Equal Pay vs the Gender Pay Gap: What’s it all about?

New regulations came into force this April that require companies with over 250 employees to report on their gender pay gap. But what does this mean?

Put simply, the regulations ask you to work out the average (both mean and median) hourly pay of male and female employees across an organisation. And then looks at the difference (as a percentage) between those rates. So a company like PriceWaterhouseCoopers who reported this week a gap of 33.1% (mean) and 34.4.% (median) says that, women’s average hourly rates are 33.1/34.4% lower than the average man’s within the company.

The regulations also talk about quartiles.

This is when you take every single employee, from the lowest paid to the highest paid, and group them into four equal sections (quartiles). You then measure the number of women and men in each quartile. Here you can see if there are more women in the lower paid quartile compared to the higher paid quartiles. For PriceWaterhouseCoopers, they have reported that there are 11.8% men in the lowest paid quartile compared to 88.2% women. And the top quartile, unsurprisingly shows the opposite, that there are 63.3% men to 36.7% women. The lack of women in higher paid roles, and the higher concentration of women in lower paid roles will exacerbate the gender pay gap.

Lastly, the regulations look at bonuses.

At PriceWaterhouseCoopers, women’s bonuses’ are 58.6% (mean) and 67.1% (median) lower than men’s bonuses. Yet out of all staff, 93.2% of men received a bonus, as well as 91% women. The huge pay gap here in bonuses is worthy of further insight.

Three stark observations have come out over the last three months:

1. Few employees know about the new regulations

There has been some press and media coverage when the regulations came into force in April, but this seems to have petered out. So far, only 20 companies have reported, out of a possible 9,000. Speaking to employers, many have been working on pension auto-enrolment, graduate recruitment and summer vacation season so many will be reporting from the Autumn onwards. This lack of coverage seems to be perpetuating the lack of dissemination around the gender pay gap regulations.

Further, perhaps due to the fact that not many employers have reported yet, employees have not found out about the regulations. Many have expressed surprise (and also some excitement) that there would be more transparency over pay.

2. Both employees and employers alike are mixing up equal pay and the gender pay gap

I was recently sat in a pub with some friends and they said that they were looking forward to finding out if their male colleague with the same job title and same experience was being more than them. I was also recently sat in a meeting with a large technology company and their Financial Director stated that the regulations were “ridiculous” as they are not comparing “like for like”.

That’s because we do not have to compare “like for like”. That would be an equal pay issues – something that is a legal requirement since the 1970 Equal Pay Act. If a male colleague has the same job title, same pay grade, same experience but earns more than the female counterpart, then there could in fact be an Equal Pay claim and legal advice should be sought. The gender pay gap reporting requirements however, are not to do with Equal Pay. They compare the overall company male average pay to the female average pay and are more likely to reflect the clustering of women in low paid, part time roles, occupational segregation as there are less women in roles that pay more, and general lack of women in leadership roles.  

As a result of these reasons, women are more likely to receive less money per hour than men.

3. Few understand the benefits that a decreased gender pay gap would bring

The changes an organisation would be expected to make as a result of finding out their gender pay gap are things like:

• An increase in the number of women on boards,
• Flexible working so that both parents can take on child-caring responsibilities
• An increase in the number of women in well-paid but male-dominated industries.

Few understand why changes like this might be beneficial to a company.

a) Improved chances of recruitment

A recent survey by HAYS stated that 62% of job seekers looking for employment care about equality and diversity. Companies that show that they are doing something about tackling their gender pay gap is attractive for hiring the best talent.

b) A positive company culture will support retention

Companies invest in staff. Creating a company culture that values their employees, by offering rewards and incentives that retain not just women, but men too, like flexible working, childcare facilities and mentoring schemes is beneficial in the long run, as the longer a talented employee stays in a company, the better their value.

c) There are proved financial benefits to gender diversity

A recent McKinsey report, Diversity Matters says that gender diverse companies who place value on equality and diversity are 15% more likely to have financial returns above their respective national industry medians.

Companies with the highest levels of gender and racial diversity have nearly 15 times more sales revenues than companies with the lowest levels of diversity; in fact, for every 1% increase in gender and racial diversity of sales team, there is up to 9% increase in sales revenues

Eliminating the gender pay gap would expand the global economy by over 20% - this accounts for 3 trillion in the US alone.

As companies start to report, the gender pay gap regulations are likely to expose some Equal Pay issues. But the regulations are also designed to and categorically expose the fact that women statistically earn less than men, as well as the added benefits that equality and diversity can bring to an organisation. And in the twenty-first century, this inequality needs to be evidenced, addressed and tackled head on.

 

by Siân Webb

Partnerships Manager of Gapsquare, a company that uses disruptive technology to analyse, tackle and eliminate the gender pay gap

@SianKWebb

@Gapsquare

www.gapsquare.com

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