The gender pay gap is a persistent problem for many business leaders as the “good bloke” bias keeps getting in the way of progress.
Australia’s most commonly cited national gender pay gap measure – based on data from the Australian Bureau of Statistics (ABS) – stands at 13.3 per cent, an improvement on 17.4 per cent when the Workplace Gender Equality Act 2012 was introduced. Based on the current annual pace of progress, the Financy index calculates it will take 24 years before we see pay parity in Australia.
A big driver of the gender pay gap is the disproportionate number of men, relative to women, in high-earning and senior leadership positions across most Australian industries.
Among the worst gender pay gap offenders by industry is financial services, where discretionary bonuses tend to inflate pay inequality.
“In finance we do have big bonuses, which can equate to 50 per cent of total compensation or more,” says Jun Bei Liu, the lead portfolio manager of Tribeca’s Alpha Plus Fund.
“I think it is literally about helping more women progress into senior leadership positions, and then we will see the gender pay gap improve as pay rates rise.”
The Albanese government has been more active than previous governments to promote and improve gender equality at work, but the pace of progress remains painfully slow when it comes to business behaviours.
Sophia Rahmani, CEO and managing director at Maple-Brown Abbott, blames much of this on persistent unconscious bias and leaders putting too much focus on base salary instead of total compensation.
“I witness a lot of conversations and scrutiny within organisations around base salaries, but a lot less when it comes to the allocation of discretionary bonuses.
“I’ve certainly seen that if there is a bit of extra money at bonus time, business leaders saying ‘oh such and such is a good bloke so let’s give him a bit extra’.”
She cites long-term incentives (LTIs) such as share options that she says are “lumped together in a dollar amount”. “I do think that unconscious bias can slip into that – business leaders will reward on whether a person is a good cultural fit over performance.”
LTIs are considered a valuable part of a total compensation package, both for delivering rewards and focusing employees on desired future outcomes and objectives.
Australia’s total remuneration gender pay gap is 22.8 per cent, which means for every $1 on average a man makes, a woman earns 77.2¢, according to analysis of the 4000 large companies reporting to the Workplace Gender Equality Agency.
This gap is almost double the national gender pay gap (13.3 per cent), which is based on the average weekly wages of men and women, as collected by the ABS.
Carol Kulik, research professor of human resource management at the University of South Australia and author of Human Resources for the Non-HR Manager, notes that many managers believe their organisation doesn’t have a gender pay gap because it is governed by award rates, or that pay is otherwise standardised.
“There are so many ways that pay is influenced by decision-maker discretion,” Kulik says. “For example, women may not be part of the informal networks to know what kinds of incentives they could negotiate into their contractual arrangements.
“Research demonstrates female managers are routinely assigned smaller budgets and fewer subordinates than male managers at their same level – and those resources influence their performance indicators, which in turn influence performance-based bonuses.
“Benign sexism can play a role here too – women may not be assigned the difficult clients or the overtime shifts that come with extra pay.”
So what can business leaders promote gender equity and help close pay gaps within their ranks?
- Build a diverse leadership team, which can help close gender pay gaps as well as also boost business profitability, according to a study by the Boston Consulting Group.
- Provide support for women through workplace flexibility so that they can work anywhere and take on more senior leadership roles.
- Provide clear key performance indicators (KPIs) to link performance targets to pay. So rather than providing an employee with qualitative feedback, look at quantitative feedback to reward bonuses.
- Encourage women to be forthcoming on pay and push for pay to be tied to KPIs.
This article has also been published in the Australian Financial Review and has been republished here only with permission.
