Tackling the gender pay gap

There is not a CEO, man or woman, I have worked with for at least ten years who doesn’t realise the importance for their business of harnessing all their talent and who isn’t working at making that happen. From flexible working, mentoring and women’s leadership development programmes through to unconscious bias training and the revisiting of all HR processes – reward, recruitment, development, promotions – through this lens.

Now the recent requirement to publish and report on the gender pay gap for organisations over 250 employees has thrown the issue of pay into sharp relief. The World Economic Forum predicts that at the current rate the gender pay gap won’t close for 217 years, and will remain at 10% by the year 2100. We know there is not only a fairness issue of women being paid less than men for the same job, but the gender pay gap also reflects the glacial movement of women into senior executive roles.  Cranfield University’s 2018 FTSE Women on Boards Report, shows a sharp drop in the number of women occupying CEO, CFO or other executive roles on FTSE 250 boards, and static numbers at FTSE 100 companies. There are now just 30 women in full-time executive roles at FTSE 250 firms, down from 38 last year – amounting to 6.4% of the total. They include six female CEOs and 19 female CFOs.

One approach to bridging the gender pay gap

We know that the reasons for the gender pay gap are complex and multifaceted.  So I was interested to see the New York law that came in last year where salary history questions are no longer allowed at interview in an attempt to prevent pay inequality between men and women.  It made me ask, what do I think about that being a requirement?

As a Chief Executive, I would bridle at the constraint and prescriptive nature of such a law.  As a women’s leadership coach, I absolutely get it. As someone speaking to HRDs who may have to coach their executives in best practice resourcing, I was struck by this challenge. The challenge that is the balancing act that most HR teams have to navigate when introducing change – the balance between compliance and commitment.  So let’s explore it from a good business practice perspective rather than a compliance perspective. Why might not asking about previous salary when deciding to hire, be a proposal worth considering as just one means of addressing the gender pay gap?

Negotiating starting salary

We know the data about starting salaries for graduates – men’s starting salaries still tend to be higher as they negotiate more – men are up to four times more likely than women to negotiate their salaries.  Women are wary of negotiating and with good reason, there is a social cost and clearly a significant economic cost for them. This doesn’t mean women are bad at negotiating as research also shows women outperform men in ‘representational’ negotiations by 14-23%.  Nor does this mean that the gender pay gap is the women’s fault for not asking, it is a more nuanced picture than that so we need to take nuanced approach to addressing it.  So yes, getting skilled at negotiating is key, as is ensuring men and women who are doing the interviewing are not ‘punishing’ women who negotiate, but let’s stay focussed on this idea of not asking about previous salary assuming women’s salaries are lower.

Our last salary we drag around with us

One reason not to ask about previous salary is that using a women’s last salary, which may be less than a man for the same role and contribution, has a compounding effect. Our last salary follows us and we never get to catch up.  So not focusing on salary history and using that as the base for a new hire salary increase has the benefit of not extrapolating from lower salaries, and therefore perpetuating the gender pay gap.

Salary as a proxy for value

There is also the potential for a women’s ‘value’ to be influenced by their previous salary. For her value to be possibly discounted in the minds of the interviewer if they are comparing them to male candidates with higher previous salaries, where salary works as a proxy for how valuable they were to a previous organisation.

Is salary history relevant?

Speaking purely from a recruitment best practice perspective, is salary history that relevant to your determining the financial value of the person you are hiring?  Not using salary history ensures the weight of a decision on pay is based on what the individual brings and their market value, which surely should be gender neutral.

So yes there will be irritation at being told what you are allowed and not allowed to do at interview and cries of ‘political correctness!’ for those firms who make it mandatory.  Yet what not referencing salary history in interviews and pay decision-making for new hires does, is make people more aware of what they are bringing to their decisions – what assumptions and cognitive autopilots they are deploying that are simply not relevant. I believe having these conversations in the business is important and making these things conscious is a good thing.

It makes us work harder on understanding the value of the individual  

So as a leader I decided that rather than railing against the perceived constraint, it gives us the opportunity to check in with the quality of our own decision-making, to ensure it is robust and that we are getting the best people for the job and paying them fairly. That would seem to be at the heart of good governance and good leadership which most businesses aspiring to be world class would recognise, and that every HR professional is there to facilitate.

So if this is something you are considering introducing into your organisation then I hope this lens will help you debate the ‘why’ with your colleagues in an environment where HR is often painted as the police who tell folk what they can’t do. Most organisations are working hard at shifting unconscious biases at work so they can be an employer of choice and keep their talent committed and productive, and to fill their talent pipeline with the best there is.  This requires us to take a multi-pronged approach to the gender pay gap and perhaps taking previous salaries out of the decision-making equation on pay is one legitimate tool to deploy. It seems worth having the conversation.

Penny de Valk is an internationally experienced Chief Executive and qualified coach who helps women build powerful professional lives.  Visit her blog for great advice on how to be your best leadership self. www.pennydevalk.com