender difference. Employers will be asked to use data from a ‘snapshot’ period in April.

Their mean gender pay gap figures.

By taking into account the full earnings distribution, the mean takes into account the low and high earners in an organisation – this is useful as women are often over-represented at the low-earning end and men are over-represented at the top.

The proportion of men and women in each quartile of the pay structure.

This shows the spread of male and female earners across an organisation, helping to demonstrate where women’s progress might be falling behind.

The gender pay gaps for any bonuses paid out during the year.

Employers will also have to publish the proportion of male and proportion of female employees that received a bonus during the year. This could cause an issue for law firms that have tended to keep this information confidential.

The government website will allow people to compare the data by sector and compare companies within a sector. Alongside the data, a business can choose to explain the figures and talk about the measures they have taken to address them. For example, if pay gaps are due to underrepresentation of women at more senior levels, businesses can state what they are doing to develop and retain female employees.

Isn’t there already a law on pay parity?

 

Under the Equality Act 2010, it is illegal for a man to be paid more than a woman in the same job (and vice versa), but it is hoped the new requirement will reflect what the overall gender pay gap is in a business, shedding light on where the problem might lie and how best a business can focus its efforts to address them.

The gender pay gap is estimated to be 18.1%, a record low, but clearly more needs to be done, particularly at the top end of the pay spectrum, where that gap widens to 54.9% between the highest paid men and women.

And if businesses don’t comply?

 

Those who fail to publish the data could open themselves up to action from the Equality and Human Rights Commission, but while the chances are low, a far bigger risk is reputational damage as those who don’t comply can be easily identified. There is nothing to force organisations to actually close the gaps – but it is hoped that with transparency will come pressure to do the right thing.

So, what’s the controversy?

 

The new measures have come in for criticism: compiling the data will be onerous for businesses, while some say that the requirement does not go far enough and that data should be broken down by age, ethnicity and disability in addition to gender.

Others warn that businesses may come under fire unfairly. There may be factors outside of their control with certain sectors unable to attract a gender balance.

It has also been argued that it won’t address a fundamental fact in that woman are still responsible for the biggest chunk of childcare and caring responsibilities, hence they are more likely to be in part-time roles and lower paid roles. The government is backing broader plans to help women advance in their careers such as free childcare and returnships. Businesses must also play their part in ensuring women are supported when they return to work after the likes of maternity leave, and by putting flexible working policies in place. Law firms are getting better at this but there is some way yet to go in this respect.

What will it mean for employees and job-seekers?

 

In the war for talent, favourable data could be a powerful tool to attract the best people. Law firms that can demonstrate they are open, inclusive and fair will be a far more attractive proposition to future employees. It has also been estimated that eliminating work-related gender gaps could add £150 billion to the UK’s annual GDP by 2025.

Some businesses are already on the front foot such as Deloitte and Virgin Money. But there is a long way to go to persuade others: a survey by NGA Human Resources found that 29% of bosses do not believe the gender pay gap is a business issue.

For all the criticism, it is hoped that it will at least start the conversation and that businesses will use it as an opportunity to level the playing field. Those that do can find themselves in a winning position to attract and retain top talent. Already, many law firms have placed a great emphasis on increasing diversity: the new requirements could bring some transparency over how this is playing out in practice.

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