What is the Gender Pay Gap? Debunking the Myths

Contents

Introduction

The Gender Pay Gap is not a new phenomenon. For as long as we’ve been paid, there have been gaps between gender, ethnicity and other demographics. There has been a long history – in the UK alone – of equal and then gender pay battles between employees and employers.

Gapsquare are at the forefront of conversations around pay equality, gender, ethnicity and wider pay gaps. This also means we are at the forefront of any potential misunderstandings around pay gaps and fair pay. And misunderstandings definitely do happen.

To put the issue to bed, this page gives you a comprehensive overview and introduction to the Gender Pay Gap (and unequal pay), its causes and its solution. It’s important to note that we at Gapsquare are UK-based. The UK has been way ahead of the game in gender pay gap reporting, bringing in legislation that blew global legislation out of the water. You can read about the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 here. It is with the perspective of this legislation that this article will cascade its experience down. We will do so by bringing together some of the incredible content that has come out of movements around the Gender Pay Gap, and we will build out concepts that will support both employers and employees alike.

If you’re not a reader, don’t worry. With videos, graphics, downloads and top tips from the Gapsquare team, we’re here to help you understand and improve pay gaps in whatever dialogue suits you.


1. What is the Gender Pay Gap?

(from a UK perspective – see global insights here)

Group of men and women looking at laptops and chatting in a work setting. They are a diverse group of people and look happy.

Understanding the terminology

In the UK, the gender pay gap is the percentage difference between average hourly earnings for men and women.

The UK government website defines the gender pay gap as ‘the difference between the average earnings of men and women, expressed relative to men’s earnings. For example, ‘In our company, women earn 15% less than men per hour.’

Although these figures aren’t the same thing as equal pay for equal/like work/equivalent (otherwise known as equal pay), they demonstrate structural inequalities in the workforce that can reveal equal pay issues or wider issues around fair pay. A smart employee will be aware of these differences, a really smart employer will be way ahead of them and will be in a space to predict potential issues.

It’s important to note that language around the gender pay gap heard from the USA or other countries is very much dependent on the context. The USA gender pay gap is often synonymous with Equal Pay.

A Great Video on the Difference between Gender Pay & Equal Pay in the UK

The global Gender Pay Gap is slightly different depending on the context and geographical use of the figure. The figure often quoted from the World Economic Forum covers a range of issues including economic participation, education, political empowerment etc.

Between 2017 and 2018, the UK Gender Pay Gap only shrank slightly from 9.7% to 9.6% in reporting companies

The Guardian

During the last UK national Gender Pay Gap report on 5 April 2019, which gave figures for the previous year, we saw very little improvement. Across 45% of firms the discrepancy in pay increased in favour of men, while at a further 7% there was no change, according to the BBC

Click here for the full results.

Median v Mean Pay Gap

The median pay gap is the difference in pay between the middle-ranking woman and the middle-ranking man. 

If you line up male and female employees in two separate lines in order of salary, the median pay gap is the difference between the woman in the middle of her line and the man in the middle of his.

This can often result in a more representative figure, as employees at the top salary bracket will not skew the median figure.

The mean pay gap is the difference between a company’s total wage spend per woman and its total spend per man.

The mean pay gap is calculated by adding up the wage of every man and of every woman within the company, dividing it by the number of men/women employed by the company, and calculating the difference between the two figures. 

The UK Gender Pay Gap reporting legislation requires both mean and median pay gap figures.

Who reports on the gender pay gap? All private and voluntary sector employers with 250 or more employees must report their gender pay gap.

Where is the data published? If a company is required to report their gender pay gap, their data must be published both on their company website and on the government’s gender pay portal. Here you can compare data between different companies.

The Gender Pay Gap in the wake of COVID-19

In April 2020, we held a webinar with Mentorloop, explaining Gender Pay Gap reporting in the UK, and why – in the period of uncertainty and instability which Coronavirus has brought – it’s so important to build diversity and inclusion practices into everything we do.

The Gender Pay Gap vs Equal Pay

What is Equal Pay? In the UK, employers must give both men and women equal treatment in their employment terms and conditions if they do:

  • ‘Like work’ – work that is the same or mostly similar
  • Work seen as equivalent under a job evaluation exercise
  • Work deemed to be of equal value in terms of effort, skill or decision making

An Equal Pay Audit involves comparing the pay of men and women doing equal work in your company. Click here for more information on Equal Pay Audits.

Interested in streamlining your company’s equal pay audit data collection? Our free downloadable mini ebook – packed with expert advice and top tips – make data preparation efficient and effective.

Download here

What do Gender Pay Gaps look like around the Globe?

The Gender Pay Gap differs by country, and the legislation surrounding it differs too. Yet it’s not always what you would expect…

Eurostat publishes regularly updated information on the Gender Pay Gap situation in the EU and Euro Area.

There are considerable differences between EU countries, with the Gender Pay Gap ranging from less than 8% in Belgium, Italy, Luxembourg, Poland, Romania, and Slovenia, to more than 20% in Austria, the Czech Republic, Germany, Estonia, and United Kingdom. 

According to an article by the World Economic Forum (WEF) in 2018, based on data from the World Bank World Development Indicators (WDI) and OECD, Korea has the most pronounced wage gap at a 37% point difference between men and women.

The WEF also produced this report about The Global Gender Gap, bench marking 149 countries on their progress towards gender parity across four thematic dimensions: Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment.

Free Resource: Equal Pay & GPG Around the World downloadable

Ever wondered what Gender Pay Gap and Equal Pay legislation is in place in different countries? Want to learn about the regulations in your neighbouring country? Or where you might have partner organisations?

It’s important to keep an eye on legislation around the globe and note how it corresponds to international pay gaps if we strive to create an optimised and fairer world of work.

Gapsquare have collated information about legislation in some countries around the world, with interactive links to further information and useful website. Download this free resource to find out more.

Download here

What do pay gaps look like in different industries?

According to results from the 2019 Gender Pay Gap reporting, the Construction and Finance & Insurance have the largest gender pay gaps. In Construction women earn just 76p to every man’s pound, and in Finance & Insurance 77p.

Other industries performed better in the 2019 audit, like Arts & Entertainment (95p), Health & Social Work (97p) and Accommodation & Food services (99p).

Have a look at this article by the Guardian for a breakdown of other industries.

The Office for National Statistic also publishes data on the UK Gender Pay Gap in different industries. Their statistic archive contains data from 2011 to present day.

Interested in learning more about pay disparities in the workplace? Listen to this podcast by Gapsquare CEO Dr. Zara Nanu to find out more

2. What is UK Gender Pay Gap Reporting?

(And why is it a global game changer?)

The Gender Pay Gap regulations came into force in the UK in April 2017, and require all private and voluntary-sector employers with 250 or more employees to publish data on their gender pay gap. The legislation is the most far reaching of its kind and has become the template for countries getting started on similar regulations.

In companies with a group structure, each legal entity will need to report its data. There is no legal requirement on smaller employers to report data, but they are encouraged to do so.

These companies must report the following statistics:

  • Average Gender Pay Gap as a mean average
  • Average Gender Pay Gap as a median average
  • Average bonus gender pay gap as a mean average
  • Average bonus gender pay gap as a median average
  • Proportion of male and female employees receiving bonus payments
  • Proportion of male and female employees by quartiles (i.e. when divided into four groups ordered from lowest to highest pay)

See ‘The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017’, listing the regulations for private and voluntary sector organisations.

Gapsquare recommends: use the legislation to do an in depth analysis of the gender pay gap and build data driven plans to narrow the gap. Companies which take effective action to address the challenges identified by reporting on the gap see increased return on investment, market share, and higher staff retention.

Free resource: Back to the basics webinar

Are you on top of your calculations? Do you know what is included or excluded as part of the Gender Pay Gap requirements? This clear and informative webinar by Gapsquare highlights who should be reporting, what you should be reporting on, and how to do it in the most painless way.

Private vs Public Sector: The Gender Pay Gap reporting requirements in the public sector largely mirror those in the private sector, though the snapshot date is different (31st March rather than the 5th April for the public sector). The private sector legislation has been introduced separately from the existing public-sector equality duty.

The GPG measures are the same for both the public and private sectors.

The Snapshot date:

Data must be published within a year of your organisation’s ‘snapshot date’ – this is 4th April for the private sector (businesses and charities) and 30th March for public sector organisations.

Where does the data go?

Companies with 250+ employees must publish their data on their public-facing website (and it must remain there for three years), as well as on the government website, using the gender pay gap reporting service. 

Businesses and charities must also publish a written statement, confirming the accuracy of the published information. 

Failing to publish the report: failing to report on time or reporting inaccurate data breaches regulations and can put a company at risk of facing legal action, leading to court orders and fines. 

It is critical that companies get to grips with what exactly causes the gender pay gap in the first place

Sian WEbb, VP Gapsquare

Our Gender Pay Gap Checklist

This checklist – designed by experts at Gapsquare – highlights exactly what you need to do before reporting on your company’s Gender Pay Gap in the UK. Not sure where to start with Gender Pay Gay analytics and reporting? We’re here to help.

Have a look at our GPG Checklist

Top Tips to Reporting your UK Gender Pay Gap

Reporting your Gender Pay Gap can be a daunting task, and when planned ineffectively, can take much longer than it needs to. Gapsquare have put together a few top tips to make the process as painless as possible.

Understand the UK Gender Pay Gap regulations

It’s paramount to understand the regulations so you know exactly which data to compile and report on. Reporting data wrong can incur a government fine, and will slow down the process of closing the gap.

Need to know more about Gender Pay Regulations worldwide? Check out this infographic.

Know the difference between Equal Pay and the Gender Pay Gap

The two are different; Equal Pay relates to paying men and women the same amount for work of equal value, the same roles, or like work. Gender Pay Gap analysis compares the overall company male average pay to the female average pay. It is more likely to reflect the clustering of women in low paid, part time roles, occupational segregation as there are fewer women in roles that pay more, and a general lack of women in leadership roles.

If a male colleague has the same job title, pay grade and experience but earns more than the female counterpart, then there could be an Equal Pay claim and legal advice should be sought.

Avoid the obvious mistakes

It’s important to know that adhering to reporting guidelines requires much more than a single consultation session or submitting the data without reflecting on the results.

The Financial Times suggests that “1 in 20 companies who have submitted their gender pay gap data to the government have reported numbers that are statistically improbable and therefore almost certainly inaccurate” in this article.

It is also important not to publish statistics without explanation or communication with your teams. Answering the questions of how large the pay gap is is not enough to build trust with employees and help drive positive change. Analysing the Gender Pay Gap is about much more – it is about working with employees to understand why the gap is there and how much companies can engage with the issues and move forward.

Analysing the gap – do it right

In the past few years we have spoken to hundreds of companies gearing up to run their gender pay gap analysis. Many are still unprepared for the reporting requirements, and a staggering majority are planning on doing it in an Excel spreadsheet.

We know that AI is currently being paraded as the end all be all solution to everything, but there is evidence that automation is creating an analysis movement where decision makers don’t have to struggle cross-analysing indicators and figuring out if they should be correlating specific variables.

In our experience, AI algorithms can be built, alongside a system of notifications, to make it easy for managers with any skills to get answers they need when they need them.

We know this because we are building such a system at Gapsquare.

Our system can answer questions and put forward unprompted nudges and solutions based on the payroll and HR data it sees. As we do this, we can see that nothing compares to the level of pattern recognition and predictions that can come through automation, harnessing the power of data to report efficiently and promote sustainable change.

What’s next? Tailoring the Solution to Your Company

The gender pay gap reporting regulations are a great starting point for building a more diverse and inclusive workforce. But what happens once you know the numbers?

There’s no one size fits all solution to tackling the pay gap. Your choice of how you report and communicate the gap comes down to your understanding of your company and how it works best.

Gender Pay Gap reporting guidance and support should always be tailored to your organisation – not a one off consultancy session or vague advice. It is important to tease out some of the core issues revealed by your data and use this to put together a plan of action.

Gapsquare have partnered with Stitch Communications, The Glass Lift and Virgin Money to create a webinar to help you communicate your Gender Pay Gap. What are the next steps once the numbers have been crunched?

Watch webinar here

Find guidance from the government website on the best actions to close the gender pay gap.

Know the benefits of understanding your Pay Gap

A more diverse workplace makes business sense. Not only does it support retention and improve chances of recruitment, but workplace diversity also has proven financial benefits.

Don’t believe us?

  • A recent survey by HAYS states that 62% of job seekers looking for employment care about equality and diversity.
  • According to the Michellake Group, companies with the highest levels of gender and racial diversity are have nearly 15 times more sales revenues than companies with the lowest levels of diversity; for every 1% increase in gender and racial diversity of sales teams, there is up to 9% increase in sales revenues.
  • McKinsey also suggests that if women participated in the British economy to the same degree as men, economic output would be 26%, or £600bn a year, higher in 2025 than current estimates for that year.
  • According to a recent report by McKinsey, gender diverse companies are 15% more likely to have financial returns above their respective national industry medians.

How to communicate your Gender Pay Gap

Your narrative: adding a narrative to your figures helps anyone reading the statement understand your view of why the gender pay gap is present and what is being done to close it. It gives you a chance to explain your ideas and be transparent about the measures being taken to reduce the Gender Pay Gap. 

Top tips for communicating your Gender Pay Gap:

  • Be transparent: transparency will help you improve understanding and help you drive change. Consider how you will communicate your Gender Pay Gap both internally and externally.
  • Be loud: Present to decision makers within the company, and share your findings with employees and partners. Do not shy away from your results. Why? Because tackling the problem head on will lead to a quicker solution. You will improve your company’s reputation quickly, attract the best talent, and build stronger relationships across your organisation.
  • Be clear and consistent: In your report and discussions surrounding it, explain confusing terms (like the difference between Equal Pay and Gender Pay Gap), use language everyone can understand and images and infographics with digestible information. Consider developing an internal communications plan to ensure you are consistent in communicating your message, your explanation and your strategy for improvement.
  • Be collaborative: Consult with your employees in your efforts to improve workplace equality to keep them informed on your decisions. Work with external organisations who specialise in Gender Pay Gap reporting. Don’t be afraid to ask for help or advice.

Some more useful advice for reporting your Gender Pay Gap come from Golin with the Fawcett Society, and Business in the Community.

3. What causes the Gender Pay Gap?

The Gender Pay Gap is minimal between men and women in their first ten years of work. Research by the Institute of Fiscal Studies found that the pay gap between men and women widens substantially following the birth of their first child.

There are a multitude of reasons why the gender pay gap might exist. Here are a few of them:

Direct discrimination

This covers Equal Pay issues, and involves the women being paid less for doing exactly the same job as their male counterpart. This is illegal and is believed to only contribute a small part to the gender pay gap.

A great video from Gapsquare’s CEO explaining what causes the Gender Pay Gap

Segregation in the labour market

Women often work in sectors (for example in health, education, and public administration) where their work is lower valued and lower paid than those dominated by men.

Women are also under-represented in managerial and senior positions.

Traditions & Stereotypes

Segregation is often closely linked to this. Whilst some will represent personal choices, the gendered way in which children are raised influences women’s later choice of educational paths and professional careers.

Learn about gender stereotypes in EU countries with this infographic from the European Commission.

Balancing work and private life

Family, care and domestic responsibilities are rarely equally shared. The responsibility of looking after dependent family members is largely down to women, meaning that women often have to leave the labour market.

Although part-time work is sometimes a personal choice, when women work part-time it has a negative consequence on their career development. There is also a lack of good-quality part-time jobs and genuine flexibility for employees at work.

Undervaluing women’s work

There are always unconscious biases at play. Women’s competences are valued differently to men’s; the importance we allocate to jobs are often influenced by societal factors and this includes job stereotypes as well as individual prejudice. 

Studies from Cornell University as described in the New York Times show that when women enter an industry or particular field in greater numbers, pay declines for the very same jobs that more men were doing before.

Read what experts – like Frances O’Grady, general secretary of the TUC Federation, and Charles Cotton, from the Chartered Institute of Personnel and Development – have to say causes the gender pay gap.

Closing the Gap takes time, but the first step towards a fairer, more diverse and more productive world of work is understand exactly what it means and how to reduce it.

If you are interested in streamlining your Gender Pay Gap analysis and reporting methodology, are intent on reducing other pay disparities, or would like to chat about any fair pay issues, get in touch with the Gapsquare team today.