So now we know: eight out of 10 companies pay their female employees less than men. But what does that actually tell us? Are they behaving illegally? Or is it nothing more than a reflection of their workforce? And is a gender pay gap of – say – 20% bad or good?
The deadline for employers (companies, public sector organisations and charities) employing 250 people or more to publish their gender pay gap was midnight on Wednesday 4 April. Over 10,000 met the deadline, but 1,500 didn’t and could face fines as a result. But there’s still a lot of confusion about what the gender pay gap is.
Gender pay gap or unequal pay?
First things first: if a company has a gender pay gap, it doesn’t mean it’s paying the women who work there less than men for doing the same job. That’s illegal under equal pay legislation. It’s true that companies may be breaking equal pay laws, but the gender pay gap reporting isn’t designed to uncover that.
The gender pay gap is the difference between the average hourly pay of men and women employed by a particular company. While it doesn’t show us if a company is behaving illegally, it does reveal something about the structure of the organisation that we haven’t been able to see until now. Namely, it shows us the split between women and men at the top and those in the lowest paying roles.
How the gender pay gap is calculated
To understand the value of the gender pay gap data, it’s worth knowing what employers have had to do. Private sector companies had to take a ‘snapshot’ of their employees’ pay on 5 April last year. For the public sector, the date was 31 March. They then had a year to work out and publish six figures.
These figures include the gap between the average hourly pay of their female and male employees (the headline ‘gender pay gap’), the gap between the average bonus paid to female and male employees (the ‘gender bonus gap’), the percentage of women and men being paid a bonus and the percentage of women who get the top pay rates, the middle rates and the lowest pay rates.
Here, companies had to divide the range of salaries awarded to all their employees into four tiers from highest to lowest, and work out the percentage of men and women in each quartile. So, for example, if a company pays its lowest earning employees £20,000 a year, and its highest earning employees £100,000 a year, it has to calculate the percentage of women and men earning £20,000 - £40,000 a year (the lower quartile), £40,000 - £60,000 a year (lower middle quartile), £60,000 - £80,000 a year (upper middle quartile) and £80,000 - £100,000 a year (top quartile). These pay quartile figures are as revealing as the gender pay gap itself.
Mean or median?
Somewhat confusingly, there are two different ways that companies have had to publish their average gender pay gap – but I think there’s a logic behind it. The first one is the ‘mean’ gender pay gap. That’s worked out by adding up all the different salaries paid to female employees and dividing the total by the number of female employees, and then doing the same for the men.
The difference between the two figures is the mean gender pay gap, and it’s this figure that has often been quoted in the headlines. But statistics experts say it’s not the best measure of what’s really going on.
A better measure is the median gender pay gap. This is a clearer way of describing the averages if there are big differences in salaries, especially when those in management earn more than most workers. That’s because their salaries can really skew the average. For example, if you have a CEO on a salary of £1 million, the mean will be higher than a company where the CEO earns £100,000, but it won’t really represent what workers are being paid. It’s the same when you’re looking at the gender pay gap.
To work out the median, you list all the salaries paid to women from lowest to highest. The median is the middle figure (or halfway between the two if there is an even number of salaries). Half the female employees earn more than this figure and half earn less. The same calculation is then made for the male employees’ salaries to work out the gap.
Who has the biggest and smallest gender pay gap?
Last year, the UK’s average gender pay gap was 18.4%. But for individual companies, the new pay gap figures show it can be much more. Lingerie retailer Boux Avenue’s is a staggering 75.7%, with men making up 91% of the top 25% of earners. Women working at the company earn just 24p for every £1 men earn (blimey, where’s my application form..?!) The retailer Debenhams, by way of contrast, has a 0.3% gender pay gap.
Ryanair has a gender pay gap of almost 72%, with women making up just 3% of the top 25% of earners. Easyjet’s is better, but not brilliant by any means, at 54%, while British Airways reported a pay gap of 10%, with women making up over a third of the company’s top earners.
In financial services, pay gaps vary in banking from over 40% (Sainsbury’s Bank and Lloyds make this list) to just 2% (M&S Bank).
In asset management, a gender pay gap of 25% to 30% isn’t unusual, and the highest I’ve found so far is over 47%. But, in a sector that’s bonus-driven, the bonus gap is even more revealing. At Rathbone, for example, women get – on average – a bonus of just 15p for every £1 that men get. At Legal & General Investment Management (a household name that manages almost £1 trillion of assets), the bonus gap is 55%.
In comparison, Yellow Dot (a company that operates day nurseries) pays women a staggering 80% more than men, on average. But with most companies the gap is much lower. Unilever pays women more than men – just. Its gender pay gap is 1.3% (although women get 44% less in bonuses).
Travel insurance company Insure & Go pays women 2.6% more than men and, unusually, most of its top earners are women – they make up over 60% of the top quartile of pay levels. Women lose out on bonuses, but by relatively little (less than 7%).
The Department for Work and Pensions – which is often in the headlines for negative stories – pays women and men the same hourly rate and the same bonuses.
As well as publishing the data, companies have had to explain why they have a gender pay gap and what they’re going to do about it. Too many gender pay gap reports I’ve read say that the gap exists because there are more men in senior roles. But that’s not the reason, that’s the consequence of recruitment policies, working practices, leadership and so on. The differences in gender pay gaps from employers in the same sector show that it’s more of a company issue, than a sector one.
The real work starts now in terms of keeping up the pressure on companies to do something meaningful about their gender pay gaps. That could mean voting with your feet, and not buying from companies that have a high gender pay gap. Independent researchers Opinium conducted some research for my website, SavvyWoman, and found that over half of women would consider switching bank if theirs had a high gender pay gap. If a big gender pay gap affects a company’s reputation, revenues and profits, they will have to take notice.
Images: Getty/ Charles Deluvio/ iStock