Progress: One Year Since the Mandatory Pay Gap Reporting Announcement.

Key points

• The current coalition government in New Zealand has opted for a voluntary gender pay gap reporting system instead of the mandatory reporting proposed by the previous government.

• Over the past 26 years, New Zealand’s gender pay gap has only decreased from 16.3% in 1998 to 8.6% in 2023.

• While countries with similar or smaller gender pay gaps have implemented mandatory reporting to speed up progress, New Zealand's more cautious approach not only differs from international practices but might also impede the acceleration of pay equality.

• Organisations that actively pursue these goals, rather than just "ticking a box," are more likely to attract and retain talent and it can also serve as a key differentiator for external investors and third parties.

Commentary

A year has passed since the previous government announced its intention to implement mandatory gender pay gap reporting. Under this policy, organisations with over 250 employees would have been required to publicly disclose their gender pay gap starting this year, with plans to eventually include companies with more than 100 employees.

However, the current coalition government has recently decided not to proceed with Labour's pre-election promise. Instead, it plans to introduce a voluntary reporting system for businesses. This new policy will see the Ministry for Women develop a calculation tool and collaborate with business leaders to support organisations in measuring, understanding, sharing, and addressing their gender pay gaps.

While New Zealand's gender pay gap has reduced from 16.3% in 1998, currently sitting at 8.6% (as reported by Statistics New Zealand in 2023). This reflects less than a 8% decrease over the past 26 years, effectively a 0.3% decrease annually. Given the limited movement over the last decade, is this new direction sufficient?

The Organisation for Economic Co-operation and Development (OECD) publishes an annual global gender wage gap report, comparing male and female wages across its member countries. It's important to note that the gender wage gap, which measures the difference between median hourly wages of full-time men and women, differs from the gender pay gap, which includes part-time workers. The latest report for 2021/2022 ranked New Zealand fifth, with a gender wage gap of 9.2% (the same as the gender pay gap reported by Statistics New Zealand in 2022), compared to Norway's 4.6% in first place.

Countries like Norway, Sweden, and Ireland have implemented mandatory reporting for companies of certain sizes. For example:

• Norway (1st - 4.6%) requires employers with 50 or more employees to conduct an annual analysis and a more intensive biannual review. The annual analysis focuses on workplace equality and anti-discrimination, with findings published in the organisation's annual report. The biannual review provides a more comprehensive examination of pay equity.

• Sweden (joint 3rd - 7.3%) mandates that all employers perform an annual pay equity analysis, with employers having 10 or more employees required to document the findings.

• Ireland (joint 3rd - 7.3%) requires employers with 150 or more employees to conduct an annual analysis and publicly disclose the results.

While Argentina (2nd - 6.3%) does not have mandatory reporting requirements it has passed legislation regulating equal pay for equal jobs, making it the second country to enforce such measures after Iceland. Under this legislation, employers may face sanctions for gender-based pay discrimination, and affected employees can claim compensation for the salary difference within a statute of limitations period.

A number of countries whose gender wage gap is lagging behind New Zealand in this report, such as the UK, Australia, Canada and France, have also implemented some form of mandatory reporting requirements demonstrating the growing global emphasis on closing the gender pay gap effectively, swiftly and sustainably.

In Australia, which ranked just behind New Zealand, the Workplace Gender Equality Agency (WGEA) reported a 1.1% decrease in the average gender pay gap for total remuneration in 2022-2023. This marks the largest drop in eight years. Notably, on February 27, 2024, the WGEA published the gender pay gaps of private sector employers with 100 or more employees to "increase transparency, encourage conversation around gender pay gaps in Australia, and accelerate change." Thus suggesting that many Australian companies were eager to improve their current gender pay gap to avoid potential embarrassment from such disclosures.

In comparison, the last time New Zealand experienced a greater than 1% annual decrease was from 12.0% in 2016 to 9.4% in 2017. Given that New Zealand was the first country to grant women the right to vote and introduce a minimum wage— a measure some economists believe positively impact a country’s gender wage gap by increasing wages for women in lower-paying jobs - it is surprising that the current New Zealand government is not taking a more proactive approach to reduce the gender pay gap.

Given that this new approach is essentially a more formal approach to the "Mind the Gap" initiative, it would be easy for organisations to think, so what?

Over 100 organisations have joined the Mind the Gap initiative, demonstrating a strong commitment to addressing their gender pay gaps. This eagerness is driven by demands from the current workforce and prospective employees for genuine implementation of diversity initiatives. Organisations that actively pursue these goals, rather than merely "ticking a box," are more likely to attract and retain talent and may also stand out as a key differentiator to external investors and third parties. Thus benefiting both the company and its employees, creating a clear "win-win" situation!