Equal pay in retail: Counting the costs and reaping the rewards

Bridging the pay divide: Why retailers must act now

The retail sector, being one of the largest employers globally, grapples with the persistent issue of the gender pay gap. In the EU, women earn on average 13% less than men, prompting companies to act if their gender pay gap exceeds 5%.

The principle of equal pay is established in Article 157 of the Treaty on the Functioning of the European Union (TFEU). However, despite increased awareness and regulatory measures such as prohibit pay secrecy, disparities in wages between male and female employees remain a significant concern. More retailers are embracing the goal to decrease pay gap between men and women and fight sexism in the retail industry.

The European Commission has identified several primary causes of gender inequality in the workplace, including sectoral segregation, unequal distribution of paid and unpaid labor, the presence of a glass ceiling, and instances of pay discrimination. Considering the multifaceted nature of this complex issue, Cognizant is dedicated to developing strategies aimed at bridging this gap using real-time data and technology to ensure fairness and equality within the workplace.

Addressing the gender pay gap serves as a strategic means for organizations to bolster their standing as desirable employers, while overlooking this issue can result in legal implications and reputational damage. In 2018, Tesco faced an equal pay lawsuit, where female employees claimed lower compensation than male counterparts, prompting discussions on equitable compensation. Similarly, in 2020, Walmart faced a lawsuit over gender-based pay discrimination, highlighting systemic issues and sparking discussions on regulatory interventions.

The gender pay gap in retail: Unveiling causes and consequences

The gender pay gap refers to the difference in average earnings between men and women. In retail, this gap is attributed to several factors:

• Occupational segregation: Men and women often occupy different roles within the retail sector. Men are more likely to hold higher-paying managerial positions, while women are frequently found in lower-paying, customer-facing roles.
• Part-time work: A significant number of women in retail work part-time, often due to caregiving responsibilities. Part-time roles typically offer lower wages and fewer advancement opportunities.
• Unconscious bias: Hiring, promotion, and pay raise decisions can be influenced by unconscious gender biases, leading to disparities in pay.

A 2020 study by Glassdoor found that in the UK, the gender pay gap in retail stood at approximately 9%, with women earning less than men even when performing similar roles. Similarly, in the US, data from the Bureau of Labor Statistics indicated that female retail workers earned about 83% of what their male counterparts made.

Closing the gap: strategic approaches to gender pay equity in retail

Addressing the gender pay gap in retail requires a multi-pronged approach, involving policy changes, cultural shifts, technology support and practical interventions.

• Transparent pay structures: Retailers must implement clear and transparent pay structures. Regular audits and publicly available pay reports ensure fairness and accountability. For example, the UK’s mandatory gender pay gap reporting has pressured companies to examine and address disparities.
• Equal opportunities for advancement: Providing equal opportunities for career advancement is crucial. Mentorship programs, leadership training, and bias-free promotion processes will help women ascend to higher-paying roles. For instance, Target has implemented leadership development programs aimed at promoting diversity and inclusion within their management ranks.
• Flexible working conditions: Offering flexible working conditions can help support employees with caregiving responsibilities, many of whom are women. Flexible hours, remote working options, and job-sharing arrangements can make higher-paying roles more accessible. Companies like IKEA have been pioneers in offering flexible working arrangements to their employees, fostering a more inclusive work environment.
• Unconscious bias training: Training programs to address unconscious bias will help mitigate discriminatory practices in hiring, promotion, and pay decisions. Retailers like Starbucks have introduced comprehensive bias training for all employees, aiming to create a more equitable workplace culture. Same approach was used by Nike Inc, where employees are required to complete mandatory Unconscious Bias training twice a year.
• Union representation and collective bargaining: Strong union representation plays a pivotal role in advocating for fair pay and working conditions. Unions negotiate on behalf of workers to ensure that pay practices are equitable and transparent. In Germany, the strong presence of retail unions has been instrumental in promoting fair wages and gender equality within the sector.
• Regular monitoring and reporting through technology: Continuous monitoring and reporting on gender pay disparities help track progress and identify areas needing improvement. Retailers should establish key performance indicators (KPIs) related to gender pay equity and regularly publish their progress. As an example, companies will have once source of information, where all relevant information about gender pay gap can be extracted from, how many men and women are in leadership, how long they have been in these positions, salary ranges, last pay increases, etc.

Breaking barriers: The multifaceted benefits of addressing gender pay disparities

The gender pay gap in retail is a complex issue requiring concerted efforts from all stakeholders. By implementing transparent pay structures, ensuring equal opportunities for advancement, offering flexible working conditions, addressing unconscious bias, supporting union representation, and regularly monitoring progress, retailers can make significant strides towards closing the gender pay gap. Real-life examples from industry leaders illustrate that while challenges remain, effective strategies can lead to meaningful progress in achieving pay equity.  

Technology solutions for fair compensation in retail

Blockchain technology ensures fair pay practices through smart contracts, which automatically execute and enforce agreed-upon conditions. For example, a blockchain-based system could ensure that pay raises or bonuses are distributed fairly and transparently, based on predefined criteria, reducing the potential for discriminatory practices. Bias in hiring practices often contributes to the gender pay gap. AI and machine learning algorithms can help mitigate this by analyzing job descriptions, resumes, and interview processes to identify and reduce gendered language and biases. These technologies can promote more equitable hiring practices, ensuring that women have an equal chance of securing higher-paying roles from the outset.

Retailers have increasingly turned to technology solutions to address the gender pay gap, leveraging data analytics, machine learning, and other tools to ensure fair compensation practices. Starbucks used a combination of technology and third-party analysis to conduct a thorough pay equity analysis. They employed advanced analytics tools to compare compensation data and ensure consistency and fairness in pay across gender. In 2018, Starbucks announced that they had reached 100% pay equity in the United States. They have since expanded this commitment globally and continue to use technology to monitor and maintain pay equity.

IKEA implemented a data-driven approach to assess and rectify gender pay gaps. They used a centralized HR data system to collect, analyze, and act on compensation data across their global operations. IKEA has made significant strides in reducing the gender pay gap, with ongoing efforts to ensure equitable pay. Their transparency in reporting and proactive use of data analytics has set a benchmark in the retail industry.

Although not a traditional retailer, Salesforce employs cloud-based analytics to ensure pay equity, making adjustments as needed and reporting annually on their progress.

Partnering for equity: How Cognizant supports retailers in achieving fair pay

In partnership with Cognizant, companies leverage our consulting approach, align critical metrics and responsibilities across functions, enabling collaborative steering of the business. Our data-driven capabilities enable informed decision-making to enhance business outcomes and drive sustainable growth.

We understand the challenges of addressing the gender pay gap and are here to support you in making informed decisions and achieving your goals. We focus on process integration, ensuring systemic alignment between strategic plans and operational execution while supporting business and cultural needs. Navigate the complexities of gender pay gap, optimize your decision-making processes, and realize your strategic objectives with confidence.

Contributor:
Stefano Montanari, Head of Retail and Consumer Goods Consulting