What is gender pay gap reporting, and what does it mean?

What is gender pay gap reporting and what is being published?

Changes to the Equality Act, which came into force on 6 April 2017, made it compulsory for companies in Great Britain (but not Northern Ireland) with more than 250 employees to report their gender pay gap figures at the end of every financial year.

Public bodies must report by 30 March and private companies must do so by 4 April. Organisations are also required to publish the breakdown of men and women in different pay quartiles and details of the proportion of men and women in the company who receive bonuses.

Last year was the first year that the rule came into force. Data submitted by the deadline showed men were paid more than women in 7,795 out of 10,016 companies and public bodies in Britain, based on the median hourly pay.

The figures showed that no sector paid women better on average than men. The construction sector had the worst average median gender pay gap at 25%. Finance and insurance were next, at 22%. The accommodation and food services sector had the best pay gap, at 1%.

What is the gender pay gap?

The gender pay gap is the difference between the average hourly earnings of a company’s male and female employees. If an organisation has, for example, a 5% gender pay gap it means that women earn an average of 5% less per hour (excluding overtime) than men, or in other words the average female employee would earn 95p for every £1 earned by a male employee. A negative 5% gender pay gap would mean women earned an average of 5% more than men per hour.

According to the ONS’s latest Annual Survey of Hours and Earnings (ASHE), the gender pay gap for median gross hourly earnings fell to 8.6% among full-time employees in 2018, from 9.1% the year before. It was 17.4% in 1997 when the ONS first collected the data.

When all workers, full and part-time, are included, the gap increases to 17.9%. This is likely to be because more women work in part-time jobs which tend to be lower paid.

According to the ONS, in 2018 the gender pay gap for full-time employees between the ages of 18 and 39 years was close to zero but began to widen for people over the age of 40. When both full and part-time employees are included in the calculation, the gender pay gap widens after the age of 30. This coincides with an increase in part-time working.

What’s the difference between the mean and the median figures?

When talking about the gender pay gap people tend to talk about the median figure rather than the mean. The mean is calculated by adding up all of the wages of employees in a company and dividing that figure by the number of employees. This means the final figure can be skewed by a small number of highly paid individuals. The median is the number that falls in the middle of a range when everyone’s wages are lined up from smallest to largest and is more representative when there is a lot of variation in pay.

Is the data reliable?

Individual companies and public bodies are responsible for publishing their own gender pay gaps using guidance from the Government Equalities Office. However, the Guardian reported last year that a number of companies had filed mathematically impossible results, with gender pay gaps of more than 100%. As of February this year, that was still the case, with hundreds of companies’ gender pay gap records still including inaccurate figures.

Does it mean women are being paid less than men in the same roles?

No. While some employers might be paying men and women differently for performing the same role or “work of equivalent value”, this is an issue of equal pay. It is illegal to pay men and women different amounts for the same work, however that is not what gender pay gap reporting is set up to measure. Rather these figures show us the overall gender pay gap, as well as the bonus pay gap and the proportion of men and women in each quartile of the pay structure of the company.

What will happen if companies don’t report?

The Equality and Human Rights Commission (EHRC) is responsible for enforcing gender pay gap reporting rules and said that, while it would approach employers informally at first if they failed to publish figures by the deadline, businesses could ultimately face “unlimited fines and convictions”.

However, information published following a freedom of information request by the Guardian showed that no companies have been fined to date despite hundreds failing to accurately file their gender pay gap figures on time. An employer would only be fined if a case were to reach the courts.