Employers accused of abusing loopholes in gender pay gap reporting laws

09 March 2018

Employers have been accused of abusing loopholes in reporting laws to make their gender pay gaps seem narrower than they are.

Chair of the Treasury Select Committee Nicky Morgan MP told the Bloomberg news agency that some companies had massaged their data by classing their top-earning partners as ‘owners’ rather than ’employees’, which means their wages can be excluded from the overall figures.

“These firms appear to be abiding by the letter of the law, but not the spirit,” she said. “They’re taking advantage of an apparent loophole. Partners are leaders and role models in their firms. They should know better than to exclude themselves”.

It is believed that this particular method of manipulating data has been used by Linklaters and EY in order to make their gender pay gaps look narrower on paper than they are in reality.

Gender pay gap reporting laws are already the subject of much criticism for not setting out any form of sanction for companies that do not comply, nor requiring employers to take any action to close their gender pay gaps. The actions of major employers massaging their figures appears to reveal a dismissive attitude to the issue overall, adding fuel to concerns that most businesses will do little to nothing to improve equality unless more is done to force their hand.

France has this week made such a move by announcing that employers will be fined if they do not take act to reduce their gender pay gap. Companies with over 50 employees will be required to install software linked to their payroll systems that monitors unjustified disparities in wages between female and male staff. Those who do not close unjustified gaps within three years will be subject to financial penalties of up to 1% of the employer’s total wage bill.

In the UK, Shadow Minister for Women and Equalities, Dawn Butler, has promised that the Labour Party would also introduce sanctions for companies who simply ignore the problem. She explained in an article for the Guardian this week that employers with more than 250 employees would be required to report what specific actions they will take to close their gender pay gap and failure to have a plan would incur a fine.

“This means the onus will no longer be on female employees to prove they are being underpaid in comparison with their male counterparts. Instead, the onus will be on employers to prove they are paying employees fairly and have good gender equality practices,” she said.

Further, she added that firms that showed the most success in closing their gender pay gaps would be rewarded with equal pay employer certifications and prioritised for public contracts.

Companies with over 250 employees have until 04 April to report their gender pay gap, although it is anticipated that a significant proportion will not comply. So far, only around 1,290 companies of an anticipated 9,000 have submitted their figures.

This week, several major firms have reported staggering gender pay gaps, with women at KPMG paid 42% less than men and women at Deloitte paid 43% less than men.

Female employees at Barclays take home 48% less than their male colleagues, while at Virgin Money the figure was 33%.

The firms accused of massaging their figures – Linklater and EY – reported much narrower gaps of 23% and 20%, respectively.