With a requirement to publish action plans on gender pay gaps on the UK horizon thanks to the Employment Rights Bill currently wending its way through the legislative process, efforts to tackle gender pay gaps look set to ramp up. And the UK is not alone in its efforts to address the difference between women’s and men’s average earnings.

“More and more territories now have local pay gap reporting,” explains Katy Bennett, Diversity, Equity and Inclusion Consulting Leader, ESG and Workforce at PwC. “Then you have these broader EU requirements coming through sustainability reporting, but also through pay transparency reporting.”

Consequently, companies that are already reporting on the pay gap in the UK are largely prepared for these new requirements. They know how much work it might entail, and the burden on the communications team for reporting the outcome when investors and media demand an explanation if the numbers are not going in the right direction.

The real challenge is the lack of consistency in the way that different regulators are defining what will be reported and how it’s reported, Bennett says. “For global companies, it’s becoming very complicated. Ultimately, the gap in different territories will vary because of the different methodologies in use.

“The risk for companies and their people is that they end up having a conversation not about what this is about – which is how we make our workplace better and how we improve equity – but about methodology.” 

Fitting into existing frameworks

UK gender pay gap reporting is now one facet of many other diversity lenses and reporting requirements, which also include FCA listing rules on diversity representation on boards and executive committees. Voluntary reporting in the UK also applies to the FTSE women leaders review, investor guidance and The Parker Review. And it’s anticipated there will also be UK ethnicity and disability pay gap reporting over time, as well as Financial Conduct Authority and Prudential Regulation Authority diversity and inclusion regulations. 

Meanwhile, from a global perspective, gender specific regulation will come in the guise of the international sustainability reporting frameworks (Corporate Sustainability Reporting Directive, the International Sustainability Standards Board and the Securities and Exchange Commission) as well as the EU pay transparency directive, which may have implications for UK employers with more than 100 employees based in an EU member state – firms have until June 26 to get ready. Broader, voluntary disclosure frameworks also exist.

The EU Pay Transparency Directive aims to enforce equal pay for equal work or work of equal value between men and women through enhanced pay transparency and enforcement mechanisms. The gender pay gap reporting obligations will come into effect on a phased basis starting on 7 June 2027. 

The challenge for companies – especially global companies – is in collecting this data without falling foul of data privacy rules, especially when that data falls outside of the confines of gender or sex. “Any company that tries to do global reporting or analysis outside gender will always have spotty results. There are countries where you just can’t gather the appropriate data,” says Bennett.

“In the UK, you can legally collect it, but you need to do so on a voluntary basis. How to convince people to share this data is a whole other question.” Add to the mix the fact that answers will change over time, not just in relation to age, but also responses to questions about living with a disability and sexuality. “The data has to be live to be meaningful,” Bennett adds.

Using data to reach gender equity

Companies that are focused on diversity, equity and inclusion (DEI) and making a difference are using data to drive their strategies, but also their day-to-day people decisions. “The reporting is just a number – you’re telling people what’s already happened. But if you look at the data and can see that men get promoted much quicker than women, you can then see if your promotion process is biased – then you can change the process. Data can be very powerful in the moment,” Bennett says.

When it comes to understanding pay gaps, there will always be anomalies that can drive that gap and they must be understood. That might have something to do with bonuses, when they are paid, who tends to receive them, bonus structures and how those different factors skew outcomes.

“A lot of companies will also ask equal pay questions (equal pay being a legal requirement) and check they are paying equally for equal work, and then start asking those questions around promotion, around performance ratings, around access to training and access to the best opportunities,” says Bennett. “All of these things either explicitly or implicitly can determine pay raises and bonuses. And then there is the pension gap – which is much bigger than the pay gap – but driven by it.”

WEF delivers a reality check

Effort to tackle pay discrepancies between the sexes are to be lauded. However, a global lack of meaningful, widespread change in rates of gender parity in the past year means that equality between the sexes remains beyond the reach of another five generations, the World Economic Forum (WEF) is warning. 

Why is this a problem? As WEF points out, where DEI efforts are longer lasting, increased productivity, adaptability to change and stronger innovation follow. Gender parity delivers a competitive advantage.

WEF says that gender parity in the workforce can be advanced through both formal measures, like quotas and policies, as well as through informal factors, such as professional networks. The acquisition of skills should also deliver a shift towards parity. 

But shifting the dial on gender parity outcomes also hinges on the global economic and regulatory context shapes, bearing in mind that economic prospects for women and girls are threatened by the continued downturns and prolonged crises. 

Policymakers, too, have a role to play in advancing gender parity and dedicating resources to close the gap requires a fundamental mindset to recognise gender parity as an engine for new, high-quality growth and to ensure that pathways to growth, prosperity, innovation and sustainability are levelling the ground for everyone.