Do you know the difference between a gender pay gap and a pay equality issue? Most people don’t.
In 2018, many articles on gender pay gap reporting appeared in the popular press. A YouGov survey found that only 1 in 3 people understood what we mean by a “gender pay gap”.
Let’s clear this up.
The gender pay gap is the average difference in pay between the entire female and male populations. This is across all the various job roles within your organisation. The regulations requiring businesses to produce a gender pay gap report came into force in April, 2017. However, this only applies to employers with 250 or more workers.
On the other hand, pay equality ensures that neither men or women are treated unfavourably in terms of pay and conditions for doing effectively the same role. Doing so has been illegal for decades. Pay equality was first established in law via the Equal Pay Act of 1970 and superseded by the Equality Act 2010.
Compounding the confusion
Unfortunately, many media articles have combined examples of pay equality issues with their reporting on gender pay gap issues. Take this article from the BBC as an example.
In that article, we have references to gender pay gap reporting at the BBC, showing an overall difference in average pay between the male and female workforce. But we also have references to individual pay equality cases. For example, Carrie Gracie being paid less than male peers of equivalent experience and seniority doing effectively the same job.
Although the BBC does refer to Ms Gracie’s case as a pay equality issue, combining discussion of both issues together has probably contributed to the confusion.
In the rest of this article, I’m going to pick through some of the complex questions that arise with gender pay gap issues vs. pay equality issues.
The influence of pay equality on a gender pay gap
Some may argue that these two issues are related. After all, if you’re paying women less than men for doing the same job, then surely that’s going to contribute to the gender pay gap? Therefore, isn’t it legitimate to link these issues together?
No. The gender pay gap refers to the mean difference in pay between male and female populations not including unlawful pay equality issues (which shouldn’t exist anyway).
In other words, even if you took those unlawful issues out of the equation, there would still be a gender pay gap. This gap commonly arises from across-the-board differences in seniority levels and career progression between the genders.
For example, senior leadership roles typically command higher salaries. If women are under-represented in senior leadership positions, then this will mean that the higher salaries earned by the majority of male senior leaders will increase the average salary of the male population.
Differences in pay exist within the same gender
Some also argue that even men doing the same job are not all paid the same. For example, in a team of software engineers, you could have two male engineers on the same grade and doing the same role but on different salaries.
Yes, that’s true. But that’s okay if differences in pay arise from differences in performance, achievement, skill-set, experience and so on.
It only becomes a pay equality issue if the difference between pay cannot be explained except by a difference in gender (or possibly any other protected characteristic, e.g. ethnicity. I’ll come to this later).
This also depends on how the pay scales are structured at the employer. In many private sector companies, there are a relatively small number of job grades each of which has a salary range associated with it. Under this model, individuals can be on the same grade (or job code) with different salaries. Provided they are below the range maximum, they can get a pay rise without being promoted to the next grade.
Another approach, more common in the public sector, is to have a larger number of pay grades each of which has a defined salary. This has the advantage of everyone being on equal pay for a given grade. However, salary increases are tied to promotions to the next grade.
In practice, there may be many variations of these approaches as well as location-specific factors (e.g. a London cost-of-living uplift) depending upon the employer’s own pay policies.
Other variables affecting the gender pay gap
Another argument raised against the gender pay gap is that its affected by variables outside the employer’s control. For example, differences in hours worked (e.g. part time choices, parental leave, etc.), job experience, education and the occupations chosen.
We do have to consider these variables. But we also have to consider why these variables have the influence that they do!
In the book Gender Inequality at Work (Jacobs, 1995), one suggested hypothesis is that jobs are broadly segregated into ‘higher tech’ (mostly male) and ‘higher touch’ (mostly female) occupations.
Even if this is true, one must ask why it should be true. Perhaps it’s an artefact of historical social conditioning. In some countries, there have been long standing stereotypes for male and female professions. For example, which of these occupations have male or female stereotypes in your location?
- bank clerk
- bank manager
- software engineer
- company director
- HR consultant
It varies by country and culture. In the UK, you don’t have to go back very far to find prevailing social stereotypes where, say, nurses were assumed to be female and doctors assumed to be male. Some might say that many of these prejudicial stereotypes still exist today.
These attitudes carry over into the workplace and so I would argue that this does make it relevant to employers. What are you doing to dissolve gender stereotypes in your organisation?
You may also find the slides below interesting. They present the results of a 2013 UNDP survey results on gender stereotypes. Some of the findings are very relevant to the topic of gender stereotypes in employment!
Parental leave & child care
Leaving employment to raise and care for children is another possible factor in a gender pay gap. Studies suggest that women taking time out from their professions for maternity and ongoing child care suffer a salary detriment known as the motherhood penalty.
The UK Government has attempted to address this, at least in part, by introducing Shared Parental Leave. This in effect means that the maternity pay and leave arrangements can be shared between the parents. The idea being that this allows more flexibility between them and less emphasis on the mother having to be the one taking lengthy breaks from work.
Unfortunately, few couples have taken advantage of this facility. Partly this is because the scheme is pretty confusing and hard to digest. Also, because men tend to have higher salaries (ironically the very problem we’re trying to address), it’s uneconomical for male parents to share the parental leave on the lower rates of pay.
Clearly we have some way to go in this area. As the government tries to promote this arrangement and people become more familiar with it, I do expect this to become more popular with workers in future – especially if the gender pay gap starts to close!
Ethnicity pay gap reporting
Following a review on Race in the Workplace by Baroness McGregor-Smith, the UK Government has launched a consultation into whether organisations should have to report on mean pay differences between workers from different ethnic backgrounds. This consultation runs from 11th October 2018 to 11th January 2019.
Although the McGregor-Smith review recommended a reporting threshold of 50+ employees, currently the government is proposing to follow the gender pay gap reporting threshold of 250 or more.
Employers could face some significant practical difficulties with implementing such a report. Many employers do gather demographic information about people, for example when they first start working for the business. However, there’s no legal obligation to provide this information. Therefore, ensuring you have a useful data set could be tricky.
Also, how should the pay gap data be reported? Trying to mirror gender pay gap reporting by comparing the average pay of white employees against all ethnic minority employees would be problematic. It rolls up all the minorities in one, which risks masking any significant differences between them. Also, if minorities are badly under-represented with only one or two in very senior positions, their ‘average’ would look favourable but would hide the overall lack of representation.
And how about people who identify as mixed race, or those who don’t feel they fit into the existing list of ‘ethnic origins’ categories, but don’t identify as ‘white’ either?
Another approach may be to report by pay bands or quartiles. This is based on how many white vs ethnic minority workers appear in each level of pay within the organisation. But we also have to consider age, gender and location differences here too.
I predict that producing meaningful reports based on statistically significant data will prove to be quite a headache!
Advice for small businesses
The reporting threshold of 250 or more workers is intended to avoid putting too much of a compliance burden on small business. To be honest, I’ve met a few small business leaders who gladly switch off as soon as they hear that!
While I don’t think that threshold will change in the near future, it’s not beyond the realms of possibility that it will drop to 150 or 100…or possibly lower in the longer term as reporting practices become more polished and familiar.
If your small business grows into a larger enterprise that crosses the threshold, you will regret having an institutionalised pay gap in your workforce that you now need to somehow fix.
Finally, small businesses shouldn’t be a potential haven for unfair pay practices. Growing public awareness over both pay gaps and pay equality will make these harder to sustain, as workers become less tolerant of perceived inequities.
My advice is to ensure you implement progressive pay policies based on sound and robust performance management. As long as you’re making demonstrably rational decisions, you’ll be on a good foundation.
Hiring and salary review considerations
Over the years, I’ve sometimes found women right at the low end of a salary range for their grade. When I ask why, the usual answer is that they were a cheap hire…their salary at their previous employer was low, so even with a modest uplift upon hiring, they still came in low.
I have sometimes found male employees near the bottom of a grade range but those are very rare edge cases. In my experience, it’s far more likely that an employee at the bottom of a grade range will be female.
I completely understand the attraction of a bargain hire. But at the same time, we should be mindful of adding to any gender pay gap. I recommend offering a hiring salary based on what they’re worth, not just on what their current employer is paying. Be courageous with your performance management to ensure they deliver!
If I have noticed someone very low on the pay scale, then as long as their performance meets or exceeds expectations, I try to ensure they get meaningful increments over subsequent annual salary reviews – at least to get them onto a ‘level playing field’ with their peers (irrespective of their gender).
Phew! What started out as a few paragraphs evolved into quite a lengthy piece. I hope this has been an interesting read and that the difference between a gender pay gap and pay equality is clear.
I’ve also mentioned a few additional things to consider, so please feel free to contact me if you would like to discuss further!