Pay equity - the business imperative

Why it is important for Western Australian businesses to address pay equity issues.

The gender pay gap can make women less likely to participate in the workforce.  This means employers are missing out on potential skilled and experienced workers. The ageing population, both locally and internationally, and a strong economy mean that a shortage of skilled employees will be a long-term issue for Western Australian business.  Best practice employers view addressing pay equity as a key attraction and retention strategy. 

Ensuring women’s skills are appropriately rewarded will increase the overall level of female participation in the workforce and make more skilled workers available to business.  In a time of critical skills shortage, this makes pay equity a business imperative.

A fact sheet is also available on this topic:

Pay equity - the business imperative fact sheet  [pdf 50kb]

Pay equity in practice

Addressing pay equity within organisations focuses on identifying and removing barriers to workforce participation and career progression for female employees. In practice addressing pay equity involves:

undertaking a pay equity audit, which is an analysis of payroll data to determine areas and occupations where gender pay differentials may exist;
reviewing human resource policies and practices to ensure that they do not directly or indirectly hinder career progression for female employees, such as not permitting part time work at senior levels; and
making flexible working arrangements available for all employees, and promoting a workplace culture that supports their use.

Benefits of addressing pay equity

Investigating and working to resolve pay equity issues can assist businesses in attracting and retaining key staff, both male and female.  Having fair and transparent pay practices increases employee morale and can improve retention rates.  The cost of replacing a skilled employee who leaves an organisation can be as much as $100,000, or three times the cost of the lost employee’s annual salary [1].

The availability of flexible work arrangements is a key strategy to widen the pool of potential applicants for vacant positions, and to retain the skills and experience of existing employees who may not want to work full time.  Employers who are struggling to fill vacant positions should consider advertising for a job share arrangement, or review whether the role/s can be undertaken by a number of part time employees.

Statistics on female participation

The level participation of women in the workforce is strongly influenced by the fact that many women have dependent children.  For Western Australian women, the workforce participation rate in August 2006 was 59 per cent.  For men, this participation rate was 75 per cent [2] .  The participation rate for women shows a sharp dip between ages 25 and 40 when many women leave the workforce due to family commitments, the DOCEP fact sheet Pay Equity - the business imperative contains a graph that illustrates this.

Western Australia, and Australia, both have relatively low female participation rates compared to other countries.  The participation rate for Australian women is one of the lowest of all OECD countries.  Levels of employment for women with children, in terms of both full time and part time employment, are 20 to 30 percentage points below other OECD countries [3].

The level of employment of women with dependent children has been steadily increasing in Australia.  In 1985 45 percent of women with dependent children were in the workforce, and by 2003 this had increased to 60 percent.  In 2003, 35 percent of women with dependent children worked part time, 28 percent worked full time, and 37 percent were not in paid employment [4].

Factors affecting female participation

Women’s participation in the labour force and thus the availability of their skills for employers is affected by a range of factors. Western Australian employers have the capacity to overcome many of the factors discouraging women’s participation. 

In particular, the provision of quality part time work can encourage women to return to work after a period of maternity leave or time away from the workforce.  Quality part time work is secure work with equitable pay and working arrangements.  People who have quality part-time jobs have a similar job content and status as full-timers, and they are also encouraged to participate in training, career and professional development programs, and feel confident in applying for promotion.

Flexible work arrangements are another key attraction strategy for female employees.  Arrangements such as flexible hours, working from home and additional unpaid leave during school holidays are also being used by many organisations to attract and retain skilled and experienced women. 

The level of remuneration women receive from working also has a direct effect on their workforce participation.  Studies in Australia and overseas have found that increases in women’s wages are recognised to significantly increase women’s labour force participation and the number of hours they work [5].  Addressing pay equity within organisations works to ensure that women are being paid fairly for the work that they do, and that their skills are appropriately valued and remunerated. 

Many occupations and industries that are female dominated have historically been less highly valued and therefore paid less than male dominated occupations and industries.  Often the skills and work associated with female labour have been seen as natural and innate and, hence, have not been highly valued in the labour market.  One element of undertaking a pay equity audit within an organisation is to determine which areas are female dominated occupations, and analyse whether the skills of employees in these areas are being appropriate valued and adequately rewarded. 

The way forward

Organisations who are serious about overcoming labour shortages are addressing pay equity as one of their range of strategies to attract and retain skilled employees.  Addressing pay equity is about taking action, such as pay equity audits and flexible work policies, but it is also about culture.  A workplace culture that supports and actively values pay equity is one in which all employees, part time or full time, male or female are appropriately rewarded, recognised for their contribution and provided with opportunities for career progression.

The Pay Equity Unit at DOCEP has created a range of tools and information materials for employees who wish to accept the pay equity challenge. 

References

1. Tim Sharp (2006) Focus on balancing work and home life, The Weekend Australian, October 7-8, CareerOne, p.1.
2. ABS Labour Force Australia 6202 August 2006
3. Selection of OECD indicators: How does Australia compare? Accessed from www.oecd.org 15 February 2007 
4. Pocock, B The Work Life Collision, Federation Press, Sydney
5. Birch, E (2005) “Studies of the Labour Supply of Australian Women: What Have We Learned”, The Economic Record Vol 81 No 252 March 2005 pp77