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What employers should do about their gender pay gaps

March 8, 2018 Rony Hacohen and Tiina Likki

For the first time in history, employers with 250 or more employees in the UK are required by law to publicly report their gender pay gaps.

The gender pay gap is not the same as unequal pay. Unequal pay means paying men and women differently for performing similar work (and is unlawful). By contrast, the gender pay gap is the difference in the average hourly wage of men and women in an organisation – which usually arises from fewer women than men holding senior positions.

With less than a month to go to the April 4th deadline, today – International Women’s Day – offers an opportunity to reflect on what behavioural science has to say about such pay transparency, as well as what employers can do to shift the dial on gender equality.

The power of transparency

Requiring companies to disclose information and be transparent with their data can be a highly powerful policy tool. Transparency has changed the behaviour of companies for the better in a variety of ways, from improving hygiene in restaurants to improving energy efficiency of electrical appliances.

We have reason to believe that the new gender pay gap reporting regulations will be particularly powerful because equality is an issue that people increasingly care about. There has been a steady, gradual shift in UK attitudes towards more egalitarian views towards gender roles, particularly among younger people. Recent research also suggests that people care about wage fairness, and that a preference for fairness can translate to real-world behaviour.  For example, people are willing to pay more for products that are fairly and ethically produced.

Moreover, large employers who fail to report their figures will not only be breaking the law, they are also likely to face extreme public anger. Experimental evidence from Professor Leslie John and her colleagues  shows that people judge non-disclosure of potentially negative information very harshly, because they imagine the worst!

What should employers do to reduce their gender pay gaps?

The new reporting requirement is helping employers to understand their gender pay gaps and what is causing them. It is also motivating them to reduce those gaps. The main question employers are now asking is: what are the most effective ways to tackle the problem?

1. Look for approaches that are backed up by evidence

The first piece of good news is that there are benefits even to taking  basic steps towards reducing the gender pay gap. Setting up diversity task forces, hiring a diversity manager, and setting organisational goals have been shown to increase gender equality in the workplace.

The second is that a lot of work has been done to understand how to make recruitment fairer, and in particular, how to overcome unconscious bias in the recruitment process. Effective actions include anonymising CVs, ensuring assessors don’t know the name or other identifying details of the applicant; structured interviews; task-based assessments; and joint evaluations. Applied is a recruitment platform that has been developed at BIT based on these insights, and can help organisations easily implement them.

Lastly, mentoring programmes have also been shown to be effective, especially at boosting the representation of BAME women in management. Professional mentorship is not as easily accessible to these groups as to white men who receive it from their existing informal networks. This is why facilitating access through mentoring programmes can be powerful, especially when these programmes have a particular focus on improving performance and progression.   

2. Don’t believe the hype

This might come as quite a surprise, but employers  should be sceptical of unconscious bias training and diversity training more broadly. Although there is a pressing need to overcome unconscious bias in the workplace, and many well motivated employers have sought to address this issue through diversity training, this approach has actually been found to be ineffective at best, and to backfire at worst. A recent meta analysis has also found either weak or no effects of unconscious bias training on biases and behaviour.

Another approach that unfortunately doesn’t live up to its hype is networking programmes that link together groups with low representation in senior positions. Research found that these programmes have, on average, weak positive effects on white women and negative to no effects on other groups with low representation. This is not surprising. The contacts and knowledge that are needed for effective networking are naturally held by those in senior positions. The weak positive effects on white women are probably explained by their better representation in senior positions, compared to other groups.

Where next?

At BIT, we are working on new ways to use behavioural science to improve gender equality in organisations. We want to build the evidence base on what employers can do to improve their  talent management processes.

We want to go beyond talent attraction and hiring, and look at progression, performance management and reward.

We want to understand how things like flexible working policies and shared parental leave can help parents balance the demands of work and family life, and how this can lead to better lives for men and women.

If you are a large organisation (employing 4,000 employees or more in the UK), and are keen to take on these challenges, please get in touch:

Looking to learn more about the gender pay gap, other gender disparities, and how to combat them this International Women’s Day? We highly recommend Iris Bohnet’s book ‘What Works: Gender Equality by Design’.

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