Breaking through the gender pay gap: Why skills-based hiring is the way forward

According to the UK’s Office of National Statistics, the gender pay gap in the UK has been declining slowly over time; in 2020, the gap among full-time employees fell to 7.4%, from 9.0% in 2019.

This fact that the gap is falling is positive news, no doubt, but despite its decline, the disparity is still there and it remains a problem in businesses across the UK, as well as globally.

Research from the World Economic Forum estimates that the gender pay gap between men and women will take approximately 202 years to close. Wow! Read that again — that’s more than double the average human lifespan, meaning that we’re looking at a problem that could take several generations to resolve.

This means that we’ve got a lot of work to do. At PitchMe, we take a data-informed approach to the issue of gender wage disparities as we advocate for hiring methods that can help close this gap.

We believe that anonymised, skills-based hiring is a key way that employers can help overcome and eliminate this disparity more efficiently.

But before we explain our vision, let’s take a closer look at changing employment trends, what they mean, and how we can take a data-conscious approach to solving the problem of gender wage discrepancies and the gender wage gap.

Even startups aren’t immune from gender wage disparities

Many people mistakenly believe that large, established companies are those likely to perpetuate gender pay gaps, whereas startups take a more modern and conscious approach to wages. As much as we would like this to be true, the data tells us otherwise.

On average, women at tech startups are still paid 3% less than a man in an equivalent position. That’s certainly a problem — particularly for a high-growth industry that plays a large role in propping up the economy.

As the UK emerges from the Covid pandemic, startups and scaleups are helping drive the UK’s economy forward. Having proven their resilience, the 2020 Scale Up Index finds that for 80% of UK scaleups, the economic impact of the pandemic has been moderate or even positive.

Even more promisingly, 14% of UK scaleups have created job opportunities throughout the pandemic, with more breaking through the £10m+ turnover than ever before. The number of female-founded scaleups has also doubled in the past year, yet only 10% of scaleup founders are female.

While broadly this outlook is good, if we look more closely, we see that not everyone is experiencing the same economic benefits. Namely, the pay disparity between men and women continues to persist, even though 52% of scaleups have at least one female C-Suite member.

What does the data show?

While much of the problem is institutional, there is also a social challenge around the issue of gender wage gap disparity, in the form of gendered salary expectations.

At PitchMe, our internal data reveals that salary expectations across Europe and the UK differ based on the compensation amounts requested by women, as compared to those requested by men.

Job application data aggregated across the UK and Europe show that women are likely to ask for a lower amount of compensation for the same role than men:

Let’s see how salary expectations for some other roles commonly hired within the tech sector compare:

While most salaries are based around a specific range, the data tells us that a male candidate is more likely to ask for the higher end of the range, whereas a female candidate for the lower end.

The data lays bare the salary discrepancies based on what candidates are conditioned to ask for in the job application process; let alone what they are eventually paid by the company.

So, by asking for less, women are short-changed, losing thousands of pounds of earnings potential. This, of course, benefits the employer, while exacerbating the societal and economic problem of the gender pay gap.

Solutions at the policy level

Various governments around the world have employed different policies to try to bridge the gender wage gap. Following a 2019 report showing that nearly eight out of 10 British companies pay men more than women, the UK is an example of where the government is looking to tackle the issue of gender pay disparity head-on.

The Equality and Human Rights Commission (EHRC) has instituted a mandatory reporting requirement for companies in the UK to report the wages they pay. The gender pay gap reporting deadline is coming up this April, and it aims to hold firms accountable to scrutiny around the issue of equal pay for equal work.

This is certainly a step in the right direction and while such institutional measures are absolutely necessary, they can’t be the only solution. The private sector also has a duty to act responsibly to help mitigate this issue.

Corporate social responsibility in hiring

As our data shows above, women will often be more conservative than men in their salary expectations. There are contributing social factors involved in why this occurs, which is why institutions need to step up to help correct the discrepancies by ensuring that all candidates are paid fairly, regardless of gender (or other identifying factors such as nationality, race, or age).

But as business becomes broadly more conscious and sustainable, employers increasingly have a social duty to help bridge the gap.

How can employers do their utmost to ensure that they don’t fall into an unconscious bias trap of propping up gender pay wage discrepancies?

The answer is through skills-based hiring. Here’s how it works and the important role it can play in leveling the playing field.

Skills-based hiring and the gender pay gap

A key way that employers can help is by adjusting how they hire to take gender out of the equation completely. This is done by anonymising the hiring process altogether.

When the hiring process is anonymous, only a candidate’s skills and work experience are presented, meaning that the employer gets a full picture of the candidate based on the strength of their skills alone, without any other identifying factors that could cause unconscious bias and contribute to pay disparities.

This is known as skills-based hiring. It means that a candidate is hired based on their skills alone, as opposed to other identifying factors such as where they went to school, or whether they share a network with the hiring manager… or more overt biases, such as gender, race, nationality, ethnicity or origin (since we know that, unconsciously, people are more likely to hire those who are similar to themselves).

Cassidy Leventhal, Vice President at investment firm University Ventures explains: “Skills-based hiring, when done right, dramatically reduces hiring inequality by focusing directly on competencies instead of on bad proxies that disadvantage non-traditional candidates, like degrees, ‘prestigious’ experiences, and shared backgrounds.”

The benefit of skills-based hiring, explains Leventhal, “directly impacts pay equality, as it matches workers to jobs based on fit rather than perceptions — either of managers or of candidates themselves!”

By removing gender and relying on gender-blind applications, employers can also ensure that the salary amount offered to the candidate is based on that candidate’s particular skills — not their asking amount.

So, for example, if the salary range for a role is between £40–50,000, the employer should avoid asking the candidate for their desired salary amount, because we know that this is a biased question. Instead, the employer should carefully consider all of the candidate’s anonymised skills and work experience to arrive at a fair salary offer.

Removing unconscious bias through anonymous, skills-based hiring processes

Anonymising the hiring process shifts the focus onto skills, avoiding the pitfalls of unconscious bias in the hiring process.

The gender pay gap is just one manifestation of how a skills-based, anonymous hiring process can have a positive impact on solving complex societal problems.

Looking at the bigger picture, there are many benefits to be gained by anonymising the hiring process. It means that, as a company, you’re making a commitment to work against unconscious biases by ensuring that all other identifying factors, including race, national origin, ethnicity, and age don’t factor into the ultimate decision to hire.

Overcoming unconscious bias can be difficult and it’s something many companies are grappling with now. It unfortunately comes up in many areas within the professional world.

However, we have the opportunity to defeat it by making a commitment to an anonymised, skills-based hiring process, which is intrinsically fair and leads to better outcomes in all areas.

To find out how your company can improve its outcomes when it comes to equality and diversity, get in touch with us at PitchMe. Our team is dedicated to helping your business develop an effective, intuitive and equitable hiring process. With our data-conscious approach, we’ll show you how.

Originally published at https://blog.pitchme.co on March 28, 2021.