By Rebecca Westaway
Updated 4 April 2022
The right to equal pay between women and men is one of the oldest EU principles but remains challenging to implement; it is an individual right, costly to enforce and often controversial due to its perceived interference with the autonomy and freedom of business.
Equal pay and gender pay gap
Equal pay looks at the difference in men and women’s pay for the same or similar work, whereas the gender pay gap is calculated by taking all employees in an organisation and comparing the average pay between men and women.
The Equality Act 2010 introduced legislation relating to pay secrecy clauses that are unenforceable if included in a contract of employment. It is unlawful for an employer to prevent or restrict workers from discussing their pay within the organisation but employers can, however, require employees to keep their pay confidential outside of work (such as from a competitor).
Lack of pay transparency is a key reason why pay discrimination is, to a large extent, a hidden phenomenon. It is partly because of a lack of information on pay, that effective enforcement of the right to equal pay for the same work and work of equal value for women and men continues to be a significant challenge (Pay Transparency Time to see the gap!, 2019)
Some managers regard current opacity around pay decisions as an essential element of workplace control and a crucial part of their managerial prerogative.
What do employees make of pay transparency?
In March 2020, Charles Cotton, Research and Policy Adviser, Performance and Reward at CIPD, reviewed Global Pay Transparency: An Employee Perspective in his In a Nutshell article Pay transparency: an employee perspective.
Cotton wrote ‘while transparency around pay has increased among employers in recent years, little research has focused on the employee‘. The authors explored the employee perspective and investigated how pay transparency could impact fairness and employee satisfaction perceptions. Cotton concluded, however, that:
‘Employers appear to be sleepwalking into ever-greater levels of pay disclosure, with little consideration either of the risks that must be managed or mitigated or of the opportunities [linked to] being more open about how pay decisions are made and the outcomes those decisions can bring.’
The science of pay transparency
Elena Belogolovsky, PhD and Professor in Human Resources Management at Cornell University, considers some degree of pay transparency necessary to convince employees that the organisation’s compensation system is equitable and fair. In the article ‘The science of pay transparency’, she’s quoted as saying: “I believe that the real issue is not whether pay should be transparent or not, but rather whether the compensation system is equitable, well managed and well communicated.” (Sarner, n.d.) adding that ‘neither a transparent pay policy, nor pay secrecy can resolve an unfair system.’
The gender pay gap (GPG)
There are several factors to bear in mind, including:
- Home: women work more unpaid hours than men, caring for family and the household.
- Working from home: women are more likely to take on domestic responsibilities while working flexibly. Men are more likely to prioritise and expand their work spheres.
- Labour market: over-representation of women in low-paid roles.
- Pandemic: women are more likely to be employed in less secure jobs, and in sectors that have been the hardest hit
- Organisation: women often earn less than men holding comparable positions, qualifications, and experience within organisations.
How organisations calculate their GPG
Organisations measure their gender pay gap across all jobs. The formula represents the difference between the average hourly earnings of men and women (excluding overtime) as a proportion of men’s average hourly earnings.
The new EU Directive
The European Commission’s Directive on Pay Transparency and Equal Pay, published on 4 March 2021, aims to take a step forward in the fight against the gender pay gap by increasing opportunities for workers to gather the data needed to call out pay discrimination.
The Directive has two specific objectives:
- empower workers to fully enforce their right to equal pay bringing instances of pay discrimination to light through transparency and giving workers the necessary information and tools to act on it; and
- address the systemic undervaluation of women’s work at the employer level through transparency and correcting biases in pay-setting mechanisms that perpetuate the undervaluation of work done by women.
In its impact assessment, the European Commission stated that the Directive could support both of these objectives by addressing the difficulties affecting the application of the key legal concepts relating to equal pay and access to justice. (Executive summary, Impact Assessment Report Proposal for a Directive of the European Parliament and Council, 2021)
Could pay transparency in the UK be the answer to gender pay equality?
During our Fellows Forum on #InternationalWomensDay, we asked that very question. Professor Carol Atkinson welcomed Professor Jill Rubery, and Caitlin Schmid (PhD candidate in Sociology) to hear the latest research insights and reflect on both UK gender pay reporting measures and the EU’s proposed pay transparency directive.
Watch the playback
Prof Jill Rubery is the Executive Director of the Work and Equalities Institute at Alliance Manchester Business School. She was previously Deputy Director of Alliance Manchester Business School and Head of the People, Management and Organisation Division (2004-2009). In 2006 she was elected a fellow of the British Academy and an Emeritus Fellow of Murray Edwards College, University of Cambridge.
Caitlin Schmid is a PhD candidate in Sociology at the University of Manchester researching measurements of gender equality, with a particular interest in unpaid work. She is also a Research Associate at the Global Institute for Women’s Leadership at King’s College London, where she has previously researched the effectiveness of the gender pay gap reporting systems in six countries.
Our Fellows Forums convene Chartered Fellows of the CIPD, executives and senior leadership to discuss and debate topics of strategic importance. The forums are a joint collaboration between CIPD Manchester Branch and the Work & Equalities Institute (part of the University of Manchester’s Alliance Manchester Business School)
Access CIPD Resources and guidance to explain the gender pay gap, the reporting requirements and the steps you can take to address the gap within your organisation
CIPD Gender Pay Gap Report 2021 – In reporting its gender pay gap data, CIPD chooses to go behind the figures as part of its commitment to fostering inclusion, fairness and flexibility within the organisation. CIPD wants to understand how its culture and actions help the Institute close the gap and to support other employers and its professional community in their endeavours to champion good work and fair pay.
Global Gender Gap Report 2021 – 135+ years to close global gender gap – World Economic Forum.
Ec.europa.eu. 2019. Pay Transparency Time to see the gap!. [online] Available at: <https://ec.europa.eu/info/sites/default/files/factsheet-pay_transparency-2019.pdf> [Accessed 3 February 2022].
Ec.europa.eu. 2021. EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL. [online] Available at: <https://ec.europa.eu/info/sites/default/files/aid_development_cooperation_fundamental_rights/swd-2021-42_en_0.pdf> [Accessed 4 February 2022].
Sarner, M., n.d. The science of pay transparency. [online] BBC Science Focus Magazine. Available at: <https://www.sciencefocus.com/science/the-science-of-pay-transparency/> [Accessed 4 February 2022].
Statista. 2022. UK gender pay gap 2021 | Statista. [online] Available at: <https://www.statista.com/statistics/280710/uk-gender-pay-gap/> [Accessed 3 February 2022].