Mind the pay gap, especially if you are older and a mother

In her first statement as Prime Minister, Theresa May said: “If you’re a woman, you will earn less than a man.” While the gender pay gap has not been solved yet, new regulations mean that everyone will know about it. The U.K. government now has the power to regulate the framework for gender pay gap reporting by companies with 250 or more employees after Section 78 of the Equality Act 2010 came into force on 22nd August. Section 78 states that the regulations may require employers to “publish information relating to the pay of employees for the purpose of showing whether, by reference to factors of such description as is prescribed, there are differences in the pay of male and female employees.”

But the gender wage gap can be looked at at a more granular level. A new study from the Institute for Fiscal Studies, The gender wage gap, quotes Labour Party leader Jeremy Corbyn’s campaign speech from July this year: “Last year Britain was ranked 18th in the world for its gender pay gap ... We can and must do far better.” The IFS report showed that the wage gap is much smaller when comparing young women—before they become mothers—to their male counterparts. It also found that the gap widens consistently for 12 years after the first child is born, by which point women receive an astounding 33 percent less pay per hour than men.

"If you’re a woman, you will earn less than a man."
Theresa May



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The study says: “Gender wage differentials remain substantial and… a hot topic in policy debate.” The study is the first in a programme of work “seeking to understand the gender wage gap and its relationship to poverty.” The first section defines the gender wage gap, and how it differs according to education level and generation. The second section provides descriptive evidence on how the gender wage gap relates to the presence of dependent children. The gap in aggregate is narrowing. The study found that the hourly wages of female employees are currently about 18 percent lower than men’s on average, while it was 23 percent lower in 2003 and 28 percent lower in 1993. However, the weekly earnings gap, though also declining, remains stubbornly high because women work fewer hours in the week than men and are less likely to work full-time, the study found. When these elements are removed, and the group is narrowed to include only young women without children, the wage gap falls to 6 percent.

Section 78 of the Equality Act 2010

The regulations may prescribe—descriptions of employer;
descriptions of employee;
how to calculate the number of employees that an employer has;
descriptions of information;
the time at which information is to be published;
the form and manner in which it is to be published.

Regulations under subsection (3)(e) may not require an employer, after the first publication of information, to publish information more frequently than at intervals of 12 months.
The regulations may make provision for a failure to comply with the regulations—to be an offence punishable on summary conviction by a fine not exceeding level 5 on the standard scale;
to be enforced, otherwise than as an offence, by such means as are prescribed.

The reference to a failure to comply with the regulations includes a reference to a failure by a person acting on behalf of an employer.

The study also found that the education gap between men and women was closed during the early 2000s and that women have now overtaken men in education level. It also attributes to this the narrowing of the wage gap. While the IFS study postulates that the difference in wage gaps between young women and older mothers may be caused by the “lower accumulation of human capital,” in other words, time taken out of employment, it does not conclusively claim that this is the case and will conduct further studies to confirm or dispute this claim.

Another study from the University of Wisconsin in the United States and the University of Warwick and Cass Business School in the United Kingdom comes up with another potential cause for the gap. It looked into the likelihood of asking for a raise between the two genders. The study says that “women ask for wage rises just as often as men, but men are 25 percent more likely to get a raise when they ask.” The data is based on employees in Australia which is described as the “natural” testing place for these theories because “it is the only country in the world to collect systematic information on whether employees have asked for a rise [in pay]”. The study notes that the gender pay gap in Australia is about 17 percent, about the same as in the United Kingdom. Like the IFS study, the University of Warwick study noted that the problem was less bad for younger female employees: “Young Australian female employees get pay hikes just as often as young Australian men,” it said.

“Last year Britain was ranked 18th in the world for its gender pay gap ... We can and must do far better.”
Jeremy Corbyn

At the time the draft regulations were published in February, the government said they would come into force in October, thus the response to the consultation and the final regulations are expected to be published next month.

Continue the conversation at Compliance Week Europe: 7-8 November at the Crowne Plaza Brussels. Join us as we look at changes in global anti-corruption regulations, slave labour risks in your supply chain, and how to detect fraud, to name just a few topics. Learn more