While companies have reported on gender differences in remuneration to the Workplace Gender Equality Agency (WGEA) for some time, the Government’s Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 will require public disclosure. The potential for adverse public attention may spur organisations to close the gap faster.
Organisations who are on the front foot with these changes (like those who currently voluntarily disclose) can take the lead by having a clear ambition and strategy for achieving career and pay equity – one that builds trust with employees, investors, and community stakeholders.
The Bill amends the Workplace Gender Equality Act to strengthen reporting provisions, including:
The Bill follows the recent ban on pay secrecy introduced under the Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022. This legislation created a new workplace right allowing employees to ask one another about and to disclose their remuneration. In addition, employers are now prevented from enforcing pay secrecy clauses in employment contracts and fair work instruments, and from including pay secrecy clauses in new employment contracts and other written agreements.
This means that employees are now free to discuss a range of pay related topics with their colleagues including remuneration increases, performance bonuses, retention payments, benefits and share allocations – conversations which were previously either subject to disciplinary action or culturally discouraged in many organisations.
The boost to pay transparency is expected to generate more data-informed conversations about pay and benefits as additional information becomes available in workplaces and the public arena. If overseas experience is a guide, we anticipate transparency will evolve to include further measures such as availability of salary ranges and other pay data at hiring and during employment.
Employees will expect more information about remuneration strategy and how remuneration decisions are made within organisations and related governance. There is expected to be increased interest by corporate stakeholders and investors on how companies are addressing gender pay equity as an important part of the “S” in their ESG platform, adding further pressure to close the gap faster.
Based on WTW’s extensive global experience advising clients in the US, the UK and Europe, where pay transparency laws have been in place for several years, we recommend three actions for employers to take now, to prepare for the new laws.
01
WTW global research confirms that fair pay is fundamental to employee engagement and an essential element of high performing companies. Whether your organisation is at the foundation stage and yet to define your fair pay ambition, or you are leading and sustaining deep stakeholder engagement, it is time to build out your roadmap for delivering greater pay transparency as part of a clear career and pay equity strategy.
A good place to start is to conduct an audit of your organisation’s people processes. Are processes like talent acquisition, career development, performance management, succession planning and remuneration inclusive and based on objective criteria? Does the governance framework support timely, data-driven decision making to prevent pay gaps emerging? A formal Job Architecture and Job Levelling approach, together with salary benchmarking, enables employers to consistently and fairly apply Total Rewards programs. These are the foundations to communicating inclusively and transparently with employees who expect objective and robust frameworks to underpin rewards decisions and fair pay.
02
Public reporting will shine a light on how companies calculate their pay gaps, be they organisation-wide, by level or across ‘like for like’ roles. Now is the time to stress test your methodology and process for identifying and acting on individual pay adjustments and then communicate the approach clearly to employees, so they know what to expect and build trust.
A pay equity analysis seeks to answer the question: “Do we pay employees doing the same job fairly?” Any differences should be due to objective factors such as skills, relevant work experience, location and performance rather than gender or other protected characteristics. It is also important to apply an unconscious bias lens to the objective factors to ensure the integrity of the assessment.
To help isolate the objective reasons for pay differences and to guide appropriate remediation, consider using multi-variate regression and analytics to help understand your current state. This method identifies where there are pay gaps, which ones you need to worry about, what individual pay changes you need to consider and the potential costs, alongside longer-term pay program and practice improvements.
The approach to methodology and analysis has moved beyond a focus on taking individual adjustment actions in each cycle. Many organisations conduct regular pay audits but find that no sooner have gaps been closed with appropriate pay adjustments, new gaps open. A more dynamic and integrated approach is needed.
There is now also a growing recognition that equal pay encompasses more than base salary – it is about inclusive policies for all pay components, benefits and career progression that address work-life considerations and gender wealth gap differentials later in career.
03
Consider the impact of these changes on your organisation’s culture in relation to transparency more broadly, not just pay. Greater transparency on pay usually goes hand in hand with transparency on other topics like financial performance, sustainability, environmental and social metrics. Having a Total Rewards change management and communication strategy is therefore vital.
Employees will turn to their managers for information, and managers need to feel equipped with the right information and skills to have these conversations. Does your organisation have a remuneration framework or compensation philosophy that is available to employees? Do employees know how remuneration decisions are made? How do you determine an employee’s remuneration and what calibration and governance takes place?
Experience in the UK, Europe and the US indicates pay transparency has evolved to legislation on publishing salary ranges so that employees can assess their pay in relation to company pay policy and market factors. Consider the benefits and risks to your organisation of making more information available, and the support for managers needed to implement this. While you may not be ready now, it is worthwhile commencing consultation and education, and planning HR system and other changes necessary to support this.
Finally, consider the demographic and cultural diversity within your organisation. Currently there are four generational groups (Baby Boomers, Gen X, Millennials, Gen Z) in the workforce. Millennials and Gen Z generally expect open conversations about pay but this may not sit well with other generational groups. Pay can be a sensitive issue so preserving psychological safety should be considered in your change and communication plan.
Pay transparency will step up the focus on fair pay. New laws will require an extra layer of care in defining and communicating remuneration policies and practices. Those organisations that have confidence in their career and pay equity strategy will soon be on their way to complying and leading in this space.
By acting now to review your people processes, calculation methodology and communications you can be equipped to meet the requirements and show your people you care. Don’t underestimate the enhanced engagement required with your current and potential employees, the media, customers and investors. Be ready to extend and lead the fair pay conversation and seize the opportunity to strengthen trust with employees through deeper engagement on career and pay equity as part of your ESG platform.
