The 5th of April is now firmly etched into the calendars of law firms across the UK. The day marks the deadline in which UK firms must report specific figures about their gender pay gap. The dust has now settled on the second round of reporting and firms can take a sigh of relief – for another year at least. Although limited solely to the UK, the figures provide a glimpse of how some of the biggest global firms are positioned in terms of their ongoing approach to gender diversity.

Of course, the obligation is not just limited to law firms but encapsulates any UK business of 250 employees or more. Last year, was the first time in which organisations were required to disclose their pay gap and although a level of imbalance was expected, the sheer magnitude in the gap took most by surprise. The legal sector was not immune. The industry also attracted added criticism over its lack of transparency with the majority of firms opting against including partners in their reporting. However, this year marked a change with 45 of the UK Top 50 providing this figure and in doing so, offering rare insight into the wide disparity in pay amongst the UK's most senior and well-paid lawyers.

In this analysis, it is argued that while a clear a gap in partner pay exists, firms should not lose sight for progress to be made in a number of aspects of gender diversity, not just in equalising remuneration. Also examined is firm performance at an employee-level which although at first glance appears to make for little progress, actually is not a fair reflection of where firms are currently at due to the inherent limitations of the reporting requirements.

Partner overview

Forty-five of the UK's top 50 firms opted to disclose their partner pay gap this year. This followed criticism last year from the UK Government's Business, Energy and Industrial Strategy Committee that firms had something to hide by not disclosing the figure. It also formed part of industry-wide efforts to create a transparent and standardised approach around the issue of gender pay.  Across the 45 firms, the average partner pay gap amounted to 16.8 percent with a median of 21.1 percent (based on figures for the 12 months to the end of April, 2018). Only three firms (Bird & Bird, Hogan Lovells and Watson Farley & Williams) boasted a pay gap in favour of all female partners demonstrating the long road ahead for the legal industry in equalizing pay at partner-level.

However, any form of purposeful shift is unlikely to take place any time soon given the deep-rooted male-centric partnerships that have become customary within the profession. The primary mechanism firms should be using to narrow the partner pay gap is to deal with the issue at source by increasing the proportion of female lawyers within their partnerships. Even here firms continue to perform badly with females consistently underrepresented at each promotions round despite ongoing pledges amongst firms to reverse this trend. Firms often speak about 'targets' and 'aims' for the future, but these do not deal with the issue of improving female representation in the now. The dominance of men within the upper-echelons of firms continues to be a cause of concern which needs to be addressed sooner rather than later or firms risk missing out on female leaders of the future.

Until women feature more predominantly at partner-level narrowing the pay gap to any form of meaningful level is set for a prolonged and arduous battle. However, it's important not to place to greater emphasis on remuneration as it has the constraint of assuming that the size of a pay-packet is the be-all and end-all for not only the entirety of female partners, but female lawyers across the board. This simply isn't the case. By focusing too readily on remuneration as the underlying cause of gender inequality distracts from the more probable causes stemming from lack of opportunities and initiatives. While a firm can look to make as much inroad as it wants in terms of equalizing pay this means little to those women which place greater emphasis upon a firm's diversity offerings including agile-working, career breaks and effective return to work programmes.

This stresses the importance for progress to be made in a number of aspects of gender diversity, not just in remuneration. The need for meaningful progress cannot be underestimated. A firm's slow rate progress simply may not be good enough for some female partners who might decide to up sticks and move to those firms seen to be making greater inroads. Furthermore, the importance of progress can be demonstrated by the emphasis placed on diversity by clients. Diversity is now integral to General Counsel (GC) selection criteria with gender forming the cornerstone of this. A firm that can demonstrate progress indicates to a GC that the firm is responsive, forward-looking and progressive.

Employee overview

As per the previous year, all UK top 50 firms were once again required to disclosure their employee gender pay gap. This excludes partners but incorporates all legal staff including business services and non-lawyer partners. Across the UK top 50, the average 2018 pay gap for employees stood at 19.5 per cent, down by just 0.2 per cent from the previous year, while the median pay gap dropped by 0.4 per cent to 27.1 per cent. At first glance, you would be forgiven in thinking that these figures look uninspiring. It seems that firms have not used the lessons learnt from the first round of reporting which highlighted such an obvious disparity to at least make some sort of progress towards narrowing the gap. But is this actually a fair reflection of the lack of progress or is it alternatively a reflection of the inherent limitations of the reporting system itself?

The reasons given by firms for the wide gender pay gap is the high female occupation of secretarial and other support roles, which also tend to be the lower paid roles in firms. As a result, a firm's employee pay gap is always likely to favour men. This suggests that the reporting requirements simply do not go far enough in determining the true extent of disparity. Take the performance of US firms for example. An initial analysis would place these firms amongst the worst offenders at the employee-level. But how can a meaningful conclusion be drawn from an average figure that combines the salary of a female secretary to that of a male associate on an eye-watering City salary? Even the breakdown of employee pay quartiles should be viewed with scepticism as we still don't know the rates of pay for comparable jobs or different patterns of working. A much more accurate picture can be made when like-for-like is compared.

In other words, the gender pay gap reporting could be telling us so much more. This is particularly in the case of non-lawyer partners. From their perspective, the primary reason for wanting to examine a firm's gender pay gap performance is for career planning. However, to form an opinion based on the current reporting requirements would be misguided. What's required is for more firms to breakdown their employee pay gap into specific job roles. This could include directly comparing the disparity in pay between female and male associates. Although some firms provide this figure, take-up across the board is generally negligible. But even this may still not be enough for some. Ideally, firms should be going one step further and providing a breakdown of their gender pay at each step of the career ladder. This would involve disclosing the disparity in pay at different levels of PQE which would create a far higher-level of transparency in which informed decisions can be made.

Identifying the cause of inequality

The legal industry continues in its struggle to shake off its macho image which has forever blighted the profession and acted as an impediment to progression. Of course, the legal industry is far from alone, but it is nonetheless guilty of consistently demonstrating an unwillingness to innovate and more with the times which has left other industries trailing in its wake. These foundations were set in stone long ago but it is the profession's inability to alter these foundations which has led to the issue of gender inequality now coming to a head.

The gender pay gap is only one mechanism that has been used to expose this. However, the reporting requirements in addition to possessing the limitations discussed above, also suffer from the insurmountable obstacle of not identifying the underlying cause of inequality. The numbers don't tell us whether the inequality is caused by discrimination or whether it has its origins in the differing choices made by men and women. Only firms can truly grapple with this and only firms can act upon the root cause to remedy the situation.

U.S. firms have faced similar struggles.  In 2018, ALM Legal Intelligence surveyed Am Law 200 partners, and found that on average, with all other metrics relatively equal, female partners earned 68 percent of what their male counterparts did, as shown in the chart above.  While programs like The Mansfield Rule are helping to address gender disparities in firms, firms and attorneys can see for themselves that there are still sizable differences in compensation.

Of course, not all firms are the same regardless of their geographic location. Many have made promising inroads and demonstrated a willingness to change. These are the firms currently ahead of the curve. However, firms should not be developing programmes and initiatives for the sake of it. A programme means nothing if it doesn't generate positive outcomes. It's also important for firms to demonstrate clarity. A lack of lucidity on what a firm's position on gender diversity actually is simply isn't good enough as part of a modern-day legal profession if the firm wants to be an attractive proposition for female lawyers.

Across the legal industry as a whole, there is a long road ahead requiring unity and acceptable across the profession in order for meaningful progress to be made. Ultimately it's easy for firms to talk a good game but a lack of purposeful action in improving gender diversity will eventually catch up with them. It's these firms that risk being alienated by clients and losing out on female talent.