Gender pay gap reforms – how boards can prepare for change

New laws aimed at accelerating change to close the gender pay gap have been introduced. Mary Wooldridge GAICD, Chief Executive of the Workplace Gender Equality Agency (WGEA) and a panel of directors told a recent AICD webinar what boards need to know and how to prepare for long-term strategies to manage gender equality. Find out how your board can prepare for the changes. Listen to the webinar here.

On 30 March 2023, Federal Parliament passed the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 to promote and improve gender equality in the workplace. Mary Wooldridge GAICD, Chief Executive of the Workplace Gender Equality Agency (WGEA), which represents more than 4.7 million employees across 11,000 employers, says the gender pay gap is effectively a proxy for performance on gender equality and a recognised worldwide measure.

“The gender pay gap looks at the average earnings of men compared to the average earnings of women, but it's not the same as equal pay. Equal pay for equal or comparable work has been the law for more than 50 years and companies need to maintain vigilance to ensure equal pay exists,” says Wooldridge. “The gender pay gap is a broader measure of gender equality that reflects both pay and composition of the workforce. What varies in its calculation is the definition of earnings.”

WGEA reported Australia’s gender pay gap in 2023 at 22.8 per cent. This year’s figure mirrors that of last year's, and progress overall has been slow. Hence the need for reforms.

The reforms have introduced a requirement for employers to share their WGEA reports with their governing body or board. So, exactly what requirements will be enforced and what can boards do to prepare for the change in reporting?

A key change is increased transparency that will see employer-level gender pay gaps published in 2024.

Non-executive director of Stockland Group, Andrew Stevens GAICD, told the webinar, “This transparency regime is going to oblige external reporting of gender pay gaps and therefore that’s a whole new level of disclosure that directors will need to be seriously involved in, to scrutinize and approve.”

“I think this is going to be a significant change,” says Stevens, “…and an opportunity for the country to really shine a very bright light on the gender pay gap. The onus now is on boards and companies to understand what that gap is and how to address those gaps.”

While many boards are already having conversations around the gender pay gap and how to address it within their own companies, some boards may be unclear on how to prepare and manage the possible consequences of disclosure that may not only impact the internal culture, but also company reputation.

“Forward looking statements that say, ‘This is what our strategy says we are doing, and this is what we will be doing,’ is another area where directors will want to be,” says Stevens.

In preparing for the disclosure, there are questions that directors can ask their management teams to better understand the drivers behind their gender pay gap, and what actions have or can be taken to address them. Questions around the diversity of their recruitment process, equitable promotion practices, diversity and inclusion training and flexible and supportive employee benefits are just a few ways of approaching broader strategies to close the gender pay gap in an organisation.

Directors should also ask questions to spark conversations about their gender equality profile that will define what they want to know in this area and how they want to communicate it to their stakeholders.

Non-executive director of Maurice Blackburn, Sunita Gloster AM GAICD told the webinar, “These reforms, whilst they address a timeless moral imperative to address the gender pay gap, also deliver on an important economic goal and enable us as directors to unlock and create long-term value for the businesses that we are part of. We know that there's so much data about inclusivity and equitable workplaces, delivering better financial performance. And this is a way to get there.”[JG1]

New reporting rules from 2024

The key change introduced by this legislation will enable WGEA to publish the gender pay gaps of all private sector employers with 100 or more employees from early 2024 (and Commonwealth public sector employers from 2025). Organisations’ data will be published on the WGEA website and employers will be given an opportunity to provide a statement that gives context to their gender pay gap results or outlines theirs plans for actions.

The first disclosure of employer gender pay gap information in early 2024 will not include CEO remuneration, which can have a significant impact on the mean gender pay gap calculation. However, from early 2025 WGEA will publish employers’ mean, median and quartile employee gender pay gaps.

Importantly, individual employee and CEO remuneration will not be published by WGEA and will remain confidential

Key points

• The WGEA reforms represent the first time that organisations with 100 or more employees will be required to provide WGEA’s gender equality reports to their board, and WGEA will publish employer gender pay gaps publicly.
• There are increased expectations from stakeholders (employees, investors, customers, etc) for organisations to take action to increase diversity and gender equality in the workforce.
• The gender pay gap is expressed as a percentage or a dollar figure, showing the difference between the average earnings of women and men.
• The gender pay gap is not the same as equal pay or a comparison of like roles.
• Rather, the gender pay gap shows the difference between the average pay of women and men across organisations, industries and the workforce as a whole.
• The gender pay gap between women and men's average earnings is the result of social and economic factors that combine to reduce women’s earning capacity over their lifetime.

o   The WGEA/KPMG report “She’s Price(d)less” identifies 3 main drivers of the gender pay gap: conscious/unconscious bias or discrimination; women’s greater amount of time out of the workforce for caring responsibilities; and industrial and occupational segregation.

• It requires cultural change to remove the barriers to the full and equal participation of women in the workforce. 
• Addressing the gender pay gap is a key lever for organisations, particularly given the increased transparency and availability of this data to the broader community.