What actually works to reduce the pay gap?

According to the Office of National Statistics, the gender pay gap for all employees in the workplace was 15.5% in 2020. While a pay gap in itself is not illegal, this trend is symptomatic of the fact that men continue to be paid more than women in too many workplaces.

As Hired’s UK Tech Workplace Equality Report reveals, UK female tech talent are offered 4% less salary on average than men with roles in Design (the most popular career choice for women in tech) and Software Engineering facing the biggest gaps. It is estimated that this gap doubles over the working life. And the pay gap doesn’t just exist across gender but across race and the differentially abled as well.

Many organisations are committed to ending this inequity. According to McKinsey, close to $8 billion is spent worldwide on diversity training per year. This includes unconscious bias training. Over the years, we have also seen executive coaches and workshops proliferate, teaching minoritised groups how to better negotiate their salaries.

The approaches cited above put the responsibility to bridge the pay gap on individuals. Yet there is little evidence to support that unconscious bias training works. Women also experience backlash when they are perceived to negotiate aggressively.

Instead what has shown to have an actual impact on the pay gap is equalising or de-biasing the salary system. The legacy wage-setting system adopted by most organisations has discretion at its heart - the salary of a new employee, a raise or a bonus is largely the result of negotiation or a decision made by a Manager. But discretion opens the door to discrimination.

So what measures could be adopted instead?

• Salary transparency

Salary transparency has several facets but at its essence, it is the practice of stating the salary of the job/position being recruited for. This takes out the power dynamics that come into play during a salary negotiation and removes the ‘discretion’ card. Also, it saves everyone time because it increases the effectiveness of the recruitment process by attracting candidates who won’t later refuse a job offer based on pay.

Salary transparency also extends to being transparent about your maternity policy, your menopause policy, your approach to flexible working, etc. Stating all this upfront prevents arbitrary individual-based decisions which allow for biases to creep in.

• End salary history

Salary history is the recruitment practice of asking job applicants their current salary. If women and other minoritised groups have historically been paid lower than their male colleagues, and a new employer uses their current salary as a benchmark to determine their new salary, the existing pay gap simply continues. Salary bias follows an employee throughout their career, hampering their efforts to escape the impact of wage discrimination even when moving jobs.

While this question is unpopular with all workers, not just women, a survey carried out by Fawcett Society revealed that it has a particularly negative impact on women’s confidence with 61% of women saying that it reduced their confidence in negotiating better pay.

• Forget employee self-assessments

Women tend to underestimate their performance and it is vice versa for men. The problem is managers ‘anchor’ their overall score to these self-assessments.

• Collective bargaining

This is perhaps more relevant for the employee than the employer.

Remember the story of how the producers of the hit comedy sitcom Friends tried to negotiate separately with each actor? All six actors decided to join forces and negotiate collectively, increasing their bargaining power as a group. In the final two seasons, this move really bore fruit with each actor being paid a million for each episode.

As Ian Newall from Huthwaite International points out, “power is fundamental to negotiation.” And power is massively imbalanced when individuals, especially those from minoritised groups, negotiate alone with an organisation.

But collective bargaining (which usually includes standardising wage rates, promoting pay transparency and establishing grievance procedures for discrimination) helps reduce the pay gap. According to a report from the International Labour Organisation, the more centralised the collective bargaining process, the smaller the pay gap.