How can we fix the KiwiSaver pay gap?

By Lyn Brieseman, Manager Central Consulting, Strategic Pay

Recent research has concluded that men on average have 16-20% more money invested in their KiwiSaver schemes compared to women. Implementing Pay Equality and remuneration transparency is an excellent start to tackle this issue. But there are further options that organisations can use to help women close the gap on their retirement savings.

Analysis we completed for our latest Pay Equity Landscape booklet agreed with the recent NZIER research which in turn backs up a report by Te Ara Ahunga Ora Retirement Commission (the ‘commission’) last year. NZIER’s report found that on average men had 20% more money in KiwiSaver schemes.

In our analysis of pay gaps across New Zealand organisations we review not just base salary differences but also examine what the pay gap looks like when benefits such as vehicles or KiwiSaver (as valued for pay purposes) are analysed, and when variable pay such as bonuses are thrown into the mix. Our analysis identifies pay gaps of around 17%, varying across sectors and industries.

Our analysis of benefits provided by organisations indicates there are significant gaps between the value that men received compared to women. It shows a 16% gap between the value of Kiwisaver in women’s remuneration packages compared to men’s.

The value of Kiwisaver in the remuneration package reflects the lower salaries women

receive and therefore mirrors the overall pay gap as it increases with job size. This will continue to exacerbate the income gap for women as they move into retirement with a lower level of savings and is contributing to the 20% gap in men’s vs women’s retirement savings noted by NZIER.

Lower incomes during their working lives

contribute both directly and indirectly to income inadequacy during retirement. As women

generally live longer than men this will further increase inequity at this stage of their lives as well.

Pay Gaps and Covid-19

Our 2021 review of the remuneration market identified that the pandemic set back our progress towards pay equity. This year’s report indicates we are turning the tide, gaining back some of the ground lost and the gap is slightly better than indicated by our inaugural analysis in 2020.

However, the report “Women and Retirement in a Post-Covid-19 World” by Dr Dale and Associate Professor St John identified that the Covid-19 lockdowns have hit women’s wallets harder than men’s.

Because more women are in people-facing roles such as hospitality and tourism, their jobs have been affected more than men’s in terms of both loss of jobs and therefore income and retirement savings, as well as being hired back at lower rates in these industries.

The continued pay gap, breaks in employment, and overall lower levels of income will continue to exacerbate reduced retirement savings, especially as those on lower incomes have less discretionary income and cannot afford to set aside a proportion of their current income for the future.

What can employers do to address the retirement savings gap:

  • Continue to pay KiwiSaver contributions while women are on maternity leave.
  • Offer “financial well-being” education services including more education on retirement issues, with a focus on catching women in their early careers to get them thinking about their long-term plans sooner.
  • Consider increasing their employer contribution and/or suggesting employees consider increasing their contribution rates each year, in line with pay increases, encouraging increasing retirement savings.

Unconscious Bias

One obvious way to remedy the gender gap in KiwiSaver contributions is to address pay inequity now. This is not a quick fix, however. Closing the pay gap in the longer term requires employers to ensure a broad range of human resources and employment practices are considered in light of their impact on pay equity.

Organisations can start by focusing on addressing their existing pay gaps and by being aware of unconscious bias in their recruitment and promotion practices. They can also focus on broadening their approach to developing talent and career pathways to encourage women into a broader range of roles, including the higher paying specialist and senior level roles.

Organisations can focus on the following:

  • Remuneration
    Ensure the pay levels for roles are related to the actual level of responsibility and skills required in the role, not what the market pays for similarly titled roles.
  • Flexibility
    Establish a culture that enables flexibility regardless of status, including employment, marital, family, sexual orientation, age etc.
  • Development
    Ensure all relevant development and reward options are accessible to all employees regardless of part-time or full-time status, gender, ethnicity, age, etc.
  • Mobility
    Encourage women into a broader range of occupations within your organisation and to put themselves forward for development and promotions

For further guidance around pay equity and increasing retirement savings for your employees, please get in touch with Strategic Pay.      https://www.strategicpay.co.nz |[email protected]

 

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