Gender pay gap reporting doesn’t have to be an inconvenience – it’s also a fantastic opportunity in a competitive marketplace.
The following article appeared in the Business Post on 13 October 2023.
The value of positive gender pay gap reporting results cannot be overstated. As well as sending a clear message to prospective employees, demonstrating a full commitment to reporting highlights the values and culture within a business to the wider public. Following the introduction of mandatory reporting in 2022, many organisations understandably undertook a reactive approach. Uncertainty regarding what exactly was required led many businesses to publish limited detail on their intended actions to address existing pay gaps. A year on, an opportunity now exists for those same organisations to establish themselves as leaders in gender pay gap reporting and, by extension, within the wider diversity, equity, and inclusion sector. That can become a powerful incentive for prospective employees.
EU Pay Transparency Directive
Additionally, the looming implementation of the EU Pay Transparency Directive is a further incentive for employers to take gender pay gap reporting seriously. Though the directive is not due for enactment until June 2026, it is set to introduce more stringent reporting requirements. It is therefore crucial that organisations begin becoming as informed as possible about what will be required now. The directive is due, amongst other changes, to financially penalise any organisations that present a pay gap of over 5%. Based on last year’s reporting data, this would mean that 71% of organisations fall within this category. Further information on these changes can be found here.
Preparing for the 2023 report
Last year’s reporting brought many learnings for businesses that will be looking to improve their performances over the coming years. And it’s clear from last year’s data that the vast majority of businesses have considerable room for improvement. One of the most striking learnings from 2022 was the varying approaches businesses took to reporting non-essential payments such as employee bonus payments. Ahead of this year’s reports, organisations will now be able to compare approaches. But prospective employees will also be able to compare prospective employers’ results. This brings potential consequences: staff become aware of just how much they’re paid compared with peers in other companies, and recruitment can become quite challenging for companies that aren’t faring as well as their industry rivals. This is proving to be a significant challenge in particular for private sector organisations that haven’t been subject to the same levels of transparency as public sector equivalents.
The financial penalties that will come with the enactment of the EU Pay Transparency Directive is a concern for organisations. But the reputational risks associated with poor gender pay gap reporting results is a far greater concern for most businesses. Amid a war on talent that is evident across most sectors today, employers need to be able to prevent deterrents arising for potential employees whenever they can. The way poor results are now subject to public scrutiny can be problematic for recruitment campaigns. There is also little wiggle room for companies looking to be ambiguous in the way they report their results. The best efforts of companies were deemed as adequate by many in 2022. That won’t be the case going forward. Furthermore, reports will also need to be signed off by senior figures within organisations such as chief financial officers. They must thus be able to stand over whatever results are put forward.
For now, only companies with 250+ employees are required to produce gender pay gap reports in December 2023. But organisations of all sizes need to be aware of what is required from them, if they aren’t already voluntarily producing reports. All organisations with 150+ employees will be required to produce reports in 2024, while organisations with 50+ employees will be expected to do likewise in 2025.
Many organisations which aren’t required to produce reports just yet are already seeing value in getting ahead of the game. As well as allowing those with positive results to be portrayed in a positive light, multiple years of reporting allow organisations to point to progress being made. There has been a spike in outsourcing assistance in this area, as a result.
It’s clear that staying ahead rather than catching up will ultimately facilitate success for organisations. With three months to go until this year’s reporting deadline, organisations that haven’t already begun the process of analysing, understanding and explaining their data are being left in the contrails of their competitors.
How Mazars can help
Since 2019, Mazars has partnered with a multitude of organisations on their gender pay gap reporting in overcoming many of the challenges covered in this article. We provide gender pay gap analysis services, taking into account gender representation, a review of diversity and inclusion activity, creation of reporting structures and benchmarks for engagement