Tackling gender pay equity

In honor of International Women’s Day and the theme of #EmbraceEquity, Laura Mitchell, Senior Organisational Development Consultant, takes us behind the scenes and shares how Beca is tackling gender pay equity. In this thought leadership article, learn about strategies to mitigate unconscious bias in the remuneration process, including multiple decision makers reviewing remuneration decisions and use of a remuneration framework, and how gender pay equity can be influenced through fair and equitable salaries as individuals enter the business.
 

For those not directly involved in an organisation’s annual remuneration process it can be somewhat of a mystery how it happens. How do they land on a final number? How do the budgets work? Who was involved in the decision? And for women there is sometimes the additional question: how do I know that I am not being paid less because I am a woman? This is a valid concern as gender pay differences are still a current reality. In New Zealand the gender pay gap is 10% and in Australia it is 13%. 

One of the starting points is to understand the definitions. Even though the terms are often used interchangeably, gender pay gap and gender pay equity are two different measures. 

Gender pay equity, as defined by Employment New Zealand and Fairwork Australia, is calculated as the difference between the median male hourly rate and the median female hourly rate for doing work of equal value. This is the calculation that women are generally thinking about when they are wondering if they are being paid fairly because it is a comparison between people who are doing similar work. Factors for how an organisation can reach gender pay equity is within an organisation’s control (i.e., they control the salaries for everyone within a given role) so this number tends to be relatively small. Most of the work around gender and pay tends to be focused on this gender pay equity number.

The gender pay gap is where the challenge and complexity expand exponentially. The gender pay gap is defined as the difference between the median male hourly rate and the median female hourly rate of the entire organisation. Essentially what this means is all men and all women (exempting non-binary people), regardless of occupation, are treated as distinct groups and then the median of each of these large pools is used. For many organisations and particularly those with predominantly knowledge-based workers this tends to be a shockingly large number. For example, across the New Zealand banking sector this number is currently 30.5% (Smith, 2022). Because of this, organisations tend to preferentially share their gender pay equity stats over their gender pay gap but that is changing over time with the movement for greater pay transparency (see Mind the Gap NZ and WGEA AU).

The causes for the gender pay gap are both structural and cultural. One major cause is occupational segregation meaning that women tend to be over-represented in lower-paying fields. This isn’t as simple as women choosing lower paid work. Research shows that as women enter an occupation that the wages for that occupation decrease over time, for both men and women. When women tend to make up the majority of a given field it is valued less than a field made up with majority men (Cain Miller, 2016). 

Compared to women, men are disproportionately represented in more senior and consequently better-compensated positions. The underlying reasons for this are multifaceted. Women often face the challenge of being in the minority or the only woman in such positions. Resolving the gender pay gap is a much more complex and challenging issue to tackle.

So where does Beca currently stand? We’re sharing our approach because our challenges are faced by many other organisations and the only way forward is greater transparency.

We consciously started our journey towards greater gender pay equity five years ago. Some organisations will have been doing this work for years longer and others have yet to start. For all organisations the journey has to start with robust, clear, repeatable measurement.

When we first looked at our gender pay statistics five years ago, they were 27% gender pay gap and 3% gender pay equity gap across our Group*. We had to decide how we would improve these numbers.

During our annual remuneration process we have hundreds of leaders across multiple locations making remuneration decisions each year which involves weighing up complex and sometimes competing considerations. We ask our managers to meet remuneration budgets, compete in tight talent markets, and recognise and reward performance. They have to do this both at scale and within tight timeframes and looking at these decisions through a gender equity lens adds another layer of complexity. It is these factors that make a remuneration process particularly vulnerable to the impact of unconscious bias – multiple, time pressured decisions about people. We start all people processes by acknowledging that unconscious bias is a function of how people’s brains operates and that it can and does impact how we make decisions. 

We put in place multiple mitigation strategies for unconscious bias. 

1. Firstly, we have the principle that it is ok to challenge decisions.
2. Secondly, we have multiple decisions makers reviewing remuneration decisions. 
3. Thirdly, we have a remuneration framework that provides a recommended range given the individuals current salary for their role. All these actions individually support leaders to make the best decisions possible. There is also a lot of work that happens behind the scenes with our People and Culture Specialists to understand where and why anomalies might occur.

Gender pay equity isn’t only influenced through a remuneration cycle. Fair and equitable salaries for people as they enter a business is also critical. Beca has the benefit of a skilled and experienced Talent Acquisition team who work with the philosophy that we must lead with our best offer. By leaving salaries to an individual’s ability to negotiate we can entrench gender difference especially as research shows that men are significantly more likely than women to engage in salary negotiations and women are less likely to be successful when they do (Dannals, Zlatev, Halevy, & Neale, 2021) 

Because we know that gender pay equity isn’t something that is achieved once but an on-going business metric, Beca has set a gender pay equity as an on-going target of between +/-1%. From our last remuneration process in 2022 our gender pay equity was -0.4% and our gender pay gap was 25%.

We still have work to do in our gender pay gap which includes getting more women into leadership roles and retaining the women we have.

What can you take away from this? Closing the gender pay gap requires leadership, deliberate focus, measurement, and commitment to sustaining action over many years. It takes the willingness of leaders to make challenging decisions and to be challenged themselves. It also takes the work of People and Culture professionals behind the scenes to guide, advise, and manage complex processes. 

With challenges that are both systemic and societal, ultimately removing the gap in gender pay is going take all of us.


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*Group is inclusive of our offices across Australia, Indonesia, New Zealand, Pacific Islands, Singapore, and Thailand.

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References:

• Cain Miller, C. (2016, March 18). As Women Take Over a Male-Dominated Field, the Pay Drops. Retrieved from The New York Times.
• Dannals, J. E., Zlatev, J. J., Halevy, N., & Neale, M. A. (2021). The dynamics of gender and alternatives in negotiation. American Psychological Association, 1655-1672.
• Smith, D. (2022, March 8). Major banks' large gender pay gaps on display. Retrieved from Stuff.