What is gender pay gap reporting & why is it important?

The Gender Pay Gap reporting came into place in 2017 and an employer with a headcount over 250 must engage with this data collecting and reporting.

This data is gathered from payroll systems which draw upon a specific date each year to compare salaries and data. This date is also known as the ‘snapshot date’ for it to be published on a government website.

What are pay gaps?

Pay gaps are indicators of embedded and systemic diversity and inclusion problems within organisations and many employers are now taking significant steps to identify and address the causes of the gaps.

Pay gaps identify and acknowledge the percentage difference in the average hourly earnings for women and men.

This is done by working out the median average, which shows the pay that half of people earn more than, and half earn less than.

Some are motivated to act by the legal requirements for transparency (in relation to gender), but others see pay gap data as an important inclusion indicator that must be tackled if they are to achieve an inclusive and diverse workplace.

Pay gaps are different from equal pay. Equal pay is the legal requirement to pay two people doing the same job the same pay, whereas pay gaps are about the average pay difference between all men and all women.

Exploring pay gaps in the UK

Currently, in the UK, organisations with more than 500 employees are required to report their gender pay gap annually (please note, in a press release issued on Sunday 2 October 2022, Liz Truss’s Conservative Party government announced that the threshold for the size of companies which are required to report on pay has risen from 250 employees to 500). Organisations must provide averages for pay and bonuses and a narrative and action plan to accompany the numbers.

The government ask for the report to be uploaded to the government portal and also be available on the employer’s website.

However, there is no scrutiny or governance in place to close an organisation’s pay gap. Therefore, meeting the legal requirement is doing the bare minimum. Inclusive employers must go beyond the legal requirement and delve into the why of pay gaps.

Ask yourself:

• Are men and women treated differently?
• Do men and women have the same development opportunities?
• Do men and women get promoted at the same rate?
• Are the differences widened by intersectional identities (i.e. disabled women, black women, etc)?
• Do specific locations or departments have wider/smaller gaps than the average?
• Are parental responsibilities impacting career progression and widening the pay gap?

By asking challenging questions you will be able to write an action plan to accompany your pay gap which drives change by being specific, measurable and time-limited.

Another way to go beyond the legal requirements is to collect and report on pay gaps based on other protected characteristics, for example, race or disability.

What types of pay gaps are common?

The most reported and recognised pay gap is Gender due to the legalities of reporting.

But more organisations are proactively doing reports and findings on ethnicity and disability too.

An Ethnicity Pay Gap works out the average hourly rate of pay between colleagues of colour and white colleagues.

Similarly, for the disability pay gap, disabled colleagues and non-disabled colleagues. This calculation is done in the very same way as your gender reporting.

There is nothing in terms of legislation that makes any organisation do with ethnic pay gap reporting or disability pay gap reporting, but many Inclusion & Diversity professionals expect to see these come into place in the future. It’s therefore often recognised as best practice to do this reporting internally.

Why are there still pay gaps?

Pay gaps are still present and they are narrowing at a very slow rate. Experts suggest that pay gaps will remain in place in the US until 2059 and the UK until 2069, with Deloitte finding that it’s closing at the rate of 2.5p a year.

The famous phrase, “glass ceiling”, sums up why there is still a pay gap. This could include gender-assumed responsibilities of care pausing or preventing a person’s career from advancing via promotion.

In addition to making personal choices, barriers are sometimes assumed. Assumptions of skill and ability before starting a role sometimes result in women having a lower starting salary than their male counterparts.

These pay gaps decisions and choices are created before a person steps foot into a workplace. We see gender disparities and a lack of opportunities in education too.

The importance of collecting pay gap data

Data collected from pay gap analysis is vitally important, but it relies upon good diversity data collection as if you don’t collect ethnicity/disability data, or you have lots of colleagues who choose not to declare then you will not get an accurate picture of your pay gaps.

Pay gap data can also help you to evaluate the success of your diversity and inclusion strategy and can be a key indicator to show what has worked and what needs to change.

If you deliver a diverse leaders programme and in the next two years you see the attendee be promoted and the pay gap decreasing you have hard evidence to show why you should keep funding that initiative.

This evidence of evaluating programs will also help you achieve silver and gold status in the Inclusive Employers Standard, as Pillar 4: Evaluate ask what quantitative and qualitative methods are used in your organisation.

Tips for your gender pay gap reporting

The dates below are when organisations must collect their data. This means organisations can’t choose a date when their data looks the ‘best’; it’s an even and fair way to allow for benchmarking and comparisons.

Organisations have one year to submit their report, for example, if data is collected on 31^st March 2022 the deadline for the report will be 31^st March 2023.

• 31 March for most public authority employers
• 5 April for private, voluntary and all other public authority employer employers

To help you, take a look at our helpful tips on how to report gender pay gaps below:

There are 6 calculations that need to be included in your reporting

1. Percentage of men and women in each hourly pay quarter
2. Mean (average) gender pay gap using hourly pay
3. Median gender pay gap using hourly pay
4. Percentage of men and women receiving bonus pay
5. Mean (average) gender pay gap using bonus pay
6. Median gender pay gap using bonus pay

Explore your data

Work out what could be causing a gender pay gap and any other pay gaps. It could be good to create some diversity of thought by looking critically at this data to bring in different observations and perspectives. Do remember though that not every colleague can work with data as efficiently as others, so try and make it digestible.  

Check your action plan

If you’ve done this reporting a few times you should have an annual action plan that sits alongside it to remove gender bias and barriers with the aim to reduce your organisation’s gender pay gap.

Setting your own annual reporting deadline can be useful to review and identify what is and isn’t working in order to put and remove initiatives in place for the following year.

Be comms ready

When submitting the gender pay gap report, you need to be prepared with your communications. Here are some suggestions for before and after:

Before:

Build a narrative to submit with your report, it can support people with reading your report, especially if the data is complicated. It’s also a great place to explain your data analysis of where the gap is coming from and as a result, how you’re going to close that gap with initiatives.

After:

You’ve pressed publish, your gender pay gap data is available for anyone to access including employees, future employees, clients/customers, and the public. Therefore, having an organised comms structure with different messages relevant to the audience is important. You should also upskill the necessary communicators with the relevant and necessary information.

Importantly, make sure your colleagues find out via you and not any third-party reporting media or social media.

Press submit!

• Press submit on the Government reporting service
• Press submit on your organisation’s website

Do this before 30^th March (public sector) and 4^th April (private sector).

Explore other organisations in your sector

Want to know how other organisations in your sector are doing with their pay gap? You can use this search tool.

Closing thoughts

If you need further support with pay gap reporting Inclusive Employers, offers a pay gap consultancy service. If you’re a member, you can explore our equal pay guide here.

If you’re not yet a member, get in touch today to see how we can help.