Gender pay gap reporting

Michael BurdMichael Burd, partner and chair at Lewis Silkin LLP, discusses gender pay gap reporting.

So, the results are in. All law firms with 250 or more employees have published their gender pay gap statistics, the majority of them choosing to do so very close to the 4 April 2018 deadline. 

As a reminder, the new gender pay gap reporting rules require publication of the mean and median difference between both pay and bonuses for men and women. In addition, the employer must publish the percentage of men and women who received a bonus and the percentages of men and women in each of four pay quartiles.  

The statistics must be produced across the organisation as a whole, which means that the numbers are something of a blunt instrument. They do not measure equal pay, which involves comparing pay for jobs of the same value, but instead produce a general picture of how pay is spread between men and women across an organisation.

Law firms, as with many other professional services firms, will tend to have a larger pay gap than average. But this does not necessarily mean that the legal profession has a major equal pay problem. It remains the case that the majority of secretarial and other support staff tends to be women, these being the lower paid roles in firms. So even if there is an even split between men and women among the lawyers, the whole-firm statistics will always produce a gender pay gap. Unsurprisingly, this has been pointed out in the explanatory notes accompanying most law firm gender pay reports. 

In terms of working out whether there is actually an equal pay problem, it is more illuminating to look at the statistics for specific job roles, such as comparing the pay of all associates. This may reveal that there is no real difference, particularly if a firm bases its pay on fixed spines and years of experience. On the other hand, in some cases this exercise may reveal that there is still a pay imbalance.  

Although more women than men are entering the legal profession, men still tend to dominate at the more senior levels. There are various reasons for this, but a major factor is women who have taken maternity leave finding it challenging to continue their careers, or choosing to leave or work elsewhere in a more family-friendly environment. There is no doubt more that some law firms could be doing to address this loss of female talent, and gender pay gap reporting is likely to increase focus on this area.

The regulations contain a curious anomaly as between the treatment of basic pay and bonuses. In computing hourly rates of pay, they allow for a pro-rating when it comes to part-time workers. However, such pro-rating does not apply in the case of the bonus gap calculation. Some feel this is unfortunate, since an employer which has good family friendly and flexible working policies (and consequently more part-time workers, the majority of whom tend to be women with childcare responsibilities) may feel tempted to reduce part-time workers as an easy means of reducing its bonus pay gap.

Another controversial issue is whether to include partner earnings in the published statistics. This is not required by the gender pay gap reporting regulations, which expressly exclude partners and LLP members. A number of firms have chosen to publish this information anyway, either separately or as part of the overall calculations, and there has been some discussion as to whether the regulations should be changed to require this.  

Irrespective of whether the figures are published or not, if a firm wishes to look at overall pay equity it makes sense to collate the information for partners as well. Simply adding partner figures to the overall statistics may not, however, be the best approach. It is difficult to do this in exactly the way required by the regulations, because partners tend not to be paid a regular monthly amount in the same way as employees. The April 'snapshot' date cannot be used to produce representative hourly pay statistics, so it would be necessary to produce an hourly rate of pay from an annual profit share figure.

As partnerships still tend to be male dominated (especially at the more senior levels), adding partner data is also likely to greatly increase the gender pay gap – as has been shown by the experience of the various firms which have chosen to do so. This could give a misleading picture of the pay gap amongst employees.

Although it is important to address any under-representation of women at the higher-paid levels of partnership, it may be better to look at this by considering the partner statistics on their own. In theory, partners should all be performing similar roles. That means that any pay difference between men and women must either be due to under-representation of senior female partners, or something else about partner pay structures which disadvantages women.

The 'snapshot' pay period used for gender pay gap reporting is in April each year. Under the regulations, the figures just published represent the position a year ago in April 2017. So if you can bear to perform the exercise again so soon, now may not be a bad time to do so ahead of the next annual report. This may help to inform the steps you should be taking to improve the representation of women at higher levels in the firm. And there is nothing to prevent you publishing the April 2018 statistics before next April’s deadline, if you choose.