- Men receiving higher incentive payments than women despite receiving the same performance rating
- Gender pay gap highest in Australian-headquartered companies
- 25% of organisations don’t pay superannuation whilst employees are on parental leave.
The gender pay gap in Australia runs deeper than just base pay; even when the general gap may appear to be closing, the cracks continue to appear in terms of performance pay, according to a new report from Mercer.
Mercer’s report provides an unprecedented view of the pay equity issue in Australia, revealing that men are earning performance bonuses of up to 35% more than women despite receiving the same performance rating.
Until now there has been no significant analysis on the impact of gender on short-term incentives and variable rewards, Mercer’s 2015 Gender Equity Report shows a disparity that compounds the fixed pay gap.
“Our report provides the hard evidence of why pay equality cannot be simply viewed through the lens of fixed pay,” said Garry Adams, Leader of Mercer’s Talent Business in the Pacific.
“The gender equity landscape within Australian organisations is complex, and many employers are making progress in moving toward pay equity.
“However, we have to put the spotlight on issues such as the massive disparities in performance-based bonuses, superannuation, and why organisations headquartered in our own backyard are often the worst performers for pay equity.
“The payment of bonuses is an area that is often overlooked, and the report shows that, with men receiving higher payments for achieving the same performance ratings as women, organisations need to change their approach to encompass all aspects of remuneration,” said Mr Adams.
Drawing on Mercer’s extensive remuneration data and research from the firms’ talent, rewards and retirement businesses, the 2015 Gender Equity Report provides unparalleled information and insights on the differences in remuneration and superannuation between men and women.
The report shows how disparities in job family, industry, career level, organisation size and ownership, performance pay and superannuation collectively contribute to women’s disadvantage in terms of pay in the workplace. The report also provides guidance on policies and benefits to help organisations to improve gender equity practices.
Rewards and incentives
Women receive lower variable reward/incentive pay despite receiving the same performance ratings as their male counterparts. Most strikingly, males who only partially met their objectives received bonuses that were 35% larger (as a percentage of employment cost) than their female counterparts.
“Our findings show that men are consistently paid higher performance bonuses than women despite receiving the same performance ratings.
“It is evident that there is a significant opportunity for organisations to review how variable rewards and incentive pay is distributed to employees. This involves organisations being aware if unconscious bias exists, and taking the first step to acknowledge this and develop a more equitable talent strategy that rewards performance regardless of gender.”
The table below shows that men received bonuses up to 35.2% more than women performing at the same level.
Short-term incentives pay gap
Far exceeded objectives
Partially met objectives
Superannuation gender gap
The gender pay gap, coupled with the fact that women earn less in incentives and typically take career breaks to care for family, means women are at a far greater risk than men of not being able to live comfortably in retirement.
The current average time out of the workforce for a woman caring for children is five years. Based on median earnings, this could reduce superannuation earnings at retirement by $80,000.
“While 66% of organisations provide superannuation on the company paid portion of parental leave, only 5% of organisations pay superannuation throughout the duration of parental leave – both paid and unpaid. Alarmingly, a quarter of organisations don’t currently provide any superannuation while employees are on parental leave.”
Do organisations’ characteristics make a difference?
The report analysed the gender gap according to headquarter location and organisation size.
“The results are concerning for Australian-headquartered organisations, with the largest gender pay gap at 5%. This was followed closely followed by organisations with headquarters in the UK, 4.9%, and well above those with a European base, 1.2%. These differences confirm parent company location is a significant factor influencing gender pay.
“Despite large organisations tending to have dedicated diversity teams and well documented pay equity policies, they report the greatest gender pay gap of nearly 8%, compared with smaller organisations, with just over 3%. With a smaller organisation it may be easier to keep track of pay gaps and manage inequities.
The gender pay gap by job family and sector
Mercer’s database of remuneration records was analysed for the Australian market to extract major insights into the pay gap that exists overall and within career level, job family, organisation ownership and industry.
“While men are being paid 4.4% more than women, a deeper analysis shows the most disadvantaged job family is research and development where the gap is 9.7%, compared with 2.1% in sales and marketing.
“The gender pay gap by industry was largest in education and research, with 10.6%, whereas in retail, women are paid 6.9% more than men.
Bridging the gender pay gap: what are the solutions?
“In addition to highlighting the size and pervasiveness of the problem, we are providing organisations with practical solutions and actions that can create an effective gender equity strategy.
“There are no quick and easy wins in addressing the gender pay gap. As our report outlines, real, sustained change demands systemic, organisation-wide analysis, change and action.”
As a general guide, there are several steps organisations can take to map out their approach to bridging the gender pay gap:
- Admit you have a problem and an opportunity
- Base your gender strategy and priorities on robust workforce analytics
- Align your diversity strategy with your talent strategy
- Implement new programs and benefits – only in the context of an enabling environment
- Broaden your understanding about what it takes to support women
- Collaborate with other stakeholders in the macro environment to impact the female talent pipeline
The Gender Equity Report 2015 draws on an extensive volume of information Mercer has collected from remuneration and benefits surveys, and the scale and expertise of its talent and retirement businesses, enabling the firm to gain a detailed understanding of where the pay gaps are, and help organisations understand the implications for them and their employees.
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset—their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com.au Follow Mercer on Twitter @MercerAu