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The Gender Pay Gap- what it is .......and what it is not

10th April 2018

UK businesses with 250 or more employees were required to disclose and publish details of their staff gender pay gap by the 4th April 2018. The information had to be submitted on a Government website, by the 4th April for private firms, and by the 30th March by organisations in the public sector. The total number of organisations involved is roughly 9,000. It is thought that some 1,500 businesses have failed to meet the required deadline.  

Under the relevant provisions, businesses (including private, public, and voluntary organisations) with at least 250 employees were required to disclose the details of the average pay for men and women, including the bonuses paid to those employees.

The figures that have been revealed have received a lot of comment, and many businesses have received a lot of criticism for having a large gender pay gap. However, we think it is important to understand the limitations of the information before coming to any decision on what the figures actually mean. Firstly, the most obvious limitation is the fact that the survey only involved employers that had 250 or more employees. While that covers thousands of employers, the vast majority of businesses employ significantly fewer people. Of course, that is not to say that the figures or the broad findings of the figures would not be similar for smaller firms, but the fact the figures only relate to bigger employers does present an important limiting factor in deciding what the data actually shows or proves (however, some 238 firms with fewer than 250 employees chose to submit their figures voluntarily). Secondly, although the process did enable businesses to provide a narrative with their figures, which could be used to explain their figures and reasons for their results, there was no obligation to provide a narrative- so the figures come with relatively little explanation from the businesses themselves.

The figures that have been released indicate that nationally there is a median pay gap of 18.4%. This is calculated on an hourly rate basis, and includes both part time and full time staff. The important proviso here is that significantly more women than men work part-time.

Of interest is the fact that there is variation in the level of the pay gap between different sectors of business. But there is No sector in which pays women more than men, ie all the distinct sectors have a pay gap that favours men.

It is perhaps no great shock that in the finance and insurance sector there is a significant pay gap favouring male staff, and the same applies in the manufacturing, construction, retail, communication, and electricity sectors. In the finance sector the figures indicate that female staff earn 35.6% less than their male colleagues. In this sector a number of well- known organisations have a pay gap of over 30%, including RBS Bank, Goldman Sachs, Clydesdale Bank, and Lloyds Bank. Looking at bonuses, the data demonstrates that men get paid more in bonuses than women, as well as bigger salary payments- and this applied in sectors as diverse as Finance, Education, and Health.

There are a few surprises in the details. The figures for the Education sector indicate that there is a pay gap of 20%. Nearly 40 of the 100 companies with the biggest pay gap are schools or academy trusts. The Accommodation and food sector also showed a gender pay gap in favour of men, as did the Health sector. The results give an indication of the differences in working patterns between men and women, and an indication of the different types of work done by men and women.        

The information does not show that women are being paid less than men doing exactly the same jobs. The figures produced are not to taken as a like for like comparison in all respects, as the figures are calculated using both part time and full- time staff in order to arrive at the average figures. So, the median gender pay gap of 18.4 % does not mean that men are being paid that amount more than women doing the same work. This point has not been made as clear as it could have been by the media or other commentators. Unlike unequal pay, having a gender pay difference at a firm is not illegal, but it may point towards some discriminatory practices in a business. Obviously, where men and women are being paid different amounts for doing the same work there is a reason to feel aggrieved, and a proper legal basis to complain to and about their employers. But it is fairly obvious that a company will have a significant gender pay gap if a significant majority of its senior jobs are held by men despite it paying the same amount to its male and female colleagues in the same roles. EasyJet reported that pilots make up more than a quarter of its UK employees, but of those pilots only 6% are women, whereas 69% of the cabin crew are women (who earn on average just over quarter of the average salary for their pilots). At Ryanair (where just 8 of the 554 pilots are women) the gender pay gap is even greater than at EasyJet.     

However, the figures that have been released do highlight a number of other issues.   

The figures do show that women are still more likely than men to work in lower paid jobs, and lower skilled jobs. The data does show that some 78% of the businesses covered by the survey paid men more than women (some 13% show their female staff being paid more than their male staff). Just one in three firms have a majority of women among their top earners. The data does show that significantly more women than men do part time work. It is notable that if you only look at the gender pay gap in full time jobs, the gap drops to 9.1%. Furthermore, if you look at the figures regarding part time work, the gender pay gap favours women, who earn 5.1% more than men in part time work.

The figures do also suggest that men occupy most of the top jobs in most industries, the jobs which pay the highest amounts. The proportion of women drops the higher up the pay scale you go. 

It is important to note that there has been a clear direction of travel for some years in regard to the reducing size of the gender pay gap in the UK. The Annual Survey of Hours and Earnings, produced by the ONS indicates that the trends have generally been moving towards a reduction in the gender pay gap for many years, with the figure falling from over 27% in 1997 to the new figures suggesting a gap of 18%. However, it is correct to note that the rate has been falling at a slow rate over the last 10 years.

Does the UK have a particularly large gender pay gap?

Looking at this issue on an international scale, the UK appears to have a gender pay gap above the OECD average- coming in a little higher than the figure for Germany, France, Ireland, and Austria; but lower than the figures for the USA, Japan and Canada.

Do the figures show the causes of the gender pay gap?

The simple answer is no. On analysis there does not appear to be any single cause of the gender pay gap. 

Although there may be some gender discrimination underlying the gender pay-gap, there are likely to be other factors behind the figures.  The Institute for Fiscal Studies (the IFS) have produced a report (“Wage Progression and the Gender Wage Gap:The causal impact of hours of work”- published in February 2018) which found that by the time a couple’s first child is aged 20 years, many mothers earn nearly a third less than the father. The report reaches the assessment that a key factor for women working part time is motherhood. The report goes on to also conclude that when women become mothers and start to work part-time they may miss out on the benefits of full time employment- where experience is rewarded with progression and higher pay. The report states that “The effect of part-time work in shutting down wage progression is especially striking”. The report also noted that the vast majority of part-time workers were women, especially mothers of young children, and the widening of the pay gap starts early but accelerates significantly from the late 20s and early 30s- when these workers are likely to start a family. The co-author of the report, Robert Joyce (associate director of the IFS), has commented that it is now the highest paid women whose wages are further behind their male counterparts- and this is related to the fact that they lose out so badly from working part-time. The report indicates that taking any part of your working life in part time work is likely to hold back pay progression. The report concludes that gender differences in hours of paid work do contribute substantially to the widening of the gender pay gap after childbirth due to their cumulative impact on hourly wages via labour market experience.

A study produced in by the Fawcett Society (“Gender Pay Gap by Ethnicity in Britain” – published March 2017) indicates that the gender pay gap in Britain is also shaped by racial inequality, and that women from different ethnic groups face different gender pay gaps. So, the pattern and experience of the gender pay gap is complicated, and the figures disclosed recently do not show the full picture of the gender pay gap in the found in Britain.  

The gender pay gap may be caused by other additional reasons, such as societal norms over care expectations (for young and older family members), expected roles within the family and home, or presumptions over certain jobs being typically male or female. 

What happens next?     

It is also debatable as to exactly how helpful the release of these figures will be to further reducing the gender pay gap, and in particular if the release of the figures will alter the rate of decrease in the gender pay gap.

Turning to the issue of the firms that failed to respond by the deadline, the EHRC has indicated that at first it will be writing to those firms to require the information from them. Ultimately if they still fail to provide the required information, they could end up facing unlimited fines. Of perhaps greater concern for those firms will be the likely damage to reputation, and the challenge in securing the best recruitment in light of a high gender pay gap that has been made public (and hence available to any discerning potential employee). It is possible that the simple fact that businesses have now been required to release the details of the gender pay gap itself will prompt a greater focus on the subject- with greater efforts made by business to address any underlying problems they may have.     

At Hallett Employment Law Services Ltd we have experience in advising employers about introducing relevant policies and procedures to combat discrimination in the workplace, and can provide training to managers to assist them in using such procedures. In addition, we can help individuals enforce their rights in relation to incidents of unlawful discrimination.

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.

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