Purpose of the Bill

The purpose of the Workplace Gender Equality Amendment (Closing the Gender Pay Gap) Bill 2023 (the Bill) is to amend the Workplace Gender Equality Act 2012 (the Act) to boost pay gap transparency, encourage action to close gender pay gaps within organisations and implement certain recommendations of the 2021 Review of the Workplace Gender Equality Act 2012, (the Review), which was released in March 2022.

In particular, the Bill aims to either partially or fully implement the following Review recommendations:

• ensuring publication of gender pay gaps of individual employers ‘to accelerate action to close them’
• introducing new gender equality standards to ‘bridge the “action gap”’
• support the Respect@Work report implementation ‘to prevent and address workplace sex‑based harassment and discrimination’ and
• setting up the Workplace Gender Equality Agency (WGEA) ‘for future success to support employers to drive gender equality in Australian workplaces’.[1]

The Bill also aims to improve accountability for equality between men and women in employment, by requiring CEOs of relevant employers to provide certain reports to be given to all members of their governing body[2] (for example, board of directors or committee of management).

Structure of the Bill

The Bill has one Schedule, divided into two parts. Part 1 contains the substantive amendments to the Act. Part 2 contains application and transitional provisions.

Background

To provide context to the amendments, a brief legislative history of the Act and a summary of the relevant Review recommendations and findings is provided below.

Legislative history of the Act

The Commonwealth first used the concept of affirmative action to address income inequality between men and women in the private sector with the enactment of the Affirmative Action (Equal Employment Opportunity for Women) Act 1986. This required large employers to prepare ‘programs’ designed to eliminate discrimination against women and promote equal employment opportunity for them.[3]

In response to a review (Unfinished Business: Equity for Women in Australian Workplaces), the Howard Government amended and renamed that Act the Equal Opportunity for Women in the Workplace Act 1999 (EOWW Act) to make it more ‘business friendly’ in various respects.[4]

In 2009, the Rudd Labor Government announced a review of both the EOWW Act and the Equal Opportunity for Women in the Workplace Agency (EOWWA).[5] In 2010, the Review of the Equal Opportunity for Women in the Workplace Act 1999: Consultation Report was released publicly.[6] In 2012, the Equal Opportunity for Women in the Workplace Amendment Act 2012 was passed, which renamed the EOWW Act to the Workplace Gender Equality Act 2012 and the EOWWA to the Workplace Gender Equality Agency (WGEA), as well as creating the current system of reporting obligations, both of which are discussed below.[7]

Current role of WGEA

The Act establishes the Director of Workplace Gender Equality, who manages WGEA. WGEA is the statutory agency created by the Act charged with promoting and improving equality between males and females in Australian workplaces. The main tools used by WGEA to do so are:

• the collection and analysis of annual pay data (including superannuation, bonuses and other payments) from non-public sector organisations with 100 or more employees and
• public reporting of that analysis in aggregate terms in relation to businesses with 100 or more employees against six gender equality indicators (GEIs, discussed below).[8]

The main tools used to by WGEA to collect the relevant information include:

• the Reporting Questionnaire: an online reporting questionnaire used to gather information about an employer’s policies, strategies and actions on gender equality (for example, whether an employer has a policy on flexible working arrangements)
• the Workforce Management Statistics Template: an Excel worksheet used to collect information about employee movements, including appointments, promotions, resignations and parental leave utilisation and
• the Workplace Profile: an Excel worksheet collecting information about workforce composition, salaries and remuneration.

All of the above are lodged through an online portal system operated by WGEA. Other tools include advisory, research and educational functions.[9] The GEIs and reporting functions are examined below.

Current reporting obligations imposed on certain employers

Under the Act, relevant employers (generally employers with more than 100 employees in Australia) must promote and improve gender equality in the workplace, including through the lodgement of annual reports containing information relating to the six GEIs to WGEA:

• gender composition of the workforce
• gender composition of governing bodies of relevant employers
• equal remuneration between women and men
• availability and utility of employment terms, conditions and practices relating to flexible working arrangements for employees and to working arrangements supporting employees with family or caring responsibilities
• consultation with employees on issues concerning gender equality in the workplace and
• any other matters specified in an Instrument under the Act (currently this is the prevention of, and appropriate response to, sexual harassment, harassment on the ground of sex or discrimination in the designated relevant employer’s workplace).[10]

The Workplace Gender Equality (Matters in relation to Gender Equality Indicators) Instrument 2023 provides further details in relation to the six GEIs. For example, in relation to equal remuneration between men and women a relevant employer must provide information about the employment status (for example, full-time or part-time), number of hours worked by part-time and casual employees and actual earnings.[11]

Additional minimum standards reporting obligations

The Act requires the Minister to set, by legislative instrument, minimum standards in relation to specified GEIs, specified relevant employers and specified reporting periods.[12] Currently the minimum standards apply to relevant employers with 500 or more employees and require them to have policies or strategies in place to support each of the GEIs as per the table below.[13]

Table 1: current minimum standards in relation to GEIs

Source: Workplace Gender Equality (Gender Equality Standards) Instrument 2023, clause 6.

WGEA collects information from relevant employers with over 500 employees via the Reporting Questionnaire, which is then used to determine compliance with the Act. If a relevant employer fails to meet a minimum standard (which is currently having relevant policies or strategies in place) in a reporting period and then fails to improve against that standard in a second period, this will constitute a failure to comply with the Act.[14]

Current reporting period

The relevant reporting period is from 1 April to 31 March for most private entities, and 1 January to 31 December for Commonwealth companies or entities.[15] In turn, WGEA is required to submit a report to the Minister every two years setting out, amongst other things, the progress achieved in relation to the GEIs in that period, and that report must be tabled in each House of the Parliament.[16]

Whilst the information used to produce that report is derived from the information that relevant employers are required to report to WGEA, any personal information or information relating to remuneration must not be published or used in WGEA’s reports to the Minister.[17]

Consequences for non-compliance

WGEA is empowered to review a relevant employer’s compliance with the Act by seeking further information from the employer. Where a relevant employer fails to comply with the Act, WGEA may:

• name the employer in its report/s to the Minister or
• in reports otherwise published (for example, on the Agency’s website or in a newspaper)

but otherwise, no financial penalties apply for non-compliance.[18] That said, the simplified outline of Part IVA (about the consequences of non-compliance with the Act) in section 18 indicates that a non-compliant employer may not be eligible to compete for Commonwealth contracts under the Commonwealth procurement framework and may not be eligible for Commonwealth grants or other financial assistance, although it is unclear how often this happens in practice. For example, in its 2019–20 progress report, WGEA noted:

There are known examples of a non-compliant organisation providing goods or services to the Australian Government because the contracted amount was below the related procurement threshold or the entity is not subject to the Commonwealth Procurement Rules.[19] A more detailed review of the application of the [Workplace Gender Equality Procurement Principles] would be of value, including specifying different thresholds to that of the Commonwealth Procurement Rules and exploring ways in which all Commonwealth entities could align their procurement processes to include compliance with the Act.[20]

Use of reported information by WGEA

Under section 14 of the Act, WGEA is not able to include remuneration data provided by a relevant employer in WGEA’s public data or reports. That being the case, WGEA cannot currently publish an employer’s gender pay gap at an organisation level.[21]

As a result, WGEA uses the information collected to primarily publish information, aggregated at different levels of granularity, in its public data dashboard (Data Explorer) to showcase workplace male and female equality results: overall, by industry, by company, over time and by company size. As such, it can currently be used to analyse overall, industry and individual company performance (although as noted above, company performance does not include the gender pay gap at an organisational level).

In addition, WGEA uses the information to publish a list of non-compliant employers and also to award, under a voluntary program, Employer of Choice for Gender Equality (EOCGE) citations. WGEA notes ‘the EOCGE citation is driving improved gender equality outcomes in Australian workplaces’. In contrast, as WGEA ‘has a collaborative regulatory posture’ it appears to use the list of non-compliant employers as a mechanism to identify employers who need support to ‘meet their obligations to achieve progress on gender equality’.[22]

Relevant Review recommendations and findings

The Review noted that in the views of stakeholders:

The rate of change on gender equality in workplaces is not happening fast enough. Gender gaps in pay, leadership, and representation continue to exist. Australia is also falling behind in international gender equality rankings. More action from employers and support from WGEA is required to drive real and meaningful change for diverse groups of women and men in the workforce.[23]

Relevantly to the measures contained in the Bill the Review recommended:

• publish gender pay gap information at the employer level to accelerate action to close them (Recommendation 2)
• bridge the ‘action gap’ with new gender equality standards (Recommendation 3)
• support the Respect@Work implementation to prevent and address workplace sex-based harassment and discrimination (Recommendation 5) and
• set WGEA up for future success to support employers to drive gender equality in Australian workplaces (Recommendation 9).

This Digest only examines the first three measures noted above. Readers are referred to the Explanatory Memorandum in relation to the final measure.

Committee consideration

Senate Finance and Public Administration Legislation Committee

The Bill has been referred to the Senate Finance and Public Administration Legislation Committee for inquiry and report by 16 March 2023. Details of the inquiry are available on the inquiry homepage.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing the Senate Standing Committee for the Scrutiny of Bills had not considered the Bill.

Policy position of non-government parties/independents

At the time of writing, it did not appear that the Opposition had commented directly on the measures contained in the Bill. However, the previous Government had stated that it was:

focused on working towards implementation of its ten recommendations, noting that the report requires further consultation with business on some aspects.[24]

At the time of writing, it did not appear that the Greens had commented directly on the measures contained in the Bill. However, the Greens have previously indicated support for giving WGEA more powers to:

tackle gender inequality in the workplace, including preventing companies who are not working to reduce their pay gap from getting government contracts, and requiring organisations to report on the volume of sexual harassment complaints (including actions taken) and use non-disclosure agreements.[25]

Independent MP Zoe Daniel has indicated support for the Bill.[26] At the time of writing the position of other non-government parties and independents in relation to the measures contained in the Bill could not be determined.

Position of major interest groups

At the time of writing, the position of most major interest groups in relation to the measures contained in the Bill could not be determined. However, pages 60 to 65 of the Regulatory Impact Statement (RIS), contained in the Explanatory Memorandum, provide a summary of the consultation process undertaken in relation to the Bill. In summary, the RIS reports that stakeholders involved in those consultation processes were supportive of the publication of the organisational gender pay gap information. However, in relation to:

• measures to close the ‘action gap’: ‘Stakeholders provided mixed feedback in response to whether employers would develop measurable and genuine targets; some expressed interest in developing more specific and useful targets for their organisation whilst others expressed concern about the burden of this task’ and
• in relation to reporting of employee remuneration: there was concern ‘about the increased burden’ required to report remuneration in relation to both lower level and management staff, but a majority also indicted ‘that they were well placed to report on manager categories at an entity level’.[27]

Stakeholders representing businesses that operate as partnerships expressed a number of concerns about the ability for partnership structures to report in the same way as employees currently do ‘due to the large variety of partnership structures and differences in the roles of partners and employees’ and in particular noted ‘the most value from WGEA’s data analysis would be drawn from a like-for-like comparison’ but ‘questioned how a like-for-like comparison could be achieved’. Further, the RIS notes that in relation to partnerships, stakeholders expressed the view that:

One complexity that was raised was that partners do not receive a salary in the same way employees do, and take on significantly more personal financial risk than employees do. Their remuneration is drawn from a number of different sources and is often dependant on the size and success of their practice. Additionally, take home profits can be linked to economic trends and therefore year on year trends may not be demonstrative of actual gender pay gaps.[28]

Financial implications

The Explanatory Memorandum to the Bill states there ‘are no financial impacts associated with this Bill’.[29]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[30]

Parliamentary Joint Committee on Human Rights

At the time of writing the Parliamentary Joint Committee on Human Rights had not considered the Bill.

Key issues and provisions

How is income inequality between men and women measured?

The concepts of pay equality and a gender pay gap, whilst related to each other, differ. Pay equality is where female and male employees are paid equally for work of equal or comparable value. A gender pay gap is the ‘gap’ between women’s and men’s overall earnings in the paid workforce.

A gender pay gap is often based on comparisons of aggregate weekly earnings, rather than comparing the amount paid to men and women for work of equal or comparable value (that is, pay equality). As noted by WGEA:

The gender pay gap is the difference between women’s and men’s pay. The pay gap can be calculated based on the average (or mean) difference in pay, or the median difference in pay, and expressed as a percentage of men’s pay … Generally, the calculation of national gender pay gaps are based on national average earnings and do not reflect ‘like-for-like’ pay gaps, where employees working in the same or comparable roles are paid differently. [emphasis added]

In this regard, the International Labour Organization (ILO) has noted that ‘raw gender pay gap’ measures based on aggregate weekly earnings are inadequate for comparing differences and that hourly wages provide a more realistic estimate of the gap, as they assist in ‘disentangling working time from earnings’ (p. 22).

In simple terms this means that at an employer level, pay equality between men and women can co-exist with an overall gender pay gap. For example, if a private, family-owned business with over 100 employees paid all its male and female employees (other than senior managers) the same salaries on an hourly basis for the same types of work, but the owner of the business only employed close male relatives as senior managers, it would:

• have pay equality (as males and females are paid the same for comparable work) but
• would have a gender pay gap (due to the higher salaries paid to his male relatives that made up the senior team).

Associate Professor of Finance, Mark Humphery-Jenner, illustrated this point in an article about the Bill and how the gender pay gap is calculated:

Consider a company with 101 employees, one being the founder and chief executive. The other 100 employees, split 50/50 between men and women, are all paid the same salary.

But suppose the chief executive pays himself ten times as much as the other employees. This isn’t ridiculous; the average CEO of a listed company in Australia is paid 132 times the average income. This creates a 17.6% gender pay gap.

Now consider a similar company, run by a “tech bro” who doesn’t draw a salary but does pay every woman 2% less than every man. The aggregate numbers will show no gender pay gap.

In the first case, where there’s no explicit gender discrimination, aggregate numbers can be misread as indicating there is. In the second case, actual gender discrimination is obscured.[35]

The Explanatory Memorandum notes that the Bill ‘expressly addresses’ the issue of ‘equal remuneration for work of equal value’ (that is, pay equity) by requiring ‘the publication of the employer gender pay gap’ (that is, the employer-level gender pay gap) which, it is argued, ‘will provide greater transparency, leading to clearer industry requirements on equal remuneration for work of equal value’.[36]

Publishing gender pay gap information at the employer level

As noted above, currently WGEA cannot currently publish information about the gender pay gap of individual employers, and so instead publishes aggregated gender pay gap information at a national and industry level.[37]

What the Review recommended

The Review recommended that the Act be amended so that WGEA can publish gender pay gap information at an employer level:

• as an overall figure and
• by quartile to encourage change within organisations

whilst ensuring that individual employee pay information is not published.[38]

The Review argued that this would ‘accelerate action to close them’.[39]

Quartile reporting

The recommendation by the Review in relation to quartile reporting appears to be an indirect attempt to deal with the potential differences between pay equality and the existence of a gender pay gap with employers. The Review notes:

Reporting across quartiles shows the spread of female and male earners across an organisation. It also shows if one gender is over or under-represented in a particular quartile. This helps employers assess what is happening and take action as needed.[40]

The Regulatory Impact Statement, contained in the Explanatory Memorandum, elaborates on how this will operate:

WGEA will publish employer level gender pay gaps and workforce composition by quartiles.

This means providing data on the full-time equivalent gender pay gap for the organisation’s highest paid quarter, upper middle quarter, lower middle quarter, and lowest paid quarter, along with the gender composition of each pay quartile. The gender composition will state the proportion of women and men in each quartile. The average remuneration of women and men in each quartile will also be published.[41]

The Review provided an example of how a quartile employer gender pay gap report may be presented, set out below.

Figure 1: Sample Employer Quartile Gender Pay Gap Report

Source: The Review, 35.

Limitations of quartile reporting

In the example above where an employer paid all its male and female employees the same salaries on an hourly basis for the same types of work, but only employed male relatives of the business owner as senior managers, the recommended quartile reporting would likely show that the employer had both pay equality in certain quartiles and a gender pay gap, due to the lack of female managers in the highest quartile. In contrast, if quartile reporting were not adopted, only a gender pay gap would be reported and important context related to pay equality would be absent in WGEA reports.

Such a measure therefore may enable WGEA, employees and employers to better identify the existence (or absence) of both pay equality and any gender pay gap in individual employers.

What the Bill does

Division 1 of Part 1 of the Bill directly implements the ability of WGEA to publish gender pay gap information about employers whilst ensuring that individual employee pay information is not published.

Proposed section 15A requires WGEA to publish aggregate information for each relevant employer for each reporting period showing the employer’s gender pay gap and progress in achieving gender equality in relation to remuneration for the employer’s workforce.

Whilst WGEA will be able to use individual remuneration information provided by employers to produce those reports,[42] proposed subsection 15A(4) prohibits WGEA from publishing information that directly or indirectly discloses personal information or information about the remuneration paid to a specific individual.[43]

Whilst the Bill ensures that, as is currently the case under the Act, no individual remuneration will be published, the RIS noted that ‘privacy concerns remain for employees that are employed by smaller organisations’ because ‘individual salaries may be able to be deduced’.[44] However, the RIS notes:

[privacy] concerns are assuaged by the methodology used by WGEA. The minimum employment sized organisation in-scope and the quartile breakdown of the data implies there will always be at least 25 individuals in each quartile, on this basis it would not be possible for individual salaries to be identified.[45]

Bridging the ‘action gap’ with new gender equality standards

Currently the Act requires that relevant employers provide WGEA with information and data relating to the six GEIs noted earlier.[46] Where the minimum standards apply (that is, where the relevant employer has more than 500 employees) a failure to meet the minimum standard in relation to a GEI in a reporting period, followed by a failure to improve against that standard (which is currently having a required policy or strategy in place) in a later period, can lead to a finding of non-compliance under section 19C of the Act. However, the Act does not directly impose a requirement for employers to continue to improve beyond having the relevant policies and strategies set out in the minimum standards.

What the Review recommended

The Review noted that currently under the Act, employers are compliant simply by having relevant policies in place that meet the base standards and are reporting the required data. There is no ‘need for employers to take action and show progress on gender equality’.[47] That is, currently employers can be compliant with the Act even where they are not taking actions to improve gender equality by addressing various gender inequality indicators, a situation the Review described as an ‘action gap’.[48] The Review recommended that to close the ‘action gap’:

employers should have to take action to improve gender equality in their workplaces in order to comply with WGEA’s reporting requirements.[49]

In this regard, the Review noted:

recent comparative research on gender pay gap reporting recommended that action plans are essential for change, finding that ‘employers should be mandated to create time-bound targets to redress pay gaps, setting out clear and measurable goals.’[50]

As a result, recommendation 3.1 of the Review was that the ‘action gap’ be addressed by renaming the minimum standards as gender equality standards (GESs) and:

• adding a new minimum standard to require relevant employers with 500 or more employees to commit to, achieve and report to WGEA on measurable genuine targets to improve gender equality in their workplace against three of the six GEIs
• strengthening the existing minimum standards to require relevant employers with 500 or more employees to have policies or strategies that cover all six GEIs (not just one policy or strategy for one gender equality indicator in the current minimum standards).[51]

The Review provided the following example of how the recommendation would work:

Targets could be set against data already provided to WGEA. For example, a target that could be set against data already reported to WGEA by employers could be ‘to have a gender balanced board with at least 40 per cent women.’ This could be a target against gender equality indicator 2 (gender composition of governing bodies of relevant employers).[52]

Recommendation 3.2 of the Review was to strength ‘accountability of relevant employers to take action’ by requiring relevant employers to:

1. report the date employers share with their employees, shareholders and/or members the gender equality reports that the employers provided to WGEA and
2. provide the Executive Summary report and Industry Benchmark report from WGEA to employers to their Board/Governing Body.[53]

What the Bill does

The items in Division 2 and Division 3 partially implement those recommendations.

Division 2 of the Bill renames the current minimum standards as gender equality standards (GESs) and changes all references to ‘minimum standards’ accordingly. The items in Division 2 also make amendments to modernise the language used in the Act (for example, changing references to ‘the Minister will’ to ‘the Minister must’).[54] The Explanatory Memorandum argues that:

These amendments fulfil Recommendation 3.1c of the Review, which called for the renaming [of ‘minimum standards’] to ‘gender equality standards’ to reflect the increased ambition of the broader recommendations of the Review to progress rapid action towards gender equality.[55]

In relation to requiring employers with 500 or more employees to have policies or strategies that cover all six GEIs (not just for one GEI as required in the current minimum standards), the Workplace Gender Equality (Gender Equality Standards) Instrument 2023 implemented that recommendation by requiring that such employers ‘must have in place policies or strategies to support each gender equality indicator’.[56] Information on those changes can be found here. However, the Bill does not directly require employers to report to WGEA on measurable genuine targets to improve gender equality in their workplace against three of the six GEIs, as recommended by the Review.

The items in Division 3 implement recommendation 3.2(b) by requiring relevant employers to provide certain reports provided by WGEA (an executive summary report and an industry benchmark report) to the relevant employer’s governing body.[57] The Bill also provides that failure to do so, without reasonable excuse, will be taken as non-compliance with the Act.[58]

Preventing and addressing workplace sex-based harassment and discrimination

Currently the Act includes arrangements for dealing with sex‑based harassment of employees in the workplace as part of the definition of employment matters.[59] In turn, the current legislative instruments specify that, separately to the definition of employment matters, the GEIs require relevant employers to provide information on sex-based harassment and discrimination in the workplace as part of existing reporting obligations.[60]

What the Review recommended

Whilst providing information on sex-based harassment and discrimination is already required under a GEI in the relevant legislative instrument, recommendation 5 of the Review was to amend the Act to include sex-based harassment or discrimination consistent with the Sex Discrimination Act 1984 (SDA) as a GEI.[61]

What the Bill does

The items in Division 4 give effect to that recommendation by:

• amending the GEIs to refer to sexual harassment, harassment on the ground of sex or discrimination against employees in the workplace, and in turn defines harass on the ground of sex and sexually harass by reference to the SDA[62] and
• amending the definition of employment matters to specifically include ‘sexual harassment, or harassment on the ground of sex, of employees in the workplace, or discrimination against employees in the workplace.’[63]

Concluding comments

Whilst the Bill has been widely consulted on and informed by a substantial body of evidence, concerns remain that due to how WGEA calculates the existence or absence of a gender pay gap, the Bill may operate in a manner that will result in both pay equity and the existence (or absence) of genuine gender pay gaps in relation to employers being obscured or mis-reported. This would undermine the intended policy outcome, namely reducing the disparity in remuneration paid to male and female employees both on a like-for-like basis, but also on a systemic basis.

Further, concerns remain regarding privacy for employees that are employed by smaller organisations, on the basis that the 100-employee threshold and use of quartile reporting of gender pay gaps at an employer level may allow the salaries of individual employees to be deduced.