Gender pay gap deadline highlights need for industry wide culture change

The gender pay gap reporting deadline has come and gone. The results are in and City law firms have filed their figures. So how did the legal sector perform and what can be done to address the issues of diversity and flexible working which underpin much of the gap that still exists?

But first, the legislation which required companies to report. Despite the Equal Pay Act 1970, which made it illegal to discriminate between men and women in terms of pay and conditions, a significant gap still exists between the genders. In an attempt to remedy this, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 became effective on 6 April 2017. These regulations introduced annual gender pay gap reporting – mandatory for every company or business which has more than 250 employees.

Over 10,000 businesses met the April deadline while 1557 did not. Unsurprisingly, no law firm has yet been identified as one of the miscreants. For those organisations which did report, the data shows that the overall median pay gap is 9.7%.

Analysis of how law firms shaped up was provided by the FT, the Sunday Times and Legal Week, among others. The mean gender pay gap for law firms is 20.5% and the median 29% – notably much greater than the national average. But critically, these figures do not include equity partner earnings which were excluded by most participating firms. This is allowed under the reporting rules because partners are considered to be business owners rather than employees. Of the top 50 UK law firms, 15 included some information about partner pay, while only seven provided a combined figure for all partners and employees.

Once partners are included, the average gender pay gap rises sharply to 50.8%. Since nearly 80% of large law firm partners are men, their inclusion in the figures significantly widens the gender pay gap. Among the five magic circle firms, it stretches even further above the average: for example, the mean pay gap at Linklaters surges from 23.2% to 60% while at Clifford Chance it jumps from 20.3% to 66.3%.

The London offices of two large US law firms showed the biggest gaps of all: Latham & Watkins has a mean gender pay gap of 39.1% while the largest median gap – 68.2% – is at Kirkland & Ellis. It is worth noting that the Big Four accounting firms – KPMG, PwC, EY and Deloitte – did publish their gender pay gap figures to include partners.

Alongside their figures, nearly every law firm explained at some length that the gender pay gap is not the same as equal pay: their figures are affected by the much greater number of women in support roles since, on average, women comprise roughly 75% of the lowest-paid quartile in the top 50.

Beyond the myriad sets of figures, one thing is manifestly obvious: the gender pay gap at most UK law firms is much worse than the average UK business at every level. Remedying this disparity will take time and a sustained effort on multiple fronts since the causes are complex and varied. But one element is perhaps easier to achieve thanks to technology: genuine agile working practices. True, many law firms have bent over backwards in recent years to introduce flexible working initiatives which, like their diversity initiatives, they sell hard at every available opportunity. Yet too often in practice these fall short of genuine agile working policies that allow women to sympathetically maintain their careers when they start a family. If they were to pursue the substance behind the rhetoric, law firms would be leading the charge in ensuring women can maintain full progression in their careers while also enjoying motherhood.

This also requires greater gender equality in child care. But for more men to take up flexi-working and use their legal entitlement to parental leave necessitates a cultural shift. In the UK, the impact is still minimal. According to government estimates, only about 2% of 285,000 eligible couples each year take equal leave for childcare.

As more millennials enter the profession, law firms will need to adapt their culture to fit shifting expectations. Millennials are not enamoured of the 24/7 work culture, rather favouring collaboration and sociability. When deciding on where to build their career, they are likely to look for a flexible working culture which promotes a healthy work-life balance. This is both more sustainable in the longer term than the current traditional big-law office culture, and is much more attractive to younger lawyers who seek a career which does not cause any detriment to their personal lives.

This is confirmed by a recent report from Deloitte, which found that the millennial generation prefer people to money, collaborative working and being able to work irregular hours. Young lawyers everywhere want a better work-life balance – not an unreasonable demand since they only have one life. It’s about time that law firms started listening more carefully to what they say, and adjusting their business model to meet the need of this century, not the last one.

Published in New Law Journal – May 2018