How is the gender pay gap calculated?
An essential part of reconciliation for a number of businesses, correctly calculating the gender pay gap is vitally important. Failing to do so can lead to negative press at the best and lead to fines and penalties at worst.
So, what exactly is the gender pay gap and what is required in its calculation?
When did the gender pay gap start?
Brought into existence by the 2010 Equality act, this was designed to overtly protect individuals from discrimination, victimisation, or harassment in the workplace. This factors nine key characteristics-
- Gender Reassignment
- Marriage and Civil Partnership
- Pregnancy and Maternity
- Religion or Belief
- Sexual orientation
Directly following on from the ground covered in the act, 2017 saw the creation of Gender Pay Gap Regulations. This act requires companies in Great Britain – but not Northern Ireland – to report on their payment figures as sorted by gender.
In a business that has less than 250 employees, they are not required to submit a report. However, they are free to provide an overview of their current payment figures and detail their commitment to equality. This includes those that are contracted to work with the business, agency workers, those that are self-employed, and any partners that add to the headcount for the business.
2020 will see the third iteration of the report, putting significant pressure on businesses to ensure full compliance with information requests. This is likely to cause traction with it being extremely likely to show a continued trend of inequality.
However, it is important to recognise that the gap can in some cases be due to voluntary action or the nature of everyday factors such as maternity leave. Despite this, it is vitally important to report, comment, and take action on any issues.
What is the gender pay gap?
The Gender Pay Gap (GPG) is the median or average difference between what male and female employees earn in a business. Specifically, it is a statistic that displays the difference in the delivery of hourly wages between men and women.
This is most commonly represented as a ratio or percentage differential, with men commonly being paid more than their female colleagues for carrying out the same role.
While there is currently no official process to enforce the non-disclosure, failure to comply with the directive is ‘unlawful’ and the process is policed by Equality and Human Right Commission (EHRC) which carries significant power to cause problems for businesses that fail to comply.
This process begins with an informal approach to press for information. If that is not provided, companies can be subject to ‘unlimited’ fines and convictions. Despite this, significant companies have chosen not to file – potentially preferring the bad publicity of failing to act over the censure of
Information about the gender pay gap can be accessed through government sources letting individuals access high level information about the gap and segment the information by organisation size or industrial sector.
Why is there a gender pay gap?
Aside from fundamental gender inequality, the gap calculation is designed to provide insight and clarity into how employees are paid in a range of sectors.
In essence, the gap allows companies and countries to better understand the difference in pay between men and women in the marketplace. By highlighting this and allowing it to remain in regular discussion, this can help it stay in the public eye.
Information is added to a searchable index, with additional pressure placed on companies to not only conform but provide justification for any perceived issues or disparities with their gap in payment.
Unfortunately, analysing it and doing something meaningful about the gap are two entirely separate conversations. In December 2018, the World Economic Forum announced that it would take up to 202 years of concerted effort to effectively address the gap.
What causes the gender pay gap?
Fundamentally, the gender pay gap is caused by systemic bias in favour of male workers when it comes to renumeration. While the specific reasons vary from company to company, the 2019 figures saw that a staggering 78% of the UK’s biggest companies failed to achieve parity, producing statistics
that were transparently in favour of men. And fewer than half of UK firms managed to narrow the gap across the period.
However, there are a range of reasons that can also influence the findings. These include-
Depending on the nature of the sector, there may be a significant division of labour when it comes to male/female roles. Known as ‘horizontal division’, this is highly prevalent in traditionally ‘male dominated’ fields such as the IT Sector, sciences, and industrial sectors, or manufacturing industries. While many initiatives are in place to help erode this bias, systemic issues
are still present.
Often women may be overlooked for a position in favour of a male colleague through conscious or unconscious bias. This can commonly take the form of male candidates being selected for traditionally ‘male’ roles.
Maternity leave or ‘the motherhood penalty’ is seen as a major obstacle for individuals returning to work or upon their parental status. This can be self-determining with many lower paying jobs only offering the flexibility that motherhood requires, with many countries providing insufficient
paternity care and leave to provide additional support – potentially reinforcing unhealthy gender roles.
One criticism is that individuals can face pressure or be socialised to
deterministically pick out roles that fit their gender. These can be reinforced by family, media, education; leading to employment in roles that are do not offer the same opportunities for advancement or progress offered by other positions.
If businesses need further information about addressing the gap, it can be accessed through official channels or by directly contacting the department.
How do I calculate it?
According to Government guidance, calculating the gap requires companies to provide-
- The median and mean gap in hourly pay
- The median and mean gap in bonus pay
- The proportion of males and females receiving bonus pay
- The proportion of males and females in each payment or salaried quartile
These can be provided as ‘whole’ percentages or figures rounded to one decimal point. While these figures may be straightforward to calculate, they do require the harvesting of key information from your payroll, known as your business’ ‘snapshot date’. Depending on the structure of your company, these need to be provided on the 5th of April for charities and businesses, or the 31st of March for those working in the public sector.
Each of these values requires the management of a number of figures that is not only time consuming but labour intensive. Once the figures have been checked and fully validated, each company is required to provide a
written statement confirming that the figures they provide are accurate and fully signed off by a high-ranking official in the business. This is also accompanied by a brief detailing the nature of any disparity and what they intend to do to resolve it. Once provided, this is then made publicly available via a PDF or ideally displayed prominently on the company’s website.
Once provided, this data is then harvested and fed into regular reports. At the low level this allows for a critique of companies that fail to address issues and at the high level ensures a better understanding of sectoral issues – allowing it to shape governmental policy.
However, as with any process, it can cause human error which can potentially be damaging when dealing with such an important topic. Choosing a software platform can allow you to automate a great deal of the process – enabling you to update, amend and validate information to ensure that it is in full compliance with Gender Pay Gap legislation.
This also allows for the harvesting of key statistics and information, allowing you to take steps to address any disparity or help better understand where any inequality stems from. This can be a
significant soft power coup, helping you attract positive press, increase your reputation, and help attract a higher calibre of client and employee in the years ahead.