Approach to Pay Equity & Gender Pay Gap by Mercer Polska

Companies start to understand and value the need to analyse pay inequity in their organizations. According to Mercer’s research globally, 74% of corporation companies claim to include pay equity into their remuneration strategy. Additionally, more than half of those companies go through the pay structure revision process focusing on pay equity. Moreover, 44% of such companies have a standardized process for addressing inequity in their remuneration policy in place.

Females are the majority in the BPO/SSC/IT/R&D sector in Poland representing almost 61% of the entire workforce. While among junior specialist women take 70% of positions, on a managerial level they occupy only 45% of roles. While most of the sector organization is declaring that diversity and inclusion are part of their strategy the average pay gap is 4.6%. The gender pay gap at entry-level positions is 1.0%, however among managers 7.1%. Despite our sector declarations that we value diversity, data shows that there is a preference in promoting men to higher levels.

Gender distribution by employee grade in BPO/SSC/IT/R&D sector in Poland.

Pay Equity and Gender Pay Gap

Mercer typically analyzes two aspects: gender pay gap and pay equity.

The pay equity factors indicate if men and women receive the same compensation for comparable work. What we check is whether an equal job means equal pay. In such analysis, several variables are taken into consideration, such as employee location, tenure in the organization or performance rating. We try to discover if men and women in the same position, with similar tenure and performance are compensated equally.

The gender pay gap evaluates women’s position in the company taking into consideration the entire company employment structure. It shows the difference in men and women hourly rates within the whole company not taking into consideration the job type. A significant gap may indicate the disproportion of employment in one of the groups in higher grades and should trigger the deep-dive analysis.

Companies are more likely to focus on pay equity than the gender pay gap as that it is much easier to control the compensation equity in the same positions than the whole employment structure.

To make it clearer let’s use the example of a company where there are 8 grading levels. In levels 1- 5 80% of employees are female while in levels 6-8 80% of employees are male. The pay equity analysis in each grade may prove that the wages are equal. However, the gender pay gap would indicate that there is an issue with hiring or promoting women to the higher levels in this organization.

Obviously, when analyzing the gender pay gap we need to take into consideration the industry within which the company operates. However, at times organizations overuse the lack of female talent argument to explain why women aren’t promoted or equally compensated.

Few remuneration analysis approaches are available. The first approach is to keep a track of compensation in positions dominated by each gender. In case there is a position where 80% of employees are women, it is worth comparing the salary with another relevant position that is dominated by men.

The second approach would focus on each employee compensation compa-ratio to the median of the salary range. And the percentage of men and women in each quartile of the salary range.

There is a number of activities that help to include women in the entire company structure. Main IT players actively support education programs for women to increase their presence in the IT industry. That not only guarantees gender diversity but also is a great promotional activity for the company.

Countries approach to pay equity

Not only the big corporate companies look into pay structures. Within the last couple of years almost all western European countries introduced some form of legal regulation on pay equity. The requirement of a regular remuneration audit is in place in 15 European countries as well as in Australia and New Zealand. The legislative works are in progress in Canada and the US. Sweden was one of the first countries where legal regulations oblige the companies to regular revision of pay equity. In Island, pay discrimination has been formally delegalized. In the UK companies are obliged to publish information on the gender pay gap. It is required to publish pay gap data, but also to the actions to reduce this gap. . Thanks to this transparency practice all the employees, or even candidates, have visibility of their organization pay equity state.

According to Eurostat data, the UE leader in dealing with the gender pay gap is Romania (2% only), while the biggest gap of 22% was reported in Estonia. The EU-28 average value is 15% (Gender pay gap in the unadjusted form in 2018). The gender pay gap in Poland is ca 9% which means that our country is dealing with this matter pretty well. However, this statistic shows the gap in companies that hire more than 10 employees. The gender pay gap on a country level should also take into consideration female participation in the labour market. The gap in employment of women and men in Poland is 14.4%, one of the highest in the EU (the average of EU-28 is 11.6%). Romania with the lowest pay gap has an even higher employment gap of18.3%. These statistics provide a bigger picture in gender pay inequity analysis.

Nordic countries are leaders in terms of gender pay gap prevention. In those countries, the gender equality legislation in the labour market is in place for few years.

Unfortunately, there is still a lot to do globally. According to World Economic Forum, if we keep the current growth of female inclusion into the labour market, we would need to wait 120 years in order to achieve an equal level of employment for men and women. This means that we will get to this stage neither during our lifetime nor that of our children.

Covid-19 impact on women pay and labour market inclusion

The crisis caused by the COVID-19 pandemic affects female employees more. 2020 recession was a ‘Femecession’. The 2008 financial crisis hit mostly the production, while the recent one affected mostly the services sector – where women prevail. According to International Labor Organization the risk of reduction of working time, lowering the salary rate or redundancy was 5.6% higher for women (40.9%) than men (35.3%) on a global level. Moreover, around 740 million women are currently working in the unofficial labour market, without a formal employment contract. Cleaning service, babysitters, etc. who usually receive the payment in cash after the service is completed, do not have any formal job agreements. During the first lockdown in Poland, such workers were left without any financial support. On top of that low-paid positions do not provide any possibility of generating savings either, which makes the situation even worse. This is the reason why COVID-19 caused the lower employment activity for women, which may lead to slow down the process of pay gap equalization, or even growth of the gap in the future.

At the beginning of 2020, the European Commission published the Gender Equality Strategy 2020-2025 communication where it declares that the EU will ‘propose binding pay transparency measures by the end of 2020’. In the communication, the Commission declared to ‘strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms’. It now is in the consultation stage.

Malwina Raducka-Sakwerda

Mercer Polska, May 2021