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Gender pay equity – Focus on the right metrics to find the right solution

7 May 2019 by  Michelle Watson

Does your organisation have a gender pay equity issue? Ask three people in the same organisation, and you may receive three different answers – ‘no’, ‘yes’, and ‘I don’t know’.

At Aon, we recognise that gender pay equity is a complex issue for organisations and society as a whole. From the work we’ve undertaken with organisations across Australia, we know that to answer this question, it is critical to first understand the appropriate metrics and measure them accurately. Only by undertaking detailed data analysis will an organisation then be better equipped to understand the causes – and identify potential solutions – to any gender pay equity issues uncovered.

The gender pay gap statistics reported widely in the media are alarming – the full-time total remuneration gender pay gap based on the 2017-18 Workplace Gender Equality Agency (WGEA) data is 21.3%* – however it’s important to understand how this figure is calculated. This figure represents the percentage difference between women’s and men’s average full-time equivalent earnings – across all industries, organisations, and roles. These types of statistics raise the profile of gender pay equity as an issue, but don’t provide a useful benchmark for organisations striving towards pay equity within their workforce.

By looking only at average pay rates for males and females, broad average pay rate statistics conflate the issue of gender pay equity – paying both genders the same amount for performing the same work – with that of gender representation equity – equal representation of both genders across industries, seniority levels and roles. Both are significant issues in Australian workplaces, but in any given organisation may have different underlying causes and hence require different strategies to address.

When analysing gender pay equity, it is therefore important to start by comparing individuals performing the same (or very similar) work, and preferably to the market pay rates for their role. If gender pay inequities are identified within these ‘same role’ or ‘like for like’ statistics, the focus should then shift to ensuring that any differences in female and male pay levels are defensible and justifiable in reference to the organisation’s remuneration philosophy – that is, what individual factors does your organisation aim to take into account when differentiating pay amongst individuals? The most common factors organisations use to differentiate pay include individual performance, and experience within the organisation or role, among others.

At this point, an understanding of gender representation across different employee populations becomes critical – if your organisation differentiates pay based on performance, what is the gender representation of each gender at different performance ratings? Are there parts of the business that are paid higher or lower compared to the market, and what is the gender balance in these areas?

As we begin to unpick the layers and join the dots, sometimes a pattern will emerge – and when it does, it’s often not what anyone expected. It is only at this stage in the process, once the organisation is armed with robust data on the issues identified, that discussions around causes and potential solutions should commence – allowing for targeted and defensible action to be taken.

By working closely with our clients to dive deep into their data, we present diagnostics that can help organisations gather a full understanding of issues that may be at play within their organisation, whether it relates to pay or representation equity. By guiding them through the next steps and sharing our expertise – garnered from our extensive experience conducting gender equity studies across organisations of all sizes and industries – our clients are then empowered by their data to rectify any pay equity issues identified, and start taking steps towards changing the policies, processes and cultural factors that may represent the underlying cause of each distinct issue.

Our research tells us that gender diversity matters. Companies that have greater gender diversity are more likely to out-perform industry medians in terms of financial performance, and greater diversity in leadership roles is associated with an increased rate of organisational innovation^.

To begin understanding how your company may be performing when it comes to gender pay and representation equity, please contact us today.

 

* https://www.wgea.gov.au/topics/gender-pay-gap
^ Aon Gender Pay Equity Whitepaper 2013.   

Michelle Watson

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