Data published recently by the Chartered Management Institute ('CMI') has revealed that on average last year men in management positions received bonuses which were twice as high as those paid out to female managers.
The disparity widens as women progress further up the ladder, with male directors receiving average bonuses 76% higher than their female counterparts. CMI's report is based on information from over 43,000 workers which showed that during their working life, male managers stood to earn over £141,000 more in bonuses than women.
Given the rhetoric by the Government in the past few years about women on company boards and in senior positions, the extent of the pay gap is quite shocking.
Interestingly, fewer men actually embark on executive careers with over 64% of entry-level executives being women, yet at middle management level the number of women falls to 44% with a further drop of 24% at board level. This seems to support the Government's position that the gender pay gap issue may be partly down to a lack of representation of women at senior levels, rather than simply a case of employers paying women less than their male equivalents.
A road map for change
Ann Francke, CMI Chief Executive, has called for a more systematic approach to tackling the situation and the CMI has produced a road map which suggests:
- all organisations should set targets for the percentage of women and men at junior, middle and top levels;
- allowing flexible working options and shared parental leave; and
- sponsorship and mentoring of talented women.
Some of these suggestions are points which the Government is already looking at, for example with the introduction of shared parental leave, which is expected in 2015. However, this overlooks the cultural norms which shape the expectations surrounding childcare as primarily a female responsibility and attitudes to women in senior positions.
The issue is undoubtedly complex and multifaceted and it seems apparent that the on-going disparity between male and female pay cannot simply be legislated away as its causes are far more subtle than blatant sexism. In order to affect greater equality significant economic, social and cultural change will be required and this is unlikely to happen quickly. For example, earlier this year, for the first time since 1999, there was a fall in the percentage of women on public company boards and current representation stands at 17% (with a target set by the Government of 25% by 2015).
It will take time for both employees and employers to adjust to a more flexible way of working and for women to become a more substantive part of the senior managerial structure and Ms Francke has warned that if businesses, "don't' tap into and develop their female talent right through to the highest levels, they will miss out on growth, employee engagement and more ethical management cultures".
In July of this year the Government's consultation on mandatory equal pay audits closed. It sought views on proposed regulations giving Employment Tribunals the power to order employers to carry out an equal pay audit if they have breached equal pay laws. At present there is no indication as to when this will be implemented. However it could act as a significant deterrent as not only is there a proposal that such audits would be published but also a £5,000 fine, should an employer fail to comply with a Tribunal's order.
CMI's data serves as a reminder for employers about equal pay obligations under the Equality Act 2010 (the "Act"). Equal pay laws do not just cover basic salary but extend to cover equality of all contractual terms of employment (for example regarding company cars, non-discretionary bonuses and other benefits).
It is now easier for employees to compare their package with those of colleagues following the introduction of the pay transparency provisions in the Act. Pay secrecy clauses in contracts are unenforceable in most circumstances and employers are prevented from victimising employees for making or seeking a relevant pay disclosure. Where there are obvious discrepancies between male and female employees' pay and benefits it is likely that an employee will raise a grievance and ultimately could bring an equal pay claim in an Employment Tribunal (or the ordinary Courts - up to six years after the end of their employment).
In addition, employers should be aware of their obligations not to discriminate based on the employee's sex, for example, when applying discretionary pay rises or making promotions. While discrimination may not be overt, indirectly discriminatory criteria such as targets or requirements which penalise part-time employees could also found a sex discrimination claim.
Tips for employers
- Ensure managers making bonus decisions are trained and aware of possible legal issues relating to equal pay and discrimination.
- Review bonus targets and job specification to ensure these are not indirectly discriminatory on the grounds of sex.
- Consider a review of existing contractual terms within the workforce to assess whether there may be any issues regarding unequal pay related to gender.