What does gender pay gap reporting say about your business?
Since the Gender Pay Gap Regulations came into effect in 2017 organisations with more than 250 employees have been reporting their gender pay gap. Increasingly organisations with fewer than 250 employees, and therefore not required to report, have been publishing their gender pay gap as the importance and value of reporting continues to be seen. Potential and existing employees value visibility and transparency around an employer’s gender pay gap, while investors and customers equally value the importance organisations place on, not only reporting their gender pay gap but reducing their gap.
So an organisation, either by requirement or voluntarily, has reported their gender pay gap, but what does this figure tell you?
Firstly it’s important to highlight that reporting your gender pay gap is not the same as conducting an equal pay audit. Gender pay gap reporting measures the difference between female and male ordinary pay and bonus pay, looking at mean and median, not taking into consideration job role or work of like value. Equal pay, in contrast, is the legal obligation under the Equality Act 2010 that requires employers to pay men and women equally if they are employed to do work of equal value. Therefore, although gender pay gap reporting can indicate that equal pay issues may exist, it isn’t a formal equal pay audit and shouldn’t be used as one.
There are several common misconceptions about gender pay gap figures. Firstly, the gap doesn’t reflect a pay differential between men and women doing like work, as previously mentioned it isn’t an equal pay audit, but it more commonly highlights the gender distribution through an organisation, or to be precise a gender imbalance. If an organisation's gender pay gap is heavily in favour of men, the common misconception is that to reduce the pay gap more senior positions need to be filled by women. This isn’t incorrect in all circumstances, as if there isn’t already equal representation in the senior team of men and women this will help close the pay gap. But the key to closing a gender pay gap is the organisation's overall gender distribution.
If an organisation's overall gender split is 55 per cent female and 45 per cent male, to register a low gender pay gap, each quartile throughout the organisation would need to mirror this distribution. Quartiles are comprised of males and females, after ranking hourly ordinary pay from lowest to highest, grouped into four populations each totalling 25 per cent of the organisation. What commonly has occurred in organisations with pay gaps heavily in favour of males is a gender imbalance. The lower quartile, being the lowest paid 25 per cent of the organisation, will have a predominantly female population, then moving up through the quartiles the male population will increase, to a point where the upper quartile has a gender distribution equal to the organisation's overall gender distribution. In the example just outlined, females dominate the lower-paid roles in the organisation but also do see proportionate representation in the upper quartile. Therefore, to close the pay gap in this scenario, recruiting more males into lower-paid junior roles would have more impact than the recruitment of additional senior female employees.
It's important to understand what your mean and median pay gap is telling you, and what the relationship between the two figures represents. This is true for both your ordinary pay gap and your bonus pay gap. The mean pay gap figure, by the very nature of averages, is more likely to be influenced by extreme values and therefore the median value is often considered more robust. In general, if the median is lower than the mean, you have major outliers in the high end of the distribution. In contrast to this, if the mean is lower than the median you have major outliers in the low end of the distribution. Now to visualise this fully, a gap in favour of males is a positive figure and a gap in favour of females is a negative figure. This enables you to understand if your gap is being driven by male or female outliers.
Making a real difference to your pay gap requires proactivity. If you’re calculating your gender pay gap in the months leading up to the deadline, which was the 4th of April for Private sector organisations in 2022, you’re working with a one-year lag time between the data you’re reporting on and the organisation's current state. Therefore to make real change and action insight gained from gender pay reporting, conducting your analysis shortly after the snapshot date, which is the 5th of April, enables actions to be taken in the time leading up to the next snapshot date.