Gender pay: What’s needed to make equality a reality?

A CMS Webinar on Tuesday 21 September will explore what society and businesses need to do to close the ongoing disparity in men and women’s pay.

Did you know that 18 September 2021 is UN Equal Pay Day? It’s something of an ironic title as this is the day, according to UN calculations, when women will effectively stop earning this year – given the estimated 23 per cent global shortfall in their pay compared to men.

After years of gender equality campaigning and legislation, the fact that women continue to be paid almost a quarter less than men for comparable work may come as a surprise. This is why CMS is hosting a webinar Mind the gap - Making equal pay a reality on Tuesday 21 September to highlight and address the issue. Featuring speakers including Neris M. Báez García de Mazzora, Director, Procurement Division at the United Nations and Professor Abi Adams-Prassl, Associate Professor and Senior Research Fellow at the University of Oxford, you can register for your free place here.

Diversity vs profitability

Gender pay inequality is often framed as a moral concern but there is a clear business case for ensuring gender (and also ethnic and cultural) diversity in an organisation through mechanisms such as equal pay. Research by business consultants McKinsey in 2019 found that companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile. What’s more, the companies that ranked lowest on executive diversity have seen their likelihood of underperforming on profitability more than double from 9% in 2015 to 19% in 2019.

Reasons for pay inequality
So if it’s so bad for business, why does gender pay inequality persist? There are a number of factors at play here. The key ones are:

• Cultural perception: Sometimes women are simply paid less than men for doing the same role – often caused by a patriarchal structure in society and the way women are viewed/valued. Women also tend to be more reluctant than men to negotiate pay rises due to their upbringing and social conditioning. Notwithstanding these dynamics, women receiving less pay for doing the same work as men is becoming less common and is unlawful in many countries.
• Under-representation: Women are less likely to have roles at (highly paid) senior levels in an organisation than men. An underrepresentation of men at junior levels /lower-paid roles in certain sectors further exacerbates the pay gap.
• Labour market segregation: Women continue to choose careers in (economically) less valued occupations, such as carers and non-managerial retail jobs, while also being dissuaded from higher-value sectors. Notably, women are underrepresented in the ‘jobs of the future’, accounting for only 14% of employees in cloud computing and 20% in artificial intelligence, for example.
• Lower labour market participation: Career breaks to have children and a greater take-up of part-time work to accommodate family needs can stop women from progressing in their career. Part-time work also tends to be less secure and lower paid (on a pro-rata basis). The ‘motherhood penalty’ can mean women are disadvantaged irrespective of whether they actually take time off to have children.

Addressing pay inequality

Pay inequality has become entrenched through a variety of longstanding social, cultural and business behaviours. So it will require a range of levers to dismantle it. At CMS, we’ve identified five steps that we believe are key to effective action for societies and businesses:

1. Introduce and actively enforce regulation on gender discrimination

Implementation of laws and regulations to protect against discrimination are the first step in any country or business to send out the message that gender inequality will not be tolerated. The challenge here is effective enforcement: for example, Italy has a number of laws in place prohibiting discrimination on the grounds of sex, but still has one of the worst gender pay gaps in Europe.

2. Make pay transparency mandatory

There are strong hopes that greater transparency on pay will make it harder for employers to accommodate pay inequality. For example, in the UK there is mandatory annual pay gap reporting for employers with more than 250 employees. Italy and France both require employers to disclose information on pay gaps. This March, the EU proposed legislation to ensure pay transparency for employees and better access to justice for victims of pay discrimination.

Public and high-profile ‘naming’ of organisations where pay inequality is evident (or, equally, where pay equality is good) could encourage more employers take more proactive steps to tackle the pay gap, such as developing, and publishing pay scales and including salary levels when advertising roles. The challenge is how to police accurate and comprehensive pay reporting.

3. Enable flexible working among both genders

More flexible working conditions can help women in the workplace who tend to take on caring responsibilities at home. Flexible working arrangements adopted in response to COVID-19 may have helped to create a broader acceptance of practices such as remote working, but only time will tell if it can become a permanent feature of professional life.

However, it is vital that flexible working conditions are embraced by both genders: if flexible working continues to be seen as a female preserve, women are likely to continue to face negative reactions for requests such as job-sharing or working from home.

4. Promote family leave – not just maternity leave

Just as flexible working needs to be seen as a gender-neutral option, so promoting ‘family leave’ for both genders and actively encouraging mothers and fathers alike to take-up this opportunity in an equal manner will help to avoid stereotyping and reduce the “motherhood penalty”.

5. Support more women at senior positions

Finally, increased representation of women at senior levels through schemes such as mentoring, sponsorship and training could have a dramatic impact on closing the pay gap, and establish role models for other women to follow However, this alone is not enough: a recent report by New Street Consulting Group shows that women on the boards of FTSE 100 companies in the UK are paid a staggering 40% less than men.

The five measures above are not either/or options. They all have to be implemented concurrently to have any significant or permanent effect and form part of a culture where diversity and inclusion is valued and promoted.

What do you think? If you have ideas or opinions on the issue of equal pay as a lawyer, employer or employee, then please do join us for the webinar on Tuesday 21 September. We look forward to hearing your thoughts.

Authored by Abbie Harley, Andrea Potz and Dani Kromer based on a collected insight of the CMS Associates Initiative members, including Collette Akwana, Federico Pisani, Parchet Aurelie, Sandra Mora and Gyorgy Balint.