Understanding Adjusted and Unadjusted Pay Gaps

What’s changed?

We’re improving the way we think about pay gaps.

Breaking down your overall pay gap into two gaps – the unadjusted gap and the adjusted gap – allows you to better understand the root causes of pay disparity.

Some pay disparity is fair and justifiable – for example, it is fair that someone with 10 years experience is paid more than someone with 2 years experience. Looking at adjusted gaps enables you to see what your numbers look like when you remove the factors which might justify pay differences.

In essence, you are now able to look at your unadjusted pay gap – the same pay gap that you were seeing in Gapsquare before – and your adjusted pay gap – which helps you  look at unexplainable differences in pay.

This provides you with a better understanding of why pay gaps occur and which areas you need to investigate further.

NB: To access these features you will have to finalise your dataset. Learn how to do this here >

Learn more with our video demos

Updated Dashboard & Unadjusted Pay Gap
The Adjusted Pay Gap

Defining and Understanding

Unadjusted “Raw” Pay Gaps

The unadjusted pay gap is the difference between the average pay of a non-baseline group to the average pay of the baseline group. This gives an overall position on equity but is often related to structural issues within the organisation, rather than individual cases of discrimination.

In this example, the mean average hourly rate of a female in the organisation is 10 per hour. The mean average hourly rate of a male in the organisation is 20 per hour.

The unadjusted pay gap i.e. the difference between the two, is 10 per hour.

Explaining Unadjusted “Raw” Pay Gaps 

The unadjusted pay gap can be broken down further. It is made of an explained and an unexplained proportion.

The explained proportion accounts for factors which may impact the pay of an individual, like tenure, job level and education. These can be called pay determining characteristics.

The unexplained proportion is what is left, and should be investigated further. This unexplained proportion is also called the adjusted gap, as it is the gap which accounts for pay determining characteristics.

A New Approach to Pay Gap Analysis

This blog piece will help you to:
  • Understand the difference between unadjusted and adjusted pay gaps
  • Demonstrate how this can help you
  • Show you how real organisations are looking at their unadjusted & adjusted pay gaps


Want to know how it works?

This technical whitepaper looks at our regression analysis method, with limitations, equations and easy explainers

Any questions?
Get in touch at hello@gapsquare.com

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