In our previous Law-Now articles in this series, we have looked at the impact of COVID-19 on various aspects of diversity. In this Law-Now we consider why the COVID-19 crisis threatens the (albeit gradual!) progress that has been made in reducing the gender pay gap and explore the opportunities the pandemic presents for employers to change the gender pay gap for the better.
The gender pay gap is the relative difference in the average pay of men and women across the labour market. In 2019 the gap was 17.3% according to the UK Office for National Statistics. The arguments for reducing the gap are clear. It goes without saying that it is the right thing to do. Beyond that, at national level, the PwC Women in Work Index 2019 reported that boosting the UK female employment rate from 57% to match that in Sweden (69%) would result in GDP gains of around £178bn. At organisational level, McKinsey’s May 2020 report Diversity Wins, found that companies in the top quartile for gender diversity were 25% more likely to have above-average profitability than companies in the fourth quartile.
Tracking progress through gender pay gap reporting
In recent years much good work has been done by organisations with a view to improving their gaps. However, even in more prosperous times, there is no guarantee of gender pay gaps improving year on year. This has been brought into sharp focus since the introduction of annual gender pay gap reporting in April 2017. All employers with legal entities in the UK that employ 250 or more employees must report their gender pay and bonus gaps annually. If we treat the publication of the “Year 1” reports in April 2018 as the reference point, all employers were hoping to report a good news story of a reduced gap in Year 2. However, in April 2019, 45% of employers reported an increase in their gap.
It has not been possible to carry out a full analysis of the 2020 results as, in March, the Government announced the suspension of gender pay gap reporting for this year. In any event, it will not be until 2022 that we will see the impact of COVID-19 coming through in gender pay gap reports. The Gender Pay Gap Regulations require publication each April of snapshot data from the previous April. So, the snapshot from April 2021, which is likely to capture the initial impact of COVID-19 on the gender pay gap, will not be reported until April 2022.
COVID-related threats to the gender pay gap
There are, however, already signs that the impact of COVID-19 and the lockdown will be to push up the gender pay gap for at least 2020/2021. For example:
- Learning lessons from history: The financial crisis and recession of 2008/2009 contributed to an increase in the gender pay gap in 2013 for the first time in 5 years. In its 2014 report, The Time to Act is Now: Fawcett’s Gender Pay Gap Briefing, the Fawcett Society reported that one of the main reasons for this was the nature of the new jobs being created at the time. Many were part-time or temporary and many women moved into these types of jobs. In 2020 we are seeing a similar trend, with the TUC, for example, reporting that 1 in 6 working mothers – mostly in low-paid jobs – say they have had no choice but to reduce their working hours.
- End of desk parenting: The ‘motherhood penalty’ is a well-recognised contributor to the gender pay gap. After having children many women move to part-time jobs, often lower paid with less chance of promotion. Mothers also move to lower skilled jobs that fit around their childcare. This has a direct impact on their pay.
As we discussed in our Law-Now What can employers do to address the impact of COVID-19 and the "new normal" on gender equality the situation has become significantly more acute with lockdown. More than six months in, the childcare issue is still not resolved. According to a survey for the TUC, in September 2020, two in five working mothers with children under 10 in Britain were struggling to find the childcare they need, as breakfast and after-school clubs remain closed and care from friends and family remains limited (the situation not helped by local lockdowns). If women follow the age-old trend and leave the workforce and/or move to lower paid roles as a result, the gender pay gap will inevitably widen.
- Economic effects: Even for those women not impacted by childcare issues, the job market is precarious. Unlike in 2008 when male-dominated sectors were hit hardest by job losses, this time round it is female dominated sectors such as hospitality, retail, tourism and catering. In May, PwC found that 78% of those who had lost their job since the coronavirus crisis began were women.
There is also the furlough factor. We are yet to see the full effects of the end of the Government’s Job Retention Scheme at the end of October but if, as suspected, despite the introduction of the (extended) Job Support Scheme, it leads to high numbers of redundancies women are likely to be disproportionately impacted. HMRC reported in August that for the period to end June 2020, young women were most likely to be furloughed (65% of female employees aged 17) while, in May, the Institute of Fiscal Studies reported that, between 29 April and 15 May, 14% more mothers than fathers had been put on furlough.
As identified by the UN as far back as April, these factors will combine to cause long term earning damage. In addition, when employees are fighting for their jobs, it becomes harder for them to challenge their pay. This gives the excuse to any employers already reluctant to prioritise pay equality to fall back on old habits. We considered why losing focus on diversity (including gender equality) is a risky option for employers in our article on Law-Now Diversity in a Recession; in short our message is don’t!
An opportunity there for the taking?
The rise and fall of the gender pay gap is not something that should be left to fate. In 2020, the huge impact of COVID-19 presents a real opportunity for employers to remodel workforces and working practices. More remote working seems set to be the “new norm”. We explored the possible unintended consequences of increased remote and flexible working in our Law-Now What can employers do to address the impact of COVID-19 and the “new normal” on gender equality. However, provided employers are alive to these risks and take active steps to counter them, the hope is that increased home and flexible working, with a focus on productivity not presenteeism, will present a real opportunity to break down the belief that key or senior roles need to be done full-time on site. The result of that should be A: a higher retention rate amongst female members of staff, and B: more women progressing more quickly in the organisation.
The maths is simple: A + B = ↓gender pay gap.
Even more fundamentally, we have begun to see calls for a revaluation of pay & status in sectors such as care, health & retail that have kept society going in 2020. We have seen a nod towards this through the bonuses that were paid to supermarket workers and NHS support workers, but a more dramatic overhaul of base pay will be required to have any long-lasting effect.
Beyond this, the pandemic has the potential to unlock the societal barriers that prevent girls studying STEM subjects and entering professions such as engineering, science and technology. During lockdown we have seen a rise in the profile of scientists (working on vaccines and providing evidence for public health policy) and IT professionals (developing track & trace apps) for example. Engineering UK reported that 12% of women surveyed stated that the pandemic made them more likely to want to work in engineering. Expanding female representation in STEM professions will inevitably be a slow burn and unlikely to have any significant impact on gender pay gap results in 2022 but could prove to be a longer-term positive outcome of the pandemic.
If anything can be learned from the first few years of gender pay gap reporting, it is that organisations who take real ownership of their statistics and delve into the reasons behind them “win”, either by being able to report a better gender pay gap or sell a good news story of their journey towards that.
Employers should not shy away from the issue. While gender pay gap reporting in April 2021 still seems a long way away, when it does come around employers will, as before, want to share a compelling narrative. Indeed, it is very possible that we will see a greater spotlight on gender pay gap results given the phenomenal response to the Black Live Matters events in summer 2020 and the increased demand for ethnicity pay gap reporting which has reignited on the back of that.
Improving the gender pay gap has always been a long-term game - it is not a linear journey. The key here is to make sure organisations do not go backwards and that the gender pay gap and indeed other diversity issues remain high on board agendas. The smart organisations will seize the opportunities presented by the COVID-19 crisis to improve their diversity profile, whilst their competitors slip backwards and spend years, at a later date, trying to recover.