The missing 40%: Why pay parity suffers when small business is excluded

Last year, Australia’s gender pay gap declined by 1.1%, the biggest single-year drop on record, according to annual figures put together by the Workplace Gender Equality Agency (WGEA).

Men are still being paid 21.3% more, on average, than women, but that’s not the only problem.

In 2012, when the Gillard government drafted and passed the Workplace Gender Equality Act, creating the WGEA in the process, it was acknowledged pay parity could only be achieved through transparency.

But seven years later, a staggering 40% of Australia’s workforce is missing from the WGEA’s data set, masking almost half of the journey towards gender equity in Australian workplaces.

That’s because small-to-medium businesses, those with less than 100 workers, aren’t required — or for that matter, voluntarily able — to report pay data to the WGEA.

It means the $25,717 difference between average full-time pay for men and women in Australia in 2017-18 could be much higher, or much lower.

Even the agency’s executive manager of engagement, Kate Lee, hazards to guess what’s going on in the SME sector.

“I really don’t know,” she tells SmartCompany.

Two years until SME participation possible

It will be at least two more years before small businesses will be able to report voluntarily to the WGEA, thanks to outdated software the agency has been stuck with for years.

WGEA director Libby Lyons conceded at Senate Estimates in February the current system will “come to an end of its useful life” by the end of this month.

Despite this, it took the government until November last year to allocate $8.1 million over four years for the development of a new system, which is only now in the project discovery phase and is slated for completion by April 1, 2021.

Back in 2015, the Abbott government wound back some of the reporting requirements under the WGEA regime, including chief executive officer salaries, complaining about red tape for businesses.

The new system, several years overdue, is slated to reduce the regulatory effect on business by about 30%.

Meanwhile, prominent small-business owners say an opportunity to contribute can’t come fast enough.

Adore Beauty founder Kate Morris, who recently forecast surpassing $100 million in revenue this year, believes more needs to be done.

“As a business owner, it would be of value to me to know how my business measures up to others on gender equality KPIs, and where we could improve,” she has told SmartCompany.

Julie Mathers, founder of online retailer Flora & Fauna, agrees.

“When you’re looking at companies of 100-plus employees you’re missing out on a huge portion of businesses,” Mathers has told SmartCompany.

There remains disagreement, however, on how SMEs should contribute — voluntary, or, like larger firms, mandatory?

Voluntary or required?

Australian small business and family enterprise ombudsman Kate Carnell supports the addition of voluntary reporting, particularly for firms with between 5-20 workers, but says mandatory reporting would be too onerous.

“The dilemma of data is somebody has to do it, put it together and submit it,” she tells SmartCompany.

“Mandatory reporting would be a step too far.”

Nevertheless, Carnell says pay parity is an issue in the SME space, and more data can certainly help to address the problem.

“We’ve often found CEOs are incredibly surprised when they sit down and look at all the salaries of various people in their organisation.

“They just didn’t realise there was a gender pay gap.”

Parity extends beyond just headline comparisons too, Lee explains.

“It’s not just about pay for small businesses, it’s also about what your mix is, your gender spread and the types of roles you have in your business.”

A recent survey of 5,000 employers and workers conducted by labour-hire firm Adecco found while 65% of SME employees say their workplace has gender diversity targets, 71% reported less than half of their colleagues were women.

Carnell says maternity leave in small businesses can also cause issues for achieving and maintaining pay parity.

Women who go on leave come back to the same salary, Carnell explains, even though their male colleagues may have been bumped up during that time, sometimes significantly.

“They don’t quite realise everything has changed, so there ends up being an entrenched pay gap at that stage, and unless it’s addressed it will continue.”

WGEA to step up SME efforts

The WGEA is looking to step up its efforts to engage with small business over the next few years as it prepares to roll out voluntary reporting.

It has worked with firm Security4Women in the past to develop educational resources, but will now look to do more.

“Sometimes it’s about knowing where to start,” Lee says.

“When you look at the way big businesses talk about gender equality it can seem complicated, the things they do in their businesses may look quite different.”

Carnell says International Women’s Day 2019 is a good opportunity for small-business owners across the country to sit down and try to get their heads around the issue.

“The real issue for CEOs in small-to-medium businesses is to use IWD to review the data, and if you find some discrepancies, work out why it has happened,” she says.