IWD: Women: like men, only cheaper – understanding unequal pay and gender pay reporting

Equal pay and the gender pay gap are grabbing headlines at the moment. Yet, whilst both relate to the disparity of pay between the sexes, they are often confused for one and the same thing. In fact, the two issues refer to quite different problems, which arise as a result of quite different factors. In order to understand them, we need to get a few things straight…

Unequal pay

Unequal pay occurs when employees within an organisation are doing the same or similar jobs, or work of “equal value”, but are not paid the same for doing so.

This is unlawful.

The Equal Pay Act 1970 enshrined equal treatment between men and women in relation to their pay and conditions of employment. Since then, and now under the Equality Act 2010, an employer will be in breach of equality legislation unless they can show that the reason for paying two employees different amounts is due to a genuine material factor other than the sex of the individuals concerned.

Although men can suffer unequal pay, the reality is that women typically experience this kind of discrimination.

The gender pay gap

The gender pay gap is another matter. It refers to the difference between the average pay for men and women within an organisation, irrespective of their jobs.

According to estimates, closing the gender gap (as a whole—across health, access to education, and work) could add an additional £23 billion (or 2% of GDP) every year to the UK Treasury.

Whilst there have been significant improvements in recent years to address the disparity between the sexes, on the basis of current rates of progress it could take up to 100 years to close the gender pay gap globally. This means that two generations of young women entering the workforce will retire before the third generation earns the same amount of money as their male colleagues.

Currently, the gender pay gap in the UK across full-time and part-time employees is 18.4%. This means that for every £1 earned by a British man, a British woman earns around 82p.

Yet, even if men and women are paid equally when they do the same work, a business can still report a gender pay gap. There are a variety of reasons for this, but some of the main contributing factors are that:

• a larger number of men operate at senior or management level;
   
• women are more likely than men to take longer (or more) career breaks to manage caring responsibilities (for example, upon having children);
   
• women are more likely than men to work part-time or flexibly (currently 42% of women work part-time as compared to 12% of men); and
   
• men are statistically more likely than women to ask for and receive a bonus or a promotion, meaning that their remuneration is likely to be higher.

Last year, in an attempt to address pay disparity between the sexes, the UK introduced legislation under which employers with more than 250 employees must publish information about pay within their workforce, broken down by gender.

Relevant employers must publish their median (i.e. middle of the range), as well as their mean (i.e. average), gender pay figures, thereby showing the “typical” pay difference between the sexes both in terms of hourly pay and the overall pay gap. They are also required to publish the proportion of men and women in each quartile of their pay structure, ordered from the lowest to the highest paid. This will show where one gender may be over-represented in the pay scale, where the progress of either gender might be stalling, and/or where the employer is getting the balance right.

In addition, to address the significant issues around bonus awards in some industries, the legislation requires relevant employers to publish the proportion of men and women who received a bonus during the previous year.

What does your organisation’s gender pay gap report mean for you?

Your organisation’s report will not tell you if you are being paid un/equally for doing the same (or a similar) job as your colleagues. However, it may enable you to make a crude assessment as to whether or not you might be.

An organisation’s gender pay gap data may indicate trends which suggest that women may be deprived of career progression opportunities. Employees will be able to see, from the data, how their organisation fares as compared with others in their industry. If women within an organisation are being paid significantly less than their male counterparts or are not properly represented at senior or management level, they might want to assess why. Is there a justifiable reason for this? If not, the data may indicate an equal pay or sex discrimination issue

Similarly, if she can see that 70% of men within her organisation work in management as compared with only 30% of women, she may want to consider her own career trajectory critically. Why is a smaller proportion of the female workforce represented at senior level? Is this because women are simply not applying for management roles within the business or do not have the requisite skill set to take on these positions, or it is because their career progression is stalling for some other reason?

Although gender pay gap reporting does not directly report gender pay differences for equal work, an organisation’s data may indicate trends which suggest that women at certain levels of the hierarchy may be under-represented, that women across an organisation may be paid less (in terms of base salary, total compensation, variable or fixed allowances, or bonus) than their male counterparts, or that women may be deprived of career progression opportunities.

Addressing pay disparity—both in terms of unequal pay and the gender pay gap—is an ongoing matter which is more than just a “women’s issue”. It is a moral, social and economic imperative for everyone.

Understanding your employer’s data, recognising what it may mean for you, and knowing your rights has never been more important.