Just over a week ago we got the Government’s much anticipated draft regulations on Gender Pay Reporting, following its recent consultation. Quickly followed by a collective sigh of relief from HR Directors on hearing that the publication date for gender pay figures will be April 2018.
But that feeling of relief will be short lived for companies that pay any type of bonus or variable pay. As well as reporting the headline average pay gap between men and women, organisations will have to include any bonus payments made during the previous 12 month period. The date the Government has given for reporting is 30th April 2017. So that means you will need to report on a snapshot of base pay on that date and bonus from April 2016 to April 2017. So this isn’t an issue to worry about sometime in the future. If you pay a variable pay/bonus to any of your employees – gender pay is an issue for you right now.
Bonus is typically the area of reward that has the least amount of rigour. Managers use their discretion to allocate their bonus pot and that leads to bias, perhaps unintentional, but bias nonetheless. The figures given by the Office for National Statistics show the national gender pay gap as 19.1% but the gender bonus gap is a staggering 57%.
So what does the Government mean by bonus? The answer is pretty broad:
- All payments received and earned in relation to profit sharing, productivity, performance and other bonus or incentive pay, piecework and commission.
- Long term incentive plans (including those dependent on company and personal performance); and the cash equivalent value of shares on the date of payment.
How will organisations explain that gap to prospective, or existing employees? It’s not too late. If you act now, you still have time make your gender pay story a good one. Some questions you may want to consider are:
- What are the objectives and metrics for your variable pay - what do you want to reward and do these align with business objectives?
- What roles are eligible for a bonus and why? Are you being fair and transparent about who qualifies?
- What levels of bonus do you have and what determines who qualifies for each level of payment?
- What performance management process do you have in place to support the distribution of your bonus pot?
- Have you built ‘moderation’ into your process to look holistically at your bonus allocation?
- If you have fewer females higher up and more bonus, creating a gap, then what opportunities for career progression can you provide for women?
Here's your action plan for what to do now:
- Do the analysis on both base and variable pay so you know what your actual gender pay gap is.
- Decide on the actions needed to address it and start thinking about your explanation to prospective and current employees.
- Bring in external experts now if you need them.
Most importantly, don’t put your head in the sand over this issue and put it off as something to tackle later. With our help you can deliver a bonus scheme that is fair and equitable, delivers commercially and is really well communicated to your employees.
