How to close the gender pay gap: Stop salary disclosure

equal pay

A female business leader has said that companies who ask for candidates’ existing salaries in the recruitment process are preventing progress on closing the gender pay gap.

Founder and CEO of The Finance People, Anita Tweats, has revealed how businesses can tackle difference in earnings between men and women by banning salary disclosures when hiring new candidates and promoting existing employees.

Men working full time took home average hourly earnings that were 8.9% higher than women across the whole UK labour market in 2019, down only 0.6 percentage points since 2012, with the difference increasing as employees get older.

Among the youngest workers the gender pay gap is negligible, but it steadily increases as employees age, reaching 11.4% for those in their 40s and over 15% for staff aged between 50 and 59.

For managers, directors and senior officials in businesses, difference between male and female pay has actually risen by two percentage points to 15.9% since 2018.

A crucial flaw in recruitment and promotion processes as employees get older and climb the career ladder is the main reason for this, according to Anita.

She claims that it’s impossible to eradicate the gender pay gap until disclosure of current salaries in job applications or at interview is stopped.

Knowing a candidate’s earnings history often leads to recruiters proposing percentage pay rises based on existing wages.

But even equal percentage pay rises generally widen the existing difference between male and female wages, as Anita shows in her white paper on the issue, entitled ‘Closing the Gender Pay Gap in Britain’s Professional Services Sector’.

A woman earning £10 hourly will earn £11 after a 10% pay rise upon promotion, but a man earning 8.9% more (the current overall full-time gender pay gap) at £10.89, who is offered the same raise, will then earn £11.98 – so the difference rises from 89p to 98p hourly, or to 10%.

Instead the business leader says companies should instead ignore past pay slips and focus on the future, by assessing candidates abilities to determine their true value to the company and a consequently appropriate wage.

Fairly rewarding staff with financial packages that directly and solely relate to their current skills and value can improves the bottom link for UK companies too, by improving morale and motivation, which in turn boosts productivity and retention rates.

Greater gender diversity, particularly at higher levels of organisations, can drive profitability too by providing alternative perspectives that can improve processes and policies, as well as aid creativity and innovation.

Tweats said: “Eradicating the gender pay gap will help businesses to get more of the right people into the right positions.

“Offering fair financial incentives based on employees skills and worth to their company will raise the morale and motivation of previously undervalued employees, inspiring greater productivity and loyalty.

“The business world and wider society is great at talking about dealing with the gender pay gap, but little concrete action has been taken recently.

“My two decades at a senior level in the finance industry has shown me that vague pledges, gentle encouragement and arbitrary targets seem to make little, if any, tangible difference.

“The gender pay gap has remained relatively stagnant at nearly 10 per cent for all full time employees since 2012 and has risen to over 15 percent for older and more senior staff in the last year of reporting.

“This is in no small part due to the continued and dated practice of disclosing salaries during the recruitment process and offering equal percentage pay rises that seem fair but actually widen the gender pay gap exponentially.

“Both should be banned or at the very least severely frowned upon, at any stage in workers’ careers, to finally tackle the perpetual undervaluing of female employees as they climb the ladder.

“Businesses and recruiters should instead put a little more effort into their processes and determine what candidates are really worth in the present moment.

“In larger companies, a mixed gender panel could conduct an objective, anonymous assessment of an individual’s skills to propose a fair wage upon hiring and promotion.

“I would urge every company though, whatever their size, to disregard old pay slips and focus on how much the future contributions someone could make are worth, regardless of gender.”