Gender pay reporting ‘should not be extended to smaller employers

The system for gender pay gap reporting is ‘flawed in principle’ and needs an overhaul, in particular simplification of the process, according to a report from the Royal Statistical Society.

It has published a report outlining 10 ways to improve the system and says it is not in favour of extending gender pay reporting to employers with fewer than 250 employees.

It says an important problem comes when employers employ fewer than 100 women (or men) as this could distort their statistics.

The report says these should be flagged. It states: ” In particular, some smaller companies could find themselves unjustly accused of discriminating against women when they have merely been victims of chance.”

Extending gender pay reporting to smaller employers would bring similar problems, says the RSS. It states:

“Any such move could create a real risk of smaller employers being unjustly accused of gender-based pay discrimination when, in reality, the difference between their men’s and women’s earnings could be down purely to chance.”

The report calls for gender pay data to be presented “in a clearer and unambiguous format” – always in pounds and pence, not percentages.

It says government guidance over how to calculate the median gender pay, in terms of hourly pay, was initially ambiguous and still leaves room for improvement.

It says using graphs might be simpler and clearer. It adds that some employers misinterpreted the government’s guidance on the creation of quartiles – in particular, the instruction to “divide this into four equal parts”.

Some employers did not divide the numbers equally, it says.

The report also calls for the provision of free online calculators to help increase the accuracy of gender pay gap reporting.

One key point is the recommendation that gender pay gap should be calculated by quartile as well, to make it harder for the system to be ‘gamed’. It says, for example, that gaming could happen if employers merely ensure that the median man and median woman are paid the same.

The report states: “The introduction of a quartile-based reporting system would give the system greater rigour and make it harder for any employer to present its performance in a misleadingly favourable light.”

Other recommendations include a call for employers to publish their annual results side-by-side to make it easy for trends and progress to be assessed and a call to improve statistical skills among human resources professionals.

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