Unpacking the new gender pay gap legislation in Australia
Australia is ranked number 26 according to the World Economic Forum’s 2023 Gender Pay Gap report. With the gap in Australia currently sitting at 21.7% (according to the Workplace Gender Equality Agency, WGEA), Australia is looking to establish greater equity in the gender divide pay scales.
And this is where new legislative reforms will be enacted.
As global trends to diminish pay gaps continue, and as governments seek to establish greater transparency in the reporting of gender pay disparity, Australia will follow suit in 2024.
From April 1 this year, key categories of businesses in Australia will be mandated to provide data on their gender pay gap, under the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Act 2023. Development of these new reporting obligations commenced in early 2023, and in two short months, reporting with greater transparency will become mandatory for many Australian businesses.
The urgency of addressing gender pay inequality
Australia sits in an inequitable position regarding gender pay disparity, as our national gender pay gap currently is 21.7 per cent.
It’s important here, to understand how the gap is calculated. From the WGEA:
WGEA calculates the national gender pay gap using the latest data from the Australian Bureau of Statistics (ABS) released in February and August. This data comes from a sample of employers selected from the Australian Business Register, with a slightly different sample taken each time.
The ABS data set:
- Estimates full-time weekly base salary employees in public and private sector
- Excludes overtime, pay that is salary sacrificed and superannuation
- Excludes junior and part-time employees.
The national gender gap is significantly lower than the WGEA Employer Census Gender Pay Gap, because WGEA’s data comes from the annual Employer Census of more than 4 million employees. It also includes total remuneration, part time and casual employees.
Both gender pay gaps show a significant imbalance in favour of men.
Australia is lagging other industrialised nations, like the UK, and is in desperate need for improvement. And the UK provides a promising indicator that these reforms will work here.
The UK experience
In 2017, the UK introduced reporting requirements for organisations and government departments, to publish data showing their average gender pay gap. Those businesses reporting their data, narrowed their wage gap by 19% (according to the London School of Economics and Political Science), although this took some time.
The firestorm about substantial gaps at big employers such as airline RyanAir (a 72 per cent gap) and bank Barclays (44 per cent), at the time, pushed the conversation about the issue.
This data from the Office of National Statistics, the UK equivalent of our Bureau of Statistics (ABS), shows the gender pay gap has fallen since new legislation was introduced in 2017. Source: ABC News.
Overview of the Workplace Gender Equality Amendment Act 2023
On 30 March 2023, Parliament passed the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023. The key changes to the bill, are provided below:
The reforms aim to accelerate workplace gender equity in Australia. Key changes to the legislation, are provided below:
It’s important to note that only those organisations, required to report under the WGE Act will be impacted. These organisations are:
- Registered higher education institutions that are employers.
- Natural persons, bodies or associations that employ more than 100 employees in Australia.
- Commonwealth companies and entities that employ more than 100 employees in Australia.
In-depth analysis of Australia’s gender pay gap reforms
Key features of the gender pay gap legislation
The reporting requirements form the primary change to the legislation. Below, we’ve outlined the new mandatory reporting obligations for employers.
Mandatory reporting for employers
In addition to previous reporting requirements under the Gender Pay Gap Act, the expanded reporting obligations include providing data on:
- Employee year of birth.
- Employee primary workplace location.
- Payment or non-payment of superannuation during parental leave.
- CEO (or equivalent) remuneration (note that individual remuneration will not be made public. Instead, it will be aggregated to calculate gender pay gaps and used for other remuneration analysis).
Additional reporting on sex discrimination, sex-based harassment and sexual harassment
Businesses will also be required to report on certain data relating to sex-based discrimination in the workplace. Previously, businesses could elect to voluntarily provide this information. The data to be reported, includes:
- Company policies and strategies for prevention, including the frequency and content of training, disclosure procedures and statements/communication demonstrating commitment to prevention and response.
- The provision of training, its frequency and content.
- Disclosure processes and management of disclosures.
- Leadership statements or communication to demonstrate commitment to prevention and response.
- Information about sexual harassment risk management.
- Information about the data collected on prevalence and risk management of sexual harassment, harassment on the ground of sex or discrimination.
- Supports available for victims or witnesses.
Businesses will also need to provide their WGE Agency Executive Summary Report and Industry Benchmark Report to their Board or governing body.
Additional Requirements for Large Businesses
Businesses with over 500 employees are also obliged to have policies and strategies against 6 sex gender equality indicators, as follows:
- Gender composition of the workforce.
- Gender composition of governing bodies.
- Equal remuneration between women and men.
- Availability and utility of employment terms, conditions and practices relating to flexible working arrangements for employees and to working arrangements supporting employees with family/caring responsibilities.
- Consultation with employees on gender equality in the workplace.
- Sexual harassment, harassment on the ground of sex or discrimination.
Methodology for Calculating Gender Pay Gaps
The gender pay gap is a simple calculation that always stays the same. It is the difference between the average pay for men and women, expressed as a percentage of men’s pay.According to the WGEA:
Although different figures are touted in the media and government reporting, the calculation doesn’t change. What does change is how organisations define ‘pay’ or ‘remuneration’. Typically, pay is defined as base salary (or total pay), which includes superannuation and company bonuses.
Pay can be what a worker earns in an hour, a week or across an entire year. It can be full-time workers only or at times, it may include part-time and casual workers too. This is where the confusion lies: with different numbers being reported, you need to ensure you’re looking at the entire story of a data set. Only then can you get a fair and objective insight into gender pay disparity.
Implications for businesses and workforce
Impact on large corporations
From 2024, large organisations (500 or more employees) will be required to have policies or strategies for each of the six gender equality indicators (GEIs). These are:
Larger organisations can be compliant with this requirement by having separate polices or strategies in place. Or, by sharing an organisation-wide gender equality strategy or policy that includes aspects that address each of the six gender equity indicators. Either way, the policy or strategy must explicitly address each individual GEI.
This requirement applies to every relevant employer with 500 or more employees. This means that if an organisation’s corporate structure includes multiple entities that have 500 or more employees in their own right, each entity of itself will each need to have their own strategy/policy. These policies could be the same or adjusted for the specific circumstances of the individual entity.
Employee rights and gender equality
After decades of widening pay disparity between men and women in Australia, the impact of these reforms will be positive. But change of this magnitude, will take time.
Organisations across the globe with greater pay equity have demonstrated the value these legislative changes can have on workers. These include:
- A greater sense of fairness and equity amongst workers of all genders.
- Greater pride and engagement from workers, where pay equity is in place. This leads to the employer being a desirable place to work, retention is typically higher, and they’re deemed an ‘employer of choice’.
- A sense where everyone is valued equally.
These outcomes not only improve the experience of workers in an organisation. They also have a positive impact on the bottom line, with a more engaged and productive workforce.
Embracing change for a fairer workplace
Organisations in Australia began taking action in response to the legislative changes, in early 2023 after the Bill passed. This included determining whether the additional reporting requirements are applicable to their business ahead of the April 2024 deadline, as well as reviewing and analysing whether a gender pay gap exists in their organisation. If they uncovered a gap, their focus has been to understand why they exist, and adjust these differences as soon as possible.
These legislative reforms are a significant step forward for Australia, to accelerate employer action to close the gender pay gap. But the real test will be future years, where the statements and data submitted and promises made about fixing the gender pay gap inside companies, can be compared to the historical data of today.
The full summary of the changes can be downloaded here, from the WGEA.