Tackle the pay gap, and the rest will follow

Are you in favour of gender representation targets in companies? Then, read on. Are you against them? Then, read on too! For there is this new thing which may get all of you to agree: the gender pay gap!?

Well, the gender pay gap is nothing new. But disclosing it has just become mandatory thanks to the European Corporate Sustainability Reporting Directive (CSRD ). Is that a good thing? Yes, it is! For DEI professionals, it may even be the greatest opportunity in decades to accelerate the journey to gender equity.?

What?! We could actually benefit from a new reporting obligation?! Yes! If we understand the rationale behind it. So, let’s start by defining what the average gender pay gap is. In very simple terms, it is the response to two questions:

• Question 1: How much do women earn in your company, on average?
• Question 2: How much do men earn in your company, on average?

The average gender pay gap is the difference between the answer to question 1 and the answer to question 2.?

Accelerate the gender equity journey by closing the pay gap

So, how could the answers to the questions above help us accelerate the journey to gender equity? Let me give you an example:

• Answer to question 1: 25 €/hour
• Answer to question 2: 28 €/hour

The formula to calculate the difference is the following:

[(average gross hourly pay of men - average gross hourly pay of women)/average gross hourly pay for men]*100

Average gender pay gap = 10,7%?

This example shows that, in this company, men earn, on average, 10,7% more than women.?

OK. But I can already hear you say: “Well, this is nonsense: you’re comparing apples with pears!” Maybe, but this demonstrates how salaries are distributed within an organisation. And since salaries are attached to jobs, it shows how jobs are distributed within an organisation. In other words, if men earn more than women on average, it shows that better paid jobs are mostly attributed to men than to women. And vice-versa.

Now, you could argue: “Yeah, but that’s normal! There are more men than women in IT, Tech and Finance roles. And everybody knows that IT, Tech and Finance roles are better paid. So, that explains it. End of the story.”

Some of you may also add: “Yeah, but that’s normal! There are more men than women in management positions. So, that explains it. End of the story.”

Well, is that really the end of the story? Or the opening of a series of questions: why are the better-paid roles predominantly attributed to men? Why are other roles predominantly attributed to women? Take HR, Communications, Marketing, first-line support. The answers are not simple. And most of them are definitely to be found beyond the company walls. It is what sociologists of labour call horizontal segregation.?

How many generations to close the pay gap?

According to Margaret Maruani, the gender pay gap has dropped in France, from 55% in 1952 to 24% in 2002. In three generations.?

Will it take three more generations to close it definitely? Probably not. Thanks to the CSRD and the obligation to disclose the gender pay gap, companies will be pushed to address the topic and to set targets to close the gap. And that’s what’s new!?

Until now, it was easy for companies to hide behind the gendered division of labour as a social fact. If little girls dream of becoming nurses and little boys dream of becoming astronauts, that’s not our fault, is it? Well, if you put it that way, sure!?

Nobody says it is our fault. But that doesn’t mean we can’t act on it. As social actors, companies have a responsibility to take corrective actions. And they do: training on unconscious bias, mentoring programs, anti-discrimination policies, speak-up programs, leadership development programs, you name it! All these policies tend to avoid building archipelagos, in which men work on a reserved island and women on another.

Gender balance in management : how to tackle vertical segregation

Until now, companies have been tempted to work on gender balance in management, especially considering that women account for the majority of university graduates in most OECD countries. And also because that’s the only diversity data that rating agencies look at. Easy to measure, easy to compare.?

But that’s just one side of the coin.?

Perfect gender balance… yet gender pay gap of 21,6%!

Let’s take this example of a very virtuous company that has achieved gender balance in management. Out of 40 executive positions, PinkWash Ltd is proud to announce a perfect gender balance: 19 men, 19 women and 2 undeclared or non-binary genders.

Let us have a look at the distribution and their hourly salary levels:

In this fictive example of a perfectly gender-balanced company at executive level, the gender pay gap amounts to … 21,6%! Why? Because certain roles are better paid than others, even at executive level. Such a perfect illustration of the gendered division of labour.

Of, course, I chose a very stereotyped and simplistic example to illustrate the rationale behind the Gender Pay Gap. The reality should be more nuanced. (Hopefully!) But now we know that gender balance in management is just one side of the coin. The other side of the coin is: where are men and women in your organisation? (horizontal segregation)

Equal-pay-for-equal-level… yet, gender pay gap of 14,1%!

In this next example, GenEqual Ltd is also very virtuous in granting equal pay for equal job level. That's what my grandma fought for in the 1960s. (See archive in French) In other words: whatever the nature of the function, every individual is paid within the same salary range. Let’s say a grade 5 in IT will reach the same salary range as a grade 5 in Communication.?

In this case, whereas the pay is perfectly equal per level (equal-pay-for-equal-level), the gender pay gap still amounts to… 14,1%. Why? Because of the gender imbalance in the hierarchy.

Now, just imagine what the pay gap would be, should this happen in a company where IT grades 5 are better paid than Communication grades 5… Oh, wait!

Closing gender pay gap = gender equity vertically and horizontally

As you can see, if companies see the gender pay gap as their new compass, they will have to address the topic both vertically and horizontally. And it allows for some room of imbalance on each axis, as long as the average pay gap is closed. And that’s what’s new!?

So, as legitimate as it is, gender balance in management should not be the overarching goal. Closing the gender pay gap is. And as you have seen, there’s good news: to bridge the gap, you need to have more gender-mixed teams at all levels of the company (the end of horizontal segregation), as well as a more gender balanced hierarchy (the end of vertical segregation).

If a company manages to close the average gender pay gap, it will mean the end of the paradigm “men are breadwinners and women are extra-salary earners''. In today’s world, women’s empowerment starts with having access to equal pay opportunities. Overall. Quite a reasonable objective to advance humanity, right?

CSRD and Pay Transparency Directive : let’s go!

On top of the new CSRD obligation, the EU Pay Transparency Directive gives companies tools to reinforce gender balance:?

• job applicants to receive the salary range of the position before an interview;
• workers to have access to information on their individual pay level and the average pay levels, broken down by gender, for categories of workers performing the same work as them or work of equal value to theirs,
• employers to ban salary history requests, to ensure vacancy notices and job titles are gender neutral and recruitment processes are non-discriminatory, to identify, remedy and prevent discriminatory pay differences when their pay reporting reveals a gender pay gap above 5% that cannot be justified and was not tackled within 6 months.

So, that’s the new context for big European companies. And this applies to all their subsidiaries around the world. If your company or subsidiary is located in the US or in any other country where ethnicity and abilities are registered in HR systems, you may even try the same exercise to identify the ethnicity pay gap or the disability pay gap. Same rationale. Same objectives. That's how, by aiming at closing the pay gap, your DEI strategy will unfold before you and help you prioritise the actions to implement. So, make it your compass, and the rest will follow.?

Gregory Renders

Syensqo Diversity, Equity & Inclusion Director

29 March 2024