The gender pay gap, small business and the tech sector

The gender pay gap is in the news again this week.

By Ed Cox · August 3, 2018

Alexandra Topping reports in The Guardian that an MP select committee has recommended that medium-size companies of more than 50 employees should be forced to report details of their pay gap and to publish action plans and narrative reports about what they’re doing to try to narrow that gap.

When large companies published their results in May 2018, many weren’t favourable. Eight out of ten companies pay men more than women and men are paid more than women in every business sector. Ryanair pays women on average 71.8% less than men. The public sector isn’t immune to unequal pay either, as highlighted in Civil Service data by Alison McGovern in The New Statesman.

Looking at our own industry – technology – Mercer has undertaken analysis of the gender pay gap in the UK tech sector and it’s not great news. The findings showed that men in high-tech companies earn 25% more than women, compared to the gap in the UK overall of 18%.

bethan, ian, jo and annie sitting and chatting

So, how do gender pay gaps happen?

Gender pay gaps can occur for many reasons and at multiple points, including when employees start at a new company and during appraisals and/or pay reviews.

Harvard Senior Lecturer Hannah Riley Bowles points to research that shows men are more prepared than women to negotiate salaries, creating wage inequalities with existing employees, meaning some people progress slower up the salary chain.

When women do negotiate their salaries, they often feel punished for just asking. Research has shown that women are treated differently to men as a result of negotiating their pay, including colleagues being less willing to work with them after the negotiation.

Women can also feel (often with good reason!) they’re being punished for taking time out of the business so are overlooked for promotions and pay rises. A recent campaign, Pregnant Then Screwed, encouraged women to share stories of pregnancy or maternity discrimination they’d witnessed and there’s evidence that this fear of reprisals is also preventing men from taking paternity leave.

nathan and Emma chat in the office

Pay gaps persist and even widen as women become more senior in the business and as they get olderAccording to the Office of National Statistics, women’s pay grows less than men’s and also stops growing earlier than men’s pay. This applies to both the private and public sectors.

Many of these behaviours come down to unconscious bias: the automatic, mental shortcuts used to process information and make decisions quickly. When we lack diversity, we lack consideration of different viewpoints, motivations and outcomes of decision-making.

But the problem isn’t just a human one.

Even before starting with a company, women are at a disadvantage. The algorithms used by some job boards may be sexist and/or racist because of existing systemic inequalities, caused by the lack of diversity of the people developing those systems. Some women and other under-represented groups may not be seeing adverts at all and the situation could get worse unless more women are involved in developing and teaching AI, argues Hannah Kuchler in the Financial Times.

We welcome extending the gender pay gap reporting requirement to medium businesses and as a small business (under 50 employees), we were curious to apply the same methodology to our own organisation, to see how we fared.

Our results

Using Acas’ guidance “Managing Gender Pay Reporting“, we worked out the mean and median gender pay gap at Reason Digital. The mean pay gap is the difference between the average hourly earnings of men and women. The median pay gap is the difference between the midpoints in the ranges of hourly earnings of men and women.

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-8.5% mean pay gap A negative percentage figure reveals that typically or overall, male employees have lower pay or bonuses than female employees.

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-4.7% median pay gap A negative percentage figure reveals that typically or overall, male employees have lower pay or bonuses than female employees.

However, our lowest-paid members of staff are male – including apprentices on the Real Living Wage and the founders, who each earn 0.65 times the company’s average wage – and these skewed the results in favour of women. Even removing the lowest paid men, the results come out in favour of women.

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-0.8% Mean pay gap A negative percentage figure reveals that typically or overall, male employees have lower pay or bonuses than female employees.

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-2.3% Median pay gap A negative percentage figure reveals that typically or overall, male employees have lower pay or bonuses than female employees.

The above results mean that our gender pay gap is either -0.8% or -2.3%, meaning female employees at Reason Digital are paid (on average) 0.8% or 2.3% more than men, depending on how you define “average.”

While these results are promising, this doesn’t mean that there aren’t gender pay inequalities within teams, for some of the reasons previously mentioned. Performing the analysis has helped us uncover these issues and provided an opportunity to address them.

So what are we doing?

Dr. Deborah Ashton, Vice President and Chief Diversity Officer of Novant Health, suggests some positive steps HR managers can take to change what is still an unacceptable situation in 21st Century business. These steps include performing an annual pay equity analysis, of which this is the first of ours.

As a business, Reason Digital needs to correct systems and processes that have been embedded since we were a micro-enterprise of men and have not developed as the business has become larger and more diverse.

We need to implement initiatives that tackle bias, unconscious or otherwise. We’re planning to introduce unconscious bias training as part of the personal development for our leadership teams, so we can make better hiring decisions and create an environment where women feel more comfortable asking for pay rises and are not treated differently for doing so.

To address pay imbalances created by making new hires at higher salaries, we’re working on standardising starting salaries, advertising them as a non-negotiable range. It will likely lead to some people ruling themselves out of applying, but we’re comfortable this is a price worth paying for equality.

To address existing pay imbalances, we’re developing a fair and transparent salary review framework, so employees know when and how to request a salary increase and to describe how decision-making happens around an objective, evidence-based “impact score,” making recommendations less subjective.

This year, we’re prioritising paying salary increases to the lowest paid members of staff – regardless of their gender – so we can introduce a fair and transparent salary scale for every role in the organisation and ensure people are not paid excessively above or below that scale.

chris, jenna, and mike sitting in the office

To address imbalances in representation of women at a senior level in the business, we’ve started a Women’s Leadership Group, with responsibility for shaping policies and addressing issues that disproportionately affect women (including pay), making recommendations directly to the Directors.

We’ll need to ensure that we keep improving the diversity of our workforce, including continuing to hire talented women that can lead positive change within the organisation and within our wider community.

We’ll continue to analyse the words used in our job ads to identify potential gender bias and we’ll reduce our reliance on potentially flawed automated systems by building relationships, having more face-to-face meetings and attending more meetups with more diverse groups of people working in tech.

We acknowledge we have some way to go to address diversity issues and we sometimes get things wrong, but we’re continuously striving to improve and to make working in tech more fun, inclusive and rewarding for everyone.