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Friday 1 November 2019

Gender pay gap

“Are you the waitress?”

Female entrepreneurs have developed technological solutions for pay gaps. But investors aren’t listening

By Rachael Revesz

After launching her software business in late 2015, Zara Nanu spent several years going from potential investor to potential investor with her PowerPoint presentation. Each time, she knew she would probably face another all-male panel. She knew that she’d likely be asked what comms experts call “defensive” questions about her unique selling point and about her competitors, while male counterparts would be asked “positive reinforcement” questions about how they were going to grow their business. And she knew that for every £1 invested by UK venture capital firms less than 1 pence goes to women founders.

“It’s always difficult as you come out of that room feeling like you’re failing because you didn’t get the money, then a male team comes out and they do have the money,” she says.

But Nanu is still trying to raise funding because she believes in her business. GapSquare calculates a company’s pay gap through artificial intelligence and machine learning, pulling information from payroll and other HR systems, identifying patterns in the data, and revealing how the gap can be closed.

The appeal to investors? Studies show that a gender-equal workforce leads to a more successful and profitable company. There was clearly a problem to solve as, in 2016, the gender pay gap for median gross hourly earnings for all workers in the UK was 18.2 per cent. In the first few months after launching GapSquare, Nanu met with the Women and Equalities Minister at the time, Jo Swinson, to discuss the pay gap reporting requirements and learn how her business could adapt. Given the legislation that the government was introducing, she thought it would be a good time to raise capital. But her efforts did not pay off.

“A lot of times at these pitching events, I’d be confused for the waitress,” said Nanu. “It changes the relationship slightly when they’ve just asked me for the wine and, all of a sudden, I’m pitching and asking for a million pounds.”

Nancy Roberts, founder of Umbrella Analytics, which also offers companies technology by which they can report and analyse their gender pay gaps and corporate culture, says she has stopped pitching to mostly all-male panels because it was “not worth [her] time”.

“From what I’ve seen, it always works better if you’re solving problems that the investors personally have experienced,” says Roberts. “For things like productivity apps, they’ll say, ‘We spend x-hundred hours a year on email and if you have this app you can save five working days per month and that equates to x-many thousands of pounds per employee,’ or whatever.” So they invest in apps like that. But when it comes to the gender pay gap, the first-hand experience isn’t there – at least not among male investors.

Neither Nanu nor Roberts have raised a penny from venture capitalists since they launched, and have instead relied on sales and grants, as well as investment from their personal networks.

Meanwhile, in the years since they launched, the gender pay gap among all employees has fallen only minimally to 17.3 per cent in 2019. In fact, over the past year, the gap among full-time workers has actually risen.

April 2020 will mark the third year that companies have had to report 14 data points under six categories to the Equality and Human Rights Commission (EHRC)’s pay portal.

Four of the data points relate specifically to gender pay gaps: the mean and median gaps in hourly pay, and the mean and median gaps for bonuses. Two of them are around representation: how many women and men get bonuses, and the proportions of each gender in each pay quartile.

“Many companies resort to the safety of an Excel spreadsheet,” observes Nanu. “But the spreadsheet won’t tell you where your key challenges are. When you do a deep dive into the data, that’s when you’re more likely to start seeing that, for example, certain departments are more of a challenge than others. Then you can actually pinpoint specific people or processes that may be holding up progress, and create change.”

Nanu insists there will be an increasing need to collect both more data and more nuanced data as time goes on – and the more data there is to work with, the more useful her AI-powered technology will be.

But there are several reasons why companies might not feel an urgent need to invest in this sort of technology. For one, there is no requirement for companies to prove how they calculated their pay gap to the government portal. In 2017, four companies altered their data after submitting it to the government, including Hugo Boss, which changed its entry three times – its median pay gap went from 0 per cent to 76.5 per cent, then back down to 4.7 per cent, all in a week.

Certain loopholes allow companies to avoid reporting altogether or to massage their numbers, such as when a private or public body outsources work to third parties, a common practice across many sectors from the NHS and local councils to the BBC.

Another loophole is that companies do not have to calculate their gap if they have fewer than 250 employees. A 2019 study from social enterprise Equileap found that 21 per cent of the UK companies they looked at had fewer than 250 employees, and these companies chose not to provide data about gender-segregated pay voluntarily.

These smaller-staffed companies include Amazon Video Limited and BlackRock Asset Management Investor Services Limited, neither of which appear to report their pay gaps – even though their parent companies are one of the world’s largest tech companies and one of its largest asset management companies, respectively.

The EHRC does have some powers to help it collect data. “They have the option to issue unlimited fines and court orders if necessary,” explains a Government Equalities Office spokesperson. “[We are] not aware of a case where they have needed to do this yet.”

But there are also significant restraints on what the EHRC can achieve. For starters, it’s had its budget cut massively since the government’s equality legislation was introduced in 2010. “This means it’s not in a position to do a lot of the detailed monitoring that is actually needed,” says Mary Ann-Stephenson, director of the Women’s Budget Group, a charity that analyses how economic policies affect women.

She continues: “The EHRC needs real power to require companies to hand over the whole data set on which they’ve based their calculations. There need to be fines for companies that don’t.”

As well as no requirement to show how they produced their percentages, there is also no law forcing companies to take any action to close their gender pay gaps. As a result, entrepreneurs like Nanu and Roberts have been repeatedly told that their products would merely be “nice to have,” rather than absolute necessities. They were also often encouraged to contact employees in the corporate social responsibility or diversity teams of companies – people who do not necessarily have the budget to buy software.

“We need to see that companies are serious about [gender equality] and putting money into it, serious money – not as a charity or a giveaway, but as a must-have, business imperative,” says Nanu. “We didn’t want to give in to the corporate social responsibility agenda because we thought that would dilute our vision and mission that women must have access to empowerment through money as well as empowerment through knowledge.”

Even though it’s early days, you could argue that the pay gap legislation has made a positive difference. Equileap’s report found that, of all the companies globally that report on gender pay, 39 per cent of them are headquartered in the UK.

But progress is still slow. The highest number of companies with no pay gap – that is, mean and median gaps that are both less than 3 per cent – were also found in the UK. There are only seven of them.

The simple fact is that there’s no sector in the UK where women are paid more than men. The worst gaps fall within finance, where some sectors are even going backwards. “The World Economic Forum says it will take 200 years before the gender pay gap is closed,” says Nanu. “We really think that tech, and scalability through tech and data can help make this gap close and faster, and we need it to happen faster.”

And, of course, there are other problems around pay and diversity. Ethnicity pay gap reporting is expected to be rolled out by the EHRC in the next two years. It is not yet known who the requirements will apply to – UK employees are not required to disclose their ethnicity, unlike in the US – but the government has had over 300 responses to its consultation so far.

Zubaida Haique, deputy director of The Runnymede Trust, warns that addressing ethnic minority groups as binary, similar to how the government has treated gender, would be a mistake. “There are massive gaps within ethnic minority groups, and one of the biggest is between Indian and Bangladeshi men and women,” she says. “It’s not a good idea to approach it as BAME and non-BAME.”

Even if we eradicate the gender and ethnicity pay gap – which would take decades – it does not address issues such as the growing number of women who work for themselves, nor the pay gaps for those who have a disability or who are working class.

But Nanu remains positive. She reckons that machine learning and AI can be applied to many areas of equality and diversity, and not just gender. She hopes to close a successful round of funding by mid-November.

“We are moving into a space where the younger generations actually want more transparency – they want things to be done more ethically, they want a purpose,” she says. “So that comes with an overhaul of every structure of how we work, and how we perceive the different roles within a company.”

In other words, an Excel spreadsheet will soon no longer cut it.

Tortoise’s recent ThinkIn with Carrie Gracie
by Merope Mills

Tortoise recently held a ThinkIn on the gender pay gap with Carrie Gracie, whose recent book Equal tells the story of her dispute with the BBC. Carrie let rip at the BBC after discovering that men at her level were being paid significantly more. She resigned from her post as China Editor with an open letter to BBC audiences. She was not alone in her complaint. BBC women – a number of whom joined us at the ThinkIn – saw institutionalised issues with gender pay at the BBC.

We were lucky to have Carrie’s former boss and Tortoise’s co-founder James Harding articulating from a management perspective how these discrepancies come to pass and why they aren’t addressed with greater speed. A lack of women at the top is clearly a huge factor in the gender pay gap. But there is a sense, too, that the very culture of a workplace like the BBC can be stacked against women; that unconscious bias can seep through the system at every level. Much frustration was directed at the decision to spend more time, money and energy fighting equal pay cases, than addressing the fundamental roots of gender pay gaps and pay discrimination.

But this is not a BBC-only issue. It’s a global pandemic. Who is responsible? A frequent argument is that women should be more assertive when it comes to negotiating pay, but is that really the answer? Do the most forceful workers always deserve the greater reward? Confidence does not always equal competence.

Rather, governments, companies and (usually-but-not-exclusively) male colleagues in cahoots with the system all share responsibility. Our legislation is weak and companies exploit a culture of secrecy when it comes to pay. In spite the legendary British squeamishness for talking about money, the room was overwhelmingly in favour of transparency on salaries. Pleasingly, there were several positive anecdotes of people voluntarily sharing their salaries with each other to begin to level the playing field.

Tortoise’s Responsiblity100Index

Tortoise recently launched the Beta version of its Responsiblity100Index, a ranking of FTSE 100 companies according to their commitment to key social, environmental and ethical objectives.

It reveals that the FTSE 100 only reduced the gender pay gap by 0.3 per cent between 2017 and 2018. At this rate, it would take 53 years for them to equalise incomes.

To see the Beta in full, ahead of the formal launch of the Responsiblity100Index in January, please click here.