Gender Pay Gap Reporting: What Needs To Change?

Published  3 MIN READ

The remit of modern finance teams is now expanding into the diversity and inclusion (D&I) space, with gender pay gap reporting. What can treasurers do to get on top of this rising trend?

Having introduced gender pay legislation in 2017, the UK Government now requires companies with 250 or more employees to report on the pay differences between male and female staff.

However, this year a raft of companies filed late – or they filed their reports incredibly close to the 4 April deadline – highlighting the fact that many organisations have yet to master this new regulatory reporting requirement.

Gender pay gap reporting is very much an evolving process, and technology is playing a crucial role in making it as painless as possible. As companies start thinking about next year’s reports, here are some pointers on limiting data problems to ensure they have more time to focus on the narratives to explain their report findings.

What’s the major problem?

The gender pay gap reporting process is a great example of where modern finance teams are being asked to use their analysis skills to support other parts of the organisation. Here they are partnering with HR to collate, analyse, and deliver a gender pay gap report without errors and in a timely fashion.

However, the HR team is not typically equipped with the financial and analytical skills needed to satisfy what the government is asking for. And those on the finance team who are equipped with those skills do not have access to the right data for confidentiality and regulatory reasons.

Therein lies a problem.

Data, data, data

The entire gender pay gap reporting process shines a light on an organisation’s data quality and underlines any gaps in their record keeping. It also makes them think about the system of record for each of the elements required to calculate the gender pay gap metrics, and how these fit together. It can be incredibly challenging, for example, if payroll data is housed in one place, and any bonus and compensation data is held elsewhere.

Also, finance teams report against general ledgers and sub-ledgers, which offer a consolidated view of data, but as of right now, do not include employee-level data.

Therein lies another problem.

Despite these difficulties, a repeatable, turnkey system needs constructing between both teams so all parties can deliver the right calculations and each employer can publish the following:

  • Average gender pay gap as a mean average
  • Average gender pay gap as a median average
  • Average bonus gender pay gap as a mean average
  • Average bonus gender pay gap as a median average
  • Proportion of males receiving a bonus payment and proportion of females receiving a bonus payment
  • Proportion of males and females when divided into four groups ordered from lowest to highest pay.

To do this, the most important step of all is that HR provides finance with the necessary data in an aggregated and anonymised format to keep everything compliant with data protection regulations. Therefore, finance must make sure HR understands what data it needs very early on.

How can tech help solve the problem?

On the tech side, this requires drilling down into multiple data sets. In the reporting world, calculations are only as good as the quality of the base data. There are a few things companies can do now to avoid errors next year.

First, get back to basics and keep HR systems up-to-date. Employee start and end dates need to be reviewed regularly, and any other systems should be kept current with the right bonus information, along with any relevant data relating to maternity leave, sick pay, or shift work that impacts an individual’s payslip.

Second, technology – such as ERP reporting – is there to support the gender pay gap process by consolidating all the right data from each source system into a reporting layer and calculating the required metrics. This same software can also run regular integrity reports throughout the year to highlight any data that is missing and so avoid any unwanted surprises as next year’s filing deadline approaches.

Tech is only part of it

The main thing that this process highlights is how the finance team interacts with the demands from the rest of the business. In order to have a complex process such as gender pay gap reporting working like clockwork, HR and Finance need to sync up quickly to work out what needs doing by whom and when. As regulatory demands increasingly impact the wider business, this is a great use case to help members of a modern finance team explain to a non-financial audience how they work when generating crucial business reports.