Australia awaits day of reckoning on gender pay gap

Perhaps Natasha Bradshaw summarises business sentiment best, “there will be nervous executives all over Australia this week.”

On 27 February, the Workplace Gender Equality Agency (WGEA) will publish the gender pay gaps for every Australian employer with 100 or more employees.

The government agency will be publishing employer gender pay gaps by median as well as the gender composition and average remuneration per pay quartile. While the process will happen in stages – due to the way the legislation was designed – this represents a seismic shift in approach to tackling gender pay disparity in the country.

“The public naming and shaming that will begin will push accountability onto employers, holding them responsible for the conditions in their workplaces,” noted Bradshaw, speaking as Senior Associate at Grattan Institute.

The change is the result of amendments to the Workplace Gender Equality Act 2012 passed by Federal Parliament in March 2023, with publishing employer gender pay gaps viewed as a “critical part” of legislative action.

In 2023, the WGEA average total remuneration gender pay gap was 21.7%. This means that women in Australia are earning, on average, $26,393 less than men a year. In other words, for every $1 on average a man makes, women earn 78c.

In response, WGEA labelled the gender pay gap as a “persistent and pervasive issue” that undermines women’s earnings across the country.

“Employers who do more, achieve more,” said Mary Wooldridge, CEO of WGEA. “When employers pursue a deliberate strategy of long-term, meaningful change they are achieving progress to close their gender pay gaps.”

Wooldridge said that international experience indicates publishing the individual gender pay gap results of companies will be an “important step” capable of accelerating change. For example, the UK introduced similar reforms in 2018 with the gender pay gap narrowing by one-fifth as a result.

“Industry averages can mask the true picture of progress,” she added. “Publishing employer gender pay gaps offers a deeper insight into industry performance and business performance that may have been hidden by averages in the past.

“This new roadmap can help companies look at their policies and develop actions to better inform their own pathway for improvement.”

How the process works

On 27 February, WGEA will publish the first set of private sector employer gender pay gaps. This will cover 1 April 2022 – 31 March 2023 reporting.

In recognition that private and public sector organisations follow different reporting timelines, the first release of government gender pay gaps will be published in late 2024 or early 2025. This data will be based on 1 January 2023 – 31 December 2023 reporting.

Employer gender pay gaps will be available on individual employer pages on WGEA’s Data Explorer. This tool offers deeper insights into gender equality performance and outcomes, in addition to comparing results across employers and industries.

Calculations will cover base salary and total remuneration gender pay gaps for employers – to ensure comparability, part-time and casual salaries are converted to full-time equivalent earnings. The total remuneration pay gap calculations include superannuation, bonuses and other additional payments.

In an effort to provide balance, each employer will have the opportunity to provide an employer statement that provides context to their gender pay gap results.

“While naming and shaming will help make this policy effective, we should be careful about rushing to judgement,” Bradshaw cautioned. “It is possible for an employer to be making serious efforts to improve while its gap remains large.”

As noted by Bradshaw, actions to improve the situation – such as implementing a gender quota on entry-level positions – can actually worsen a company’s apparent gender pay gap in the short-term by temporarily increasing the number of lowly-paid women.

“Also, there will be firms that have a low gender pay gap because they pay both men and women poorly,” Bradshaw clarified.

“We should instead look closely at whether the organisation has outlined clear steps it will take to improve, and how it compares to its competitors. In future years, we will be able to see how things have changed.”

For businesses that operate ‘same pay for the same role’ policies, an important distinction should also be considered. According to WGEA, the gender pay gap is the difference in average or median earnings between women and men in the workforce.

“It is not to be confused with women and men being paid the same for the same, or comparable, job – this is equal pay,” a statement read.

Striving for best practice

A deep divide currently exists within industry sectors between the best performing businesses – those that are making progress to close their gender pay gaps – and the worst performers.

Mining, manufacturing and retail trade as well as the professional, scientific and technical services sector are among the industry sectors where this difference is most pronounced.

That’s according to a recent report – Gender Equity Insights – published by Bankwest Curtin Economics Centre (BCEC) and WGEA, which examined the gender equality strategies of nearly 4,800 Australian employers.

Findings indicate employers that have taken “deliberate, long-term action” in their workplaces get results, highlighting the best performing Australian companies recorded a 5.3pp drop in their gender pay gaps in three years.

Report author, Alan Duncan – Director of Bankwest Curtin Economics Centre (BCEC) and Distinguished Professor – said the analysis used a new “maturity framework” to help organisations identify, measure and implement practical policies and actions that can drive improved workplace gender equality outcomes.

“Focusing on industry-wide changes to gender pay equality and women’s workforce representation can hide some significant differences in progress between businesses,” Professor Duncan noted.

For example, Professor Duncan said the most advanced businesses in the mining sector are 7X more likely to set targets to reduce gender pay gaps and 4X more likely to report pay equity metrics to senior executives compared to businesses that are early on in their journey towards workplace gender equity.

“While progress is being made, the reality is that closing the gender pay gap is still many years off for a large share of Australian businesses,” he acknowledged.

The report benchmarks the performance of organisations based on their approach to pay equity strategies, recruitment and retention and other policies and actions aimed at driving progress – this includes parental leave, family and caregiving and sex-based harassment.

“We found businesses that reach higher maturity levels in their approach to gender equality achieve far stronger results than organisations at lower levels of maturity,” Professor Duncan said.

“When organisations implement pay equity audits and report gender pay metrics to their senior leadership and governing boards, we see a greater pace of change.”

In addition, the best performing businesses have enhanced parental leave provision for secondary as well as primary carers, as well as reporting, training and accountability for flexible work.

Meanwhile, report co-author, Astghik Mavisakalyan – Associate Professor at BCEC – said consultation through employee surveys, advisory bodies and boards was also an “important enabler of progress” for businesses aspiring to reach higher levels of gender equity maturity.

“Businesses should plan for continual improvements, enhanced actions and higher standards of practice in gender equality policies as internal and external expectations develop,” Mavisakalyan advised.

“Business leaders need to be careful not to focus attention on one employee group at the expense of others.”

For example, Mavisakalyan said a commitment to progress gender equality for managers and executives should not diminish the attention given to improving gender equality outcomes among non-managerial occupations.

“Gender diversity in decision-making and on boards is a key driver of organisational change,” Mavisakalyan added. “While there’s been progress in the past three years, employers must keep up the pace to avoid leaving women under-represented in the boardroom for decades to come.”