Removing current pay consideration from recruitment will help reduce gender pay gap.
A female business leader has said that companies who ask for candidates’ existing salaries in the recruitment process are preventing progress on closing the gender pay gap.
Anita Tweats, founder and CEO of The Finance People, says businesses can tackle difference in earnings between men and women by banning salary disclosures when hiring new candidates and promoting existing employees.
Men working full time took home average hourly earnings that were 8.9 per cent higher than women across the whole UK labour market in 2019, down only 0.6 percentage points since 2012, with the difference increasing as employees get older. Among the youngest workers the gender pay gap is negligible, but it steadily increases as employees age, reaching 11.4 per cent for those in their 40s and over 15 per cent for staff aged between 50 and 59.
For managers, directors and senior officials in businesses, difference between male and female pay has actually risen by two percentage points to 15.9 per cent since 2018. A crucial flaw in recruitment and promotion processes as employees get older and climb the career ladder is the main reason for this, according to Anita.
She claims that it’s impossible to eradicate the gender pay gap until disclosure of current salaries in job applications or at interview is stopped. Knowing a candidate’s earnings history often leads to recruiters proposing percentage pay rises based on existing wages.
But even equal percentage pay rises generally widen the existing difference between male and female wages, as Anita shows in her white paper on the issue, entitled ‘Closing the Gender Pay Gap in Britain’s Professional Services Sector’.
A woman earning £10 hourly will earn £11 after a 10 per cent pay rise upon promotion, but a man earning 8.9 per cent more (the current overall full-time gender pay gap) at £10.89, who is offered the same raise, will then earn £11.98 – so the difference rises from 89p to 98p hourly, or to 10 per cent.
Instead the business leader says companies should instead ignore past pay slips and focus on the future, by assessing candidates abilities to determine their true value to the company and a consequently appropriate wage. Fairly rewarding staff with financial packages that directly and solely relate to their current skills and value can improves the bottom link for UK companies too, by improving morale and motivation, which in turn boosts productivity and retention rates.
Greater gender diversity, particularly at higher levels of organisations, can drive profitability too by providing alternative perspectives that can improve processes and policies, as well as aid creativity and innovation.
“Eradicating the gender pay gap will help businesses to get more of the right people into the right positions,” says Tweats. “Offering fair financial incentives based on employees skills and worth to their company will raise the morale and motivation of previously undervalued employees, inspiring greater productivity and loyalty.
“The business world and wider society is great at talking about dealing with the gender pay gap, but little concrete action has been taken recently. My two decades at a senior level in the finance industry has shown me that vague pledges, gentle encouragement and arbitrary targets seem to make little, if any, tangible difference.
She added: “Businesses and recruiters should instead put a little more effort into their processes and determine what candidates are really worth in the present moment. In larger companies, a mixed gender panel could conduct an objective, anonymous assessment of an individual’s skills to propose a fair wage upon hiring and promotion.”
To view the full white paper on how to close the gender pay gap, please click here.