Tackling the gender bonus gap

How should we address the gender bonus gap which, in some sectors, is significantly higher than the gender pay gap and distorts earnings?

Gender Pay Gap

 

The gender pay gap has spawned several related offshoots: the gender pension gap, the gender commuting pay gap and the gender bonus gap, for instance. The first is the result of the accumulation of the earnings barriers that women face over a lifetime. The gender commuting pay gap is linked to the fact that women tend to work closer to home after their children are born and that local jobs often pay less than those in bigger cities. Hopefully, this may change somewhat with wider access to remote or hybrid working.

The gender bonus gap occurs if, for example, the jobs where men pre-dominate are more likely to attract a bonus or a bigger bonus, for instance, those related to sales or finance. The Equality and Human Rights Commission advises employers to check that their bonus policy is not discriminatory by ensuring they have sound criteria for awarding bonuses and that everyone is aware of the decision-making process, by ensuring the bonus is clearly defined and people know what they have to do to get it and by checking that any employees who don’t get it are not excluded because of their gender but for a genuine business reason.

Having different bonus schemes for different types of workers can open up a whole can of worms, it warns, and lay an organisation open to equal pay or other claims.

The gender pay audits often show large differences in the bonuses paid to men and women, particularly in sectors such as financial services. This is often because the big bonuses go to jobs in investment banking and asset management which tend to be taken by men. In 2019, for instance, the mean bonus gap for HSBC Bank Plc was 85%, down 1% on the year before, but it was up by 2% for HSBC Global Asset Management (UK) Ltd  and HSBC Private Bank (UK) Ltd – from 62 to 64% and from 49 to 51% respectively. The same year Barclays has an overall 40.2% gap, but a 73.7% mean bonus pay gap, although more women received bonuses than men.

The problem is that the bonus culture, particularly when it comes to high bonuses, is associated with a certain type of job done in a certain way [usually all hours] and by a certain type of person.

The usual aim of bonuses is to incentivise people – certain people – to perform better, but a research study conducted by Brice Corgnet, Professor of Finance at  Emlyon Business School, casts doubt on that theory. It found that employees vying for a bonus exaggerated their contribution, making out they had completed much more work than they had and said that bonuses could encourage division and competition rather than a team approach. The study says team-based rewards might be a better bet. John Lewis famously, of course, allows all employees to own a share of the company and receive a percentage of their pay as part of the company’s annual share-out of profit.

Sometimes, however, employers who seek to address the gender bonus gap by being more even-handed when it comes to paying them out run into trouble. In the last weeks some employers, such as Aviva, have announced bonuses for staff to reward them for all the work they have done during the pandemic. In the last few days, for instance, Asda has announced that 103,000 employees will share a £27.8m bonus pot in their February pay packets in recognition, the company said, of employees’ hard work during the pandemic. The average hourly-paid full-time worker will get £413, while the average figure for all hourly-paid store workers is £269.  However, while it rewarded shop staff – traditionally more likely to be women – whose pay is traditionally lower than warehouse staff who are generally men – something that has put supermarkets at the centre of an equal pay claim – unions said the one-off bonus did not make up for the supermarket’s decision to impose a well below inflation pay increase of just 3.25 per cent on retail workers just before the announcement was made. Most of the staff affected by the real terms decrease in pay are women, said the GMB.

The rewards systems that have built up over decades need, like everything, to be rethought in light of what their purpose is, who they reward most and what gets valued. A recent McKinsey report highlights the importance of principles such as transparency and fairness in the post-Covid rewards package as well as non-financial rewards – and says any changes should be subject to close monitoring. The authors state: “Organisations that keep these principles in mind while designing and implementing total rewards will be better positioned to attract and retain top talent in a workforce that is increasingly demanding flexibility and equity.”



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