Gender Pay Gap – Day is Upon Us!

The last date for companies and organisations with more than 250 employees to publish their Gender Pay Gap statistics is today. Understandably perhaps, there has been much furore in the press about what the statistics mean. It’s also true to say that there is a great deal of misinformation and misunderstanding about what a particular pay gap indicates.

The basic position is that the gender pay gap is a measure of the difference in pay received by men and women in an organisation. The first point which employers need to report on is very simple: the difference between the mean hourly rate of pay between male full-pay relevant employees and female full-pay relevant employees in the pay period within which the snapshot date falls. Put it another way, the gender pay gap is expressed as a figure representing the difference in women’s pay as a percentage of that received by men, e.g. if the average pay for men is £10 per hour and the average pay for women is £8 per hour, then the average gender pay gap at that employer would be 20%.

However, because the primary indicator is simply an average across an entire organisation, the figure may be significantly affected one way or another by a range of factors, for example, by the employment sector itself. Take for example sectors such as health, education and retail which currently employ two-thirds of women over 50. Due to the concentration of women in lower paid positions in those sectors it may well be that the “average” hourly rate for women is very much lower. If we have a school with 100 female employees consisting of catering staff, cleaning staff and teachers. That school may have only 20 male staff of whom, for historical reasons, none work in catering, only one or two work in cleaning and janitorial and the rest are teachers.

In that example the “average” hourly rate between male and female is likely to be significant simply due to the arithmetic of averages. But when one compares the actual rates of pay of, for example, male teachers with female teachers in in similar positions – heads of department for example – they are most likely to be paid according to the same fixed pay bands or pay spines which are unaffected by sex.

Take a more extreme (and therefore unlikely!) fictional example to illustrate this point further:

• 100 Employees all of whom work 37 ½ hours a week. The total number comprises the following:
  • 1 male employee paid £50,000 per year for 1700 hours a year
  • average male rate of pay (£50k divided by 1 divided by 1700) = £29.41 per hour

• 99 female employees of whom:
  • 1 earns £70,000
  • 2 earn £65,000
  • 50 earn £35,000
  • 25 earn £25,000
  • 21 earn £16,500

• Average female rate of pay is (£2,921,500 divided by 99 divided by 1700) = £17.35 per hour
• So on average, women in the fictional organisation earn just 59% of what the men earn so its Gender pay gap is 41%

It is vital therefore, to understand that the gender pay gap is quite different from, and not a measure of, an employer’s compliance with equal pay for equal work legislation. That said, it might be such an indicator but not necessarily: an employer delivering equal pay may still have a large pay gap and an employer with no pay gap may be breaching the law. This is because, while breach of equal pay legislation may be a contributing cause, the gender pay gap is affected by a large variety of factors, most significantly women being more likely to work in lower-paid part-time roles, in lower-paid sectors and to less often be appointed into senior roles.

Other causes of the gender pay gap, which can be numerous and complex include the fact that women generally don’t get as far up the career ladder as men. However, this isn’t necessarily because of sex discrimination (although of course there will be cases where it is), very often it is for a much wider range of reasons including career breaks, childcare and personal choice.

Of course, there are also cases where women are not as well paid as the men in their organisation even when they achieve similar levels of seniority. In such cases this may well may be due to breach of equality legislation. This is not always the case however and every case has to be looked at on its own particular facts.

The danger of unfairly accusing companies of breaching equality legislation merely because of their GPG figures cannot be over-emphasised. Prime Minister Theresa May has famously declared the gender pay gap to be a “burning injustice”: where the reason for the gap is sex discrimination, certainly that must be right. But to draw conclusions about unequal pay from GPG figures alone is very dangerous. It must also be borne very much in mind that simply dropping in one or two more senior female appointments at high rates of pay in an organisation will not affect the broad averages to any significant extent: arithmetically that isn’t reasonably possible (always assuming you don’t pay a ludicrously exorbitant rate to just one person).

So if we are looking for a general rule to emerge then it must be this: businesses which have a more even distribution between the sexes at all levels, not just at senior levels, should have the smallest gender pay gap. Whether they will be able to achieve this will undoubtedly depend on a very wide and varied set of factors, not least of these being the nature of the sectors in which they operate and their respective appeal to members of each sex. This may be an uncomfortable or inconvenient truth but it is one which legislation alone is unlikely to change.