In a significant step towards achieving workplace equality, will publication of gender pay gap have influence?

In Australia’s bid to become an ‘equal and fair society for all’ , February 27, 2024 marked the first time that gender pay gaps were made publicly available by the Workplace Gender Equality Agency (WGEA) for all private organisations with more than 100 employees. Recent research indicates transparent gender wage reporting is one effective policy tool for promoting gender equity. WGEA defines the gender pay gap as a “measure of how we value the contribution of men and women in the workforce.” In opportune alignment, this development closely coincides with the 2024 celebration of International Women's Day, which campaigns to ‘Inspire Inclusion’ under the theme ‘Targeting Economic Disempowerment’.

What is the median gender pay gap?

WGEA reports a nation-wide median total remuneration pay gap of 21.7% in favour of men indicating the median pay for a woman is 78% of the median pay for a man. More specifically, while nearly a third of the median gender pay gaps among private organisations are considered to have achieved gender parity (below 5% gender pay gap), nearly two thirds of the organisations reported a median gender pay gap that was over 5% in men’s favour , with a remaining 8% reporting a pay gap in favour of women. Using the median or mid-point in a range of salaries organised from smallest to largest avoids irregularities of very high or low salaries in the group from skewing the result as is visible when taking the average.

The gender pay gap shows how “social and economic factors combine to reduce women’s earning capacity over their lifetime,” highlighting the need for organisations to take meaningful action and strive for equitable practices.

We see that what women earn directly impacts them, their families/loved ones, and the organisation. This means it is an ‘us’ problem to tackle.

McKinsey & Company?found that companies in the top quartile for gender diversity on their executive teams were 21% more likely to experience above-average profitability (The study also found that executive teams that were high-performing had more women in revenue-generating roles. That still holds true today.

What type of industry holds a gender pay gap in favour of males?

WGEA reports women’s median remuneration is consistently lower compared to their male counterparts in every industry including those that are female-dominated. Similarly, the pay gap exists in favour of males across most organisations of all sizes although it is smaller among organisations with 5,000 or more employees. The Australian National University notes that among the top 20 publicly listed companies on the Australian Stock Exchange 19 have a pay gap that favours men and 16 perform worse than the mid-point of all employers which currently sits at 9.1%, and 11 companies have a median pay gap higher than 20%.

Given the gender pay gap has become a focal point for Australian organisations and the government, it is crucial for corporate leaders to develop a strategic gender equality agenda alongside policies that aim to continuously reduce the gender pay gap and improve gender equality within their organisations. WGEA will yearly ask for data on six indicators and track the overall progress and interestingly the government according to The Age published an article indicating the government will seek evidence of gender pay gap action for the $70 billion in government work. Not to mention the potential for super payments whilst on parental leave. Does this mean that the financial imperative is taking centre stage just as much as fairness in doing the right thing?

Anchoring to Trust and Equity

While there is a strong societal commitment to achieving a neutral gender pay gap, it is crucial for organisations to recognise the significant benefits it brings in terms of driving a strong employee value proposition and retaining talent, as well as impact to their bottom line.

The level of trust that employees have in an organisation serves as a powerful indicator of their sense of empowerment and overall well-being at work. Recent results from Mercer’s global survey on talent trends indicate 69% of employees believe that their employers will prioritise societal welfare, a notable decrease from the 78% reported during the pandemic. This decline in trust for social welfare underscores the timely need for organisations to prioritise diversity, equity, and inclusion initiatives, as these factors strongly influence employees' trust and perception of the organisation's value proposition.

Several avenues to increase employee trust in equity include ensuring equal access to bonuses, overtime and allowances that currently are more favourable to men. Another possibility includes working to debunk long-term stereotypes regarding ‘gender appropriate’ careers and equal sharing of home duties which has been listed as the next frontier to accelerate change by the Champions of Change Coalition that champions equal representation of females at every level of an organisation.

Where to focus attention

We believe there are a few critical areas of focus, that organisations ideally prioritise for action. Below let us look at four of them:

Workforce composition: One of the drivers of the gender pay gap within an organisation can be the reduced representation of females at higher salary levels that is frequently observed. Chief Executive Women Australia advocates for setting 40:40:20 gender targets in leadership teams, which aim for 40% women, 40% men, and 20% representation of any gender. Additionally, data published by WGEA highlights that organisations with this gender representation in their leadership teams are 50% more likely to have a neutral gender pay gap. It’s no wonder the Australian Institute of Company Directors is calling for a new round of executive representation targets that are well designed and realistic – to deliver results. More on this below. Undertaking internal labour workforce movement analysis will help to pinpoint workforce composition opportunities and commercial impact that needs adjusting.

Leadership and pipelines: Establish clear and measurable targets for gender representation in executive leadership positions. CEW research also says that company performance can be positively impacted by more women in leadership roles, yet sadly according to their research as at 2022, 82% of pipeline roles or rather feeder roles are held by men. Therefore, it is an urgent priority to be investing in gender balanced CEO and Executive Leadership Team talent pipelines (i.e. COO, CFO) and building inclusive, flexible, and respectful workplaces for all. The other interesting research noted from Professor Carl Kulik Uni SA is that where females hold leadership roles and are paid fairly the trickle-down effect means the gender pay gap is often less. Pipelines are critical to ensure a robust bench strength exists and these individuals are afforded the right experiences to set them up for the most senior appointments in the organisation.

Policies and practices that support work-life balance, flexible work arrangements, and parental leave for both genders can help create an inclusive and supportive environment for all employees. Comparing policies to external benchmark and determining if change is required to be more inclusive and market leading.

Education and training on unconscious bias and gender equality to foster a culture of awareness and accountability, along with helping leaders and hiring managers make good decisions in the moments that matter around pay.

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By taking these actions, leaders can pave the way for a more equitable future and create workplaces where everyone has an equal opportunity to thrive. Remember this is an ‘us’ problem that impacts not only females in the workplace but at their tables at home and the organisation. There is no doubt, that this is a complex area and can change year to year which means our attention must always be on. Publication of data will force more action, though the right action is critical. Publication by WGEA has received much media attention both good and bad but let us not forget the point and that is to make a societal impact for the better where we all thrive.

Authors

Anne Le Blanc – Senior Principal Mercer

with Nelson Tang Senior Associate Mercer and

Rosa Bauernfeind Associate Mercer

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