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Equal Pay VS The Gender Pay Gap: How To Explain The Difference to Stakeholders

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Despite the Equal Pay Act of 1960 prohibiting any less favourable treatment between men and women in terms of pay and conditions of employment, the current gender pay gap means that in 2016, relative to men, women stopped earning on 10th November, effectively working for free for the remaining 52 days of the year.

Though the gender pay gap is closing (the 2016 date for Equal Pay Day fell one day later than the previous year’s), estimates abound that at current rates of progress, it will take another 60 years to close the UK’s gender pay gap,[1] and as many as 170 years to achieve global pay parity.[2] As organisations around the world take bold steps towards reducing the gap, it’s important to have the differences between equal pay and the frequently confused gender pay gap clearly defined. For while both deal with pay disparity, they are two distinctly different issues, which require different initiatives and strategies to address.

 

HOW ARE EQUAL PAY AND THE GENDER PAY GAP DEFINED?

Equal pay refers to a legal requirement that within an organisation, male and female staff members who are engaged in equal or similar work or work of equal value must receive equal pay and other workplace benefits.

The gender pay gap is a broader measure of the difference in the average earnings of men and women—regardless of the nature of their work—across an organisation, a business sector, an entire industry or the economy as a whole. It is expressed as a percentage of men’s earnings and currently sits at 18.1% in the UK,[3] meaning that for every pound earned by a British male, a British female earns just under 82 pence.

 

IF MEN AND WOMEN RECEIVE EQUAL PAY, WILL THE GENDER PAY GAP BE WIPED OUT?

Not necessarily. A business is considered compliant with equal pay regulations if, at every level of its hierarchy, male and female workers engaged in comparable job roles receive equal pay and benefits. But if that same organisation’s senior management and leadership teams are predominantly male, while its junior positions are held by a majority of females, it may have a considerable gap between the average earnings of its male and female workers.[4]

It’s worth noting that an organisation committed to gender diversity may take positive action that unwittingly increases its gender pay gap, such as recruiting more females at entry level, while maintaining a male-dominated leadership team. The gender pay gap, requires that organisations think more broadly about how they can simultaneously attract, retain, engage and advance more women up through the talent pipeline.

 

DO UNEQUAL PAY AND THE GENDER PAY GAP HAVE DIFFERENT CAUSES?

The law concerning equal pay means that employers who do not award equal pay for equal work can easily find themselves facing legal action on the grounds of discrimination by disgruntled workers or teams. The causes of the gender pay gap, meanwhile, are more varied and complex than can be accredited purely to outright prejudice.

Some of the reasons commonly cited by various sources for the gender pay gap include:

  • While girls often do well at school, there is a tendency for them to end up concentrated in employment sectors offering narrower scope for financial reward, while higher paying sectors like banking and finance and technology industries are disproportionately male. (Equality & Human Rights Commission[5]).
  • Women are far more likely to take career breaks to look after family and to return to work on part-time wages. Unconscious bias is also said to play a role, whereby employers make assumptions about female ambition and financial goals. (Equality & Human Rights Commission)
  • There for some women there is a ‘confidence’ gap whereby women, it was found by an internal report by Hewlett Packard, put themselves forward for a promotion only if they possess 100% of the requisite skills, while men apply when they meet only 60% of the necessary qualifications. (Forbes[6])
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WHAT ARE THE BUSINESS BENEFITS OF PROVIDING EQUAL PAY AND TARGETING THE GENDER PAY GAP?

A transparent pay structure that provides all employees with equal pay and benefits reduces the risk of costly, productivity-, morale- and reputation-damaging equal pay claims.

Employees feel more valued, trust the organisation and in return are more engaged with their work. Having regular pay audits has also ensured that TfL has not needed to spend excessive amounts of time and resources rectifying pay discrimination through litigation. Equal pay is embedded into the business culture as a core value and business function. It is considered part of a manager’s ‘toolkit’ and is given due weight and consideration when line managers are recruiting new staff, setting salaries and giving promotions.

How Transport for London (TfL) benefits from equal pay.[7]

The benefits to an organisation of ensuring it is equal pay compliant are shared by those who work to eliminate the gender pay gap. But research shows that taking steps to increase gender diversity and inclusion brings with it a whole raft of further business advantages. A growing body of research finds that the more diverse a company, the greater its employee engagement, retention, productivity and profit rates.[8]

In French multinational firm Sodexo, data from 50,000 managers across 90 entities worldwide showed that teams with a male-female ratio between 40% and 60% produce more sustained and predictable results than those of unbalanced teams.[9]

 

What are the differences between initiatives for equal pay and those that tackle the gender pay gap?

Many organisations avoid legal action arising from equal pay issues by conducting regular equal pay audits and taking the necessary steps to ensure all employees are compensated fairly.

But an equal pay audit, while essential practice, will not reduce the pay gap alone, because it does not address the underlying causes of low female representation in senior positions. Just as the causes of the gender pay gap are many and varied, so too are the initiatives organisations are successfully employing to drive up their attraction, retention, engagement and advancement of women.

These include:

  • Using technology-based algorithms to sniff out job description jargon and vocabulary that could be limiting female candidates.[10]The makers of one such tool, utilised by organisations including Vodafone, Cisco and BP, claim that by eliminating gender-specific vocabulary, recruiters can expect to attract up to 23% more female applicants.[11]
  • Investing in quality learning and development programmes for female staff. Research by everywoman has found that such initiatives increase a woman’s chances of promotion by 42%.[12]
  • Programmes that target and support women returning from maternity leave and career breaks. This initiative is used by FDM Group, whose gender pay gap in 2017 stands at 0%.[13]

The information provided in this guide is correct at publication (June 2017). For the latest updates concerning gender pay gap reporting, visit the government page https://www.gov.uk/guidance/gender-pay-gap-reporting-overview.


[4] In his 2015 Women on boards: 5 year summary, Lord Davis found that the representation of women on FTSE 100 and FTSE 250 boards sat at 26.1% and 19.6% respectively (a new target of 33% has been set by 2020 by the Hampton and Alexander Review into senior leaders). At the other end of the scale, figures show that the majority of jobs paying minimum wage are held by women (59%) and that 27% of jobs held by women pay below the living wage, compared to 17% of men (Source: The Independent).

[8]For a summary of these findings, download the 2016 everywoman whitepaper Retaining & advancing women in business: a model for success.