The 2019 Gender Pay Gap Information Bill was passed by the Dáil, with Equality Minister Roderic O’Gorman calling it a “priority”. It will now be debated in Seanad.
Once approved, the legislation will require public and private sector employers with 250 or more workers to publish pay differences between female and male employees. This will be extended over time to organizations with 50 or more employees.
The bill was originally published in April 2019. It lapsed with the dissolution of the Dáil in 2020, before being reinstated on the Order Paper later in the year.
Much has happened since the bill was first published. We know for sure that reports on the gender pay gap are coming, but this could be the tip of the iceberg when it comes to pay-related reporting.
PwC Ireland got ahead of the approval of Irish law and was the first Irish ‘Big 4’ professional services firm to publish its gender pay gap in 2019.
Declaration of pay differentials by ethnic origin
The Black Lives Matter movement, along with the Covid-19 pandemic, has seen issues of equality and fairness rise to the agenda. As a result, many organizations are grappling with new challenges, such as conversations about race and ethnicity, and creating fairness in the workplace.
In 2019, the UK government organized a consultation on the declaration of pay based on ethnicity. More than 130,000 people have signed a petition calling for it to be made mandatory.
He confirmed that parliament would consider the petition for debate. The date for the debate has not yet been confirmed.
Some organizations in the UK are not waiting for the government to put in place an ethnic pay gap legislation and are already releasing their data voluntarily.
PwC UK was the first professional services firm to do so and in January of this year it published, for the first time, its pay gaps between Blacks, Asians and mixed ethnicity.
However, reporting the pay gap by ethnicity is not without its problems. The most obvious initial hurdle is that many employers do not keep ethnic data on their employees.
There is no legal obligation for employees to disclose what ethnic group they identify with, and requests for disclosure can result in low response rates if the process is not handled with great care.
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Whether or not reporting the pay gap based on ethnicity becomes mandatory in Ireland, employers should now pave the way to create an inclusive company culture that encourages employees to disclose their information.
This culture must create trust so that employees feel safe to share, know their data will be managed appropriately, and most importantly, have confidence that the organization will take action. Work of this nature will benefit all employees, not just those from ethnic minorities.
Environment and governance
Societal pressures beyond diversity and inclusion put more emphasis on compensation. Climate change, plastic pollution and water shortages are environmental issues that are also becoming critical business issues for companies.
Almost half of the FTSE 100 companies use an environmental, social and governance (ESG) measure when setting executive compensation targets *.
Concerning the “S” in terms of ESG, concerns are also growing regarding inequalities in societal wealth.
Executive remuneration
Executive pay has been in the spotlight for years as the pay gap between executives and workers continues to widen. The Covid-19 has shaken things up by placing more emphasis on the value of “essential” workers, who often have few rights at work and few wages.
As of January 1, 2020, listed organizations with more than 250 employees in the UK are legally required to disclose their executive compensation ratios. At a high level, this ratio indicates the ratio between the remuneration of a general manager and the remuneration of other employees of the same company.
Reports released in the UK so far this year show executive pay at UK’s largest companies has fallen by more than a fifth since the start of the pandemic.
The executive pay cuts have shown solidarity with employees, many of whom have either been on leave or fired.
It remains to be seen whether companies will continue to monitor their executive compensation practices as the recovery evolves and, indeed, whether executive compensation ratio reports are forthcoming for Ireland – in these areas, we tend to follow the UK.
Salary Transparency Directive
As progress in reporting on gender, ethnicity and executive compensation continues, the European Commission has proposed a directive that could create even bigger changes. The directive aims to ensure the transparency of remuneration in a number of categories:
– An obligation for employers to proactively indicate the initial salary or the salary scale before any interview;
– An obligation to make accessible a description of the non-sexist criteria used to define their remuneration and career development;
– Workers have the right to receive information on their individual pay level and on average pay levels, disaggregated by sex, for categories of workers performing the same work or work of equal value.
This level of disclosure would represent a radical change for the majority of private sector organizations and would require strong and transparent compensation and career structures.
The committee’s proposal must be submitted to the EU parliament and council. If the directive is formally adopted, member states will likely have two years to implement it. According to general estimates, if adopted, the directive should be implemented by the end of 2024.
More transparency
Developments to payroll reporting are coming and will create greater transparency. Reporting alone will not create more inclusive organizations or society. Employers will have to act or run the risk of demoralizing employees and damaging their employer brand and competitiveness.
At the heart of all reporting will be the need to communicate effectively with stakeholders.
Organizations that view payroll reporting as a valuable opportunity to improve their reputation, attract new talent, and strengthen their culture, rather than a compliance activity, are likely to thrive.
As we emerge from the pandemic, greater pay and reporting transparency should be a key consideration to “build back better” for the future.
Doone O’Doherty, is a PwC partner for People & Organization
