Will the new pay equity analyses help close the pay gap?

A recent analysis of data from the management consultancy Mercer shows that the adjusted gap in basic pay between women and men in Switzerland fell from 1.5 percent to 0.85 percent (-76 percent) between 2019 and 2020. The adjusted gap takes into account the hierarchy level and workload of employees in terms of "equal pay for equal work." The unadjusted gap, which represents the difference between women and men regardless of rank and position, also decreased from 5.3 percent in 2019 to 4.9 percent in 2020 (-8 percent).

Gender inequality less in pay, more in higher-paying positions

The differentiation between adjusted and unadjusted pay gap is important to discuss two different issues. The adjusted analysis addresses the issue of equal pay ("equal pay") and the existing disparities that cannot be explained by seniority or position. The unadjusted analysis highlights pay disparities that can be explained in part by a lack of representation of women in leadership positions. Since there tend to be more men than women in higher-paying positions, they also see larger gaps here. The Mercer data confirms that the proportion of women is lower at higher hierarchical levels than at lower positions.

"Our analysis clearly shows that one of the main reasons for the sometimes large unadjusted pay gaps between women and men is their representation in higher-paid specialist and management positions. The legally required pay equity analyses are certainly a good step toward uncovering inequalities. But to really make a difference, we as a company and society need to work to give women access to higher-paying positions. Issues such as absences due to childbearing or part-time work must no longer be seen as automatic career killers, but must be recognized as part of a normal working life and managed accordingly," comments Tina Buchmeier, Consultant at Mercer Switzerland.

In addition to the base salary, this year we also looked at the extent to which there is a salary difference between women and men in terms of salary, including the short-term variable compensation component. A target value is set for the variable component, but the actual payout is adjusted at the end of the year depending on performance. Looking at the base salary plus target bonus, women are 0.8 percent below the base salary plus target bonus for men doing the same job. However, if the actual bonuses paid are considered, this difference increases to 1.1 percent. According to the unadjusted analysis, the target salaries (base salary plus target bonus) of women are 3.3 percent lower than those of men. However, the salaries paid out, including the variable component, are even 5.2 percent lower. These figures show that a difference already exists in the planned bonuses, which becomes even greater when they are actually paid out. Companies can address this issue by clarifying job positions and ensuring fair performance evaluation without gender bias.

The statutory wage equality analyses as a building block for success

As of July 1, 2020, Swiss employers with more than 100 employees have a legal obligation to conduct a pay equity analysis. The first analysis must be carried out by June 30, 2021, and must be audited by an auditing firm within one year. The results must be communicated to employees and, in the case of listed companies, disclosed in the annual report. If pay inequality is identified, the company is required to repeat the analysis at least every four years until the pay inequality is remedied.

One of the federally recognized pay equity analysis methodologies was developed by Edge, a globally recognized workplace equity auditing and certification body. In partnership with Edge, Mercer has already conducted analyses for many companies in Switzerland, providing them with strategic support on the path to greater pay equality through its consulting expertise. A majority of the companies that have already completed the analysis show positive results and no demonstrable pay gaps. Nevertheless, the Mercer analysis also shows that there is potential for improvement. The equal pay analyses are just one step of many.

"We observe a clear trend in our analyses and daily client work: The more professionally the HR department is set up in the company, the smaller the observed salary gaps tend to be. This is partly due to the fact that professional HR teams have established a sound job architecture and follow clear, comprehensible and data-based processes in talent management," says Stephan Pieronczyk, Partner at Mercer Switzerland.

Concrete measures to promote wage equality between women and men

• A sound job architecture as the basis for a fair and transparent pay philosophy
• A clear job and grading structure to classify positions in the company based on their value and contribution to the company's success
• Salary bands per job profile to control wage differentials for equivalent work
• Regularly conducted compensation benchmarks to align the compensation strategy in the company with market conditions
• Derivation of concrete measures and appropriate monitoring to identify and close gaps or ensure internal consistency