Our thinking

Mind the (compensation) gap

4 February, 2021

It won’t be news that, on average, women earn less than their male colleagues. Although the pay gap is falling in the UK, in 2020, women still earned 15.5% less than men on average. But the gender pay gap that no one’s talking about goes beyond base pay.  

Mandatory gender pay gap reports focus on the differences between hourly earnings but they don’t account for equity-based compensation, like stock options. When these are factored in, the gap widens even further. Only 3 out of 27 HR professionals interviewed said their firm assessed the gap between equity-based pay as well as salaries and bonuses. 

The good news? A study suggested that men aren’t favoured over women based on assessment of their potential when it comes to awarding stock options. The bad news? They are favoured when it comes to retention. In other words, stock options are primarily given to incentivise talented people to stay with the company – and men are perceived to be more important to retain, hence given more stock options. With retention being the reason that 90% of employers say they award share options to employees, this is clearly something that needs further exploration.  

So, while gender pay gap reporting shines a light on one problem, it obscures another. In order to really understand the issues, we need to assess the whole problem. We can start with companies disclosing more than the regulatory required data and thinking about the whole picture when considering gender equality in the workplace. After all, you can’t manage what you don’t measure. 

This highlights the need to continually review metrics, and think more broadly about the real point of reporting on these issues, rather than simply following the mandatory reporting requirements. Some interesting insights arise when you do. We’d advocate for being on the front-foot, rather than the back, and being leaders of change.