The ongoing impact of gender pay gap transparency legislation

Since April 2017, UK employers with over 250 employees have been required to annually report their gender pay gap to the public. The introduction of pay transparency legislation is undoubtably one of the most significant policy developments aimed at tackling the gender pay gap worldwide.

The original publication comprised 10,000 organisational gender pay gaps, attracting widespread attention from the media, and raising the profile of UK gender pay inequality. Reporting pay differences between men and women at large firms has been used to claim unequal treatment, such as when the BBC published the names of those earning £150,000 in July 2017.

Now that five years have passed since the legislation first came into force, it is unclear how effective annual reporting of organisational gender pay gaps remains. It’s a vital point to consider, due to the administrative costs that the legislation imposes on the government and all firms involved.

Professor Melanie Jones, Professor Kerry L. Papps and Dr Ezgi Kaya have evaluated the current impact of gender pay gap transparency, with a focus on the temporary interruption to the legislation due to the COVID-19 pandemic, in a new paper published by IZA Institute of Labor Economics.

The full paper indicates that annual publicising of pay transparency is still crucial, even during a period where COVID-19 was at the forefront of media and public discussion. Employers who reported during this period were found to have 6% lower gender pay gaps one year later, compared to organisations that did not. Furthermore, there is no evidence from the report to suggest that companies who publicised their gender pay gap prior to the suspension year are systematically different to those who failed to report. Ultimately, this demonstrates a substantial year-on-year impact of gender pay gap transparency legislation.

An increase in the concentration of higher paid females in these organisations has helped to drive these changes, in addition to a general increase in the proportion of women in the workforce. This potentially indicates a change in company recruitment and retention, and could suggest that existing female employees are being offered more opportunities for progression within the organisation.

Additional evidence in the paper suggests that pay transparency legislation is especially effective among organisations who have previously had weaker pressures to narrow their gender pay gap.

The findings in this new paper support the reinstatement of the requirement to report annual gender pay gaps post COVID-19. Pay transparency legislation has a constant, ongoing effect beyond its initial introduction, and evidence shows that it is a vital component of gender pay gap reform. In addition to this, such evidence is useful when designing future pay gap reporting schemes on an international scale.

Related articles covering gender pay gap transparency legislation can be found below:

The UK Gender Pay Gap: Does Firm Size Matter?

Gender Pay Gap Transparency Legislation in the UK: How have employers responded?

Gender pay gap narrows in organisations with largest disparities

Photo by Marcela Ruth Romero on iStock