Tech Sector: Improving the Gender Pay Gap and DE&I Challenges

Legislation introduced to parts of Asia last year is gradually leading to more transparency on gender pay gaps overall, as organisations become more aware of pay disparities and more proactive about addressing gender inequity.

Data is starting to come through under Japan’s new wage gap disclosure rules. In July last year the Act on the Promotion of Women’s Participation and Career Advancement in the Workplace came into effect, with reporting due within three months of the end of the 2023 fiscal year, which for most companies in Japan was March 31.

Companies with 301 or more employees are required to disclose the gender pay difference between male and female employees annually. While employers with 101 to 300 employees are currently exempt from supplying pay gap information, all organisations need to disclose gender balance information in their securities reports, such as the ratio of women in management positions and the percentage of male employees taking childcare leave, as well as their plans to improve gender equality in the workplace.

This means employers need to prepare for increased scrutiny on gender pay equity, and diversity, equity and inclusion (DE&I) more broadly, not just from regulators but also from shareholders, current and potential employees and customers. Organisations that don’t have relevant strategies in place could risk their reputation and may fall short of workplace health and safety (WHS) regulations.

While new legislation has elevated the issue for companies in Japan, many organisations have already started to create policy and strategies around gender equality in the region, especially those headquartered in Europe or the US that have a major footprint in Asia. Often, they are looking to deliver a more consistent employee experience across their global workforce and set the standard for DE&I in hiring, remuneration and promotion practices.

The technology industry is often at the forefront of change, including taking the lead on emerging workplace trends. Generally, pay gaps are minimised, but there are opportunities in the broader DE&I eco-system to improve equal gender participation and, in a competitive market, ensure equality in how talent is attracted and retained across different roles and levels. For example, hiring and promotion practices that promote inclusivity and reduce bias create a wider pool from which the company can draw, and then reward and leverage top skills.

At the outset, things look good for a graduate; our research shows technology organisations are effectively hiring men and women in equal numbers. From middle management through to executive level, the workforce composition is skewed. Female representation declines across higher levels in the organisation, suggesting their careers are more likely to stall compared with their male peers.

In the hardware sector this highlights relatively limited advancement opportunities for women compared with men. 50% of female employees in hardware firms are at the support level, compared to 30% of males. Half of these female employees are at S1, compared with males who are evenly spread across S1-S3 levels, suggesting males have more opportunities to progress their career.

Heading up the ladder, we see another gap in rates of promotion for women, with only 20% of females advancing beyond P3 (executive) compared to 34% of males.

At the top, across both software and hardware companies overall, the female headcount at executive and management level is significantly lower than male headcount.

These are just some of the data points highlighting the trend for women taking a narrower career path in technology compared with men and having fewer opportunities for advancement.

Potential barriers contributing to this could include:

Training is usually designed as a regular and continuous pathway, but career journeys can get sidetracked when women take time away from work to care for family. Education opportunities become limited, and instead of providing a boost, become an obstacle to moving out of support roles into engineering and technical positions, as shown in Figure 1.

A broken career pattern and ongoing care responsibilities can also limit women from participating in traditional leadership pathways, which often involve multi-day offsite programs and other activities and responsibilities that demand extended working hours. This lower representation of women in management and executive roles is also reflected in the scorecard above.

After three years of allowing remote working, some organisations mandating a return to office are facing resistance, especially from women and other groups who benefit from being able to design their working hours and location around their responsibilities. Software companies are often more open than their peers in the hardware industry when it comes to meeting these different needs at various life and employment stages. An operating model that supports flexible and remote work has potential to be a key driver for this part of the tech industry, which posts a higher mobility rate for women overall, compared with hardware firms.

These barriers can be addressed by reviewing and overhauling recruitment and career advancement frameworks and processes in the following areas:

Accurate data is vital for effective action on hiring and performance processes. Organisational data on pay gap, performance management and career advancement can all help to define gender equality goals and inform strategies to reach these goals. It can also provide essential context to pay gap reporting and messaging to inform stakeholders and manage any impact on brand and reputation.

Our research shows that within tech organisations, males tend to move up the ranks faster and are more highly rewarded for loyalty than females. Designing a formal job architecture with DE&I in mind can help combat this, providing the framework for effective and equitable talent and reward programs. When communicated correctly, job architecture can provide employees with a more transparent career path and give organisations a way to monitor, understand and remediate pay gaps.

A properly implemented performance management system has been shown to significantly improve the workplace experience for females. Examine data from performance management to identify where inconsistencies exist and apply a consistent process to target equal opportunities for advancement, secondment and other career opportunities. With legislative reform on pay transparency expected to become more widespread in Asia, organisations need to be clear on their current performance and the levers for making improvements.

Bias is often unconscious during recruitment or advancement discussions. However, bias can be reduced by conducting skills assessments that can more accurately predict a candidate’s or employee’s ability to succeed in a specific role or highlight the need for extra training. According to a meta-analysis published in the Journal of Research in Personality, there is a significant correlation between personality traits and job performance across various occupations and industries.

By taking a proactive approach to gender equality and communicating effectively on actions and outcomes, companies can help employees and candidates understand how they can compete on an equal footing for rewards and career opportunities, as well as support brand and organisational values.

Providing a clear career path within the company and demonstrating respect for different life stages and career choices are key components of offering a sustainable working life. While not everyone aspires to management roles, employees still want to be valued for their contribution and offered opportunities to grow.