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In order to understand the reasons for the pay gap it is useful to know the proportion
of men and women across the organisation. One simple way of doing this is to line
up all the employees by pay, with the lowest paid (by hourly rate) at the bottom and
the highest paid at the top. They are then split into quarters. These groups are called
‘quartiles’. The middle person is also called the median, which is used for the median
pay gap calculation. Once the organisation is split into four equal groups the
proportion of men and women within those groups is calculated. If there is a large
pay gap it is often because the lower two quartiles have a higher proportion of
women, and the higher two quartiles have a higher proportion of men. This is often
called vertical segregation.
The pay gap calculations require there to be a baseline (in this case men) and a non-
baseline. This non-baseline could be any other gender. At present it is not possible
to have a gender identity other than male or female on passports, so many
companies use that information. Some companies also collect other gender
information, understanding that some of their employees prefer to identify as non-
binary. In that case they are able break down their figures further.
When looking at ethnicity there are multiple categories. It is therefore possible to look
at each category against the baseline (white), and to look at all non-white categories
combined against the baseline for a binary pay gap figure.
Although the pay gap figures require only two groups, it is possible to look at more
than two for the other calculations:
– Percentage of each group receiving bonus
– Percentage of each group in each quartile.
This shows whether there is a difference in the ability to receive a bonus within the
organisation. It is the number of women who receive a bonus as a percentage of the
total number of women in the organisation on the snapshot date and the number of
men who receive a bonus as a percentage of the total number of men. Those eligible
for bonuses are often either higher up in a company or part of a particular group (e.g.
sales). If there are more men in those groups there will generally be a higher
percentage of men eligible. This can show the negative consequences of
occupational segregation.
This is the difference between the pay that the average man receives and the pay that the average woman receives. The calculation is:
Average can be defined in two ways – mean and median. Both the mean and median pay gaps are provided as they have different strengths.
Mean is what people generally refer to when they say average. It is the sum of all the pay divided by the number of people. This is useful as it includes all pay in the company. However, if there are some very high or very low pay amounts in comparison to the rest, these may skew the figures.
Median is the ‘middle’ number. So, 50% of the pay is higher than this value and 50% of the pay is lower. This removes any skewing from outliers, but is sometimes misleading.
The numbers that companies use to calculate the pay gap are hourly rates, in order to ensure that all employees are compared fairly. Allowances are included within hourly rates. If employees have a salary sacrifice scheme for pensions or other benefits, the hourly rate is after these deductions.
Employees are included in the calculations if they were employed on the ‘snapshot’ date – 5 April for private sector, 31 March for public sector – and were not on any leave at that time that wasn’t paid at the full amount. Therefore people on unpaid leave or leave where they are paid a lower amount rather than full pay are not included.
All companies with 250 or more employees are required to publish their gender pay gap figures on the government website (link) and on their own website. It provides the following figures:
The data is based on the snapshot date and the UK government gives employers a year to report. This means that reports required by 30 March 2025 for public sector employers and 4 April 2025 for private sector employers are based on snapshot dates of 31 March 2024 and 5 April 2024 respectively.
Firstly the gender pay gap is a reflection of the opportunity of women to earn the same as men. If there is a pay gap it suggests that there are barriers to women doing the work that is paid more highly. This could be because they are doing jobs that have a lower market value or because they are in jobs that pay well, but in lower levels of those jobs.
The market value for a job is defined as the median pay that employees in that job are receiving across companies, locations and industries. Organisations use these market values to see how they are paying their own employees against the market. Gender is not a factor in determining those market values. However, we know that there has been occupational segregation in the past1, some of which continues today, and that there is a history of undervaluing ‘female’ work2. As market values are a reflection of the society from which they are taken, it is not surprising that jobs that were traditionally female have a lower market value than those that were traditionally male. In particular, management roles have had much higher increases year on year in the past few decades than non management roles. As they are traditionally male roles, this has lead to higher pay gaps.
The question of choice of roles is one that has been much studied over the years. The assumption is that both men and women have a free choice over their careers, when generally that is not the case. The choices are narrowed by the society in which we live. If childcare is expensive and women are the primary carers, their choice for employment is much reduced. They may need to find a part time job, which generally pay less, or they may need to work remotely, or have a shorter commute. Choices of career are also shaped very early on in life, and there are different societal expectations of men and women3. If a woman does choose a high paying career and doesn’t have children or isn’t the primary carer, they often still experience barriers to reaching higher levels in that career4.
Finally, there are cases where men and women who should be paid the same are not, either within an organisation (as shown by tribunal cases against Birmingham City Council and Next) or across companies5.
So, although it may be factually true to say that the pay gap is due to choices of jobs and their market values, it is generally accepted that the reasons for those values and the lack of free choice is due to historical bias against women in society. This is why there are equal pay and pay gap reporting laws – to try to redress this bias.
This is when people of one demographic are more likely to do one type of work. For
example, nursing roles have a higher percentage of women, and construction roles
have a higher percentage of men.
This is also known as horizontal segregation.
This is the same calculation as the pay gap but uses bonus pay instead. Bonus pay
includes any payments that were ‘discretionary’ during the year running up to the
snapshot date. So performance bonuses, profit sharing schemes, sales commission
and long service awards are included. These payments are as is and not calculated
as an hourly rate. This is because some bonuses are calculated as a percentage of
salary and others are a fixed amount or percentage of a sale.
The gender pay gap at an organisational level is more a representation of the opportunity gap, than about pay. It does not mean that men and women are being paid unequally for the same, or similar, jobs. It could be that there are no legal equal pay issues but that there is still a large pay gap. This typically arises from the fact that, although men and women are paid similarly for the same work, women do not have the opportunity to work in the higher paying roles. This could be due to many reasons, including, for example, promotion and hiring policies favouring men at the higher levels. However, there can be situations where men and women are not being paid equally for the same, or similar work, which organisations should clearly also be checking for.
For smaller organisations, a seemingly large pay gap may have arisen simply due to chance. It is possible to carry out some statistical analysis to see whether the actual pay gap is statistically significant or not (meaning that the likelihood of it being like that due to chance is very small). For larger organisations, most pay gaps above 2% are statistically significant.
Some companies provide a full narrative explaining the work that they have done to reduce the gender pay gap, and the work that they intend to do. If your company has done so, this may give you some additional information. If they haven’t, it might be worth enquiring why not. In 2024 the UK Government introduced legislation to require Equality Action Plans, setting out how to address gender pay gap issues.
It is useful to understand if your employer has done any analyses in addition to those that are required. For example, they could have looked at the pay gaps by department, or by level. They also may have done some analysis to look into the causes of the pay gap, such as whether there are barriers preventing women from working in the higher paid roles.
Gender is only one protected characteristic. Many companies look at other characteristics, such as ethnicity and disability, both individually and combined. It is often the intersectionality between protected characteristics that surprises people. For example, the UK gender pay gap in 2022 between men and women was 14.9%, but for women of Pakistani heritage, compared to white British men, was is 25.9% (ONS, Ethnicity pay gaps, November 2023)
Companies must have equal pay for equal work, or work of equal value. This means that people doing the same job can only be paid differently in specific circumstances. And it isn’t just those with the same job title. They can be doing very different jobs but where those jobs are of equal value. There are many tribunal cases going through the UK courts at the moment looking at workers in retail and warehouse roles. Tribunals have decided that those jobs are of equal value, so now the companies have to prove that the reasons for the differences in pay were justified. https://www.bbc.co.uk/news/articles/cj0817jd9dqo
Speak to your employer in the first instance and ask if they have done a pay gap analysis that looks at jobs of equal value. They won’t necessarily be able to tell you the pay gap for the group that your job is in, but they should be able to tell you if they have done the analysis and that you are paid fairly against your peers within that group. If they haven’t done that analysis it would be appropriate to ask how they know that you are paid fairly. Companies in the EU will have to provide this information to employees from June 2026.
Another way to find out if you are paid fairly is to look at job postings. Nowadays many companies provide pay ranges in the job post. Indeed found that 70% of jobs on their platform have a range1. If your company does this you could look at what they are putting on posts for your job and jobs that you believe are of equal value to yours (for example, those at the same job grade, if your company has them). You could also look at posts from other companies for the same jobs. These data could help you determine whether you are paid similarly to others in your position.
One final way of finding out is to speak to your colleagues. As a society we are not generally comfortable with talking about our pay. But if we became a bit more open, companies would find it harder to pay people differently, except for reasons that they could easily explain.
We shouldn’t be! The gender pay gap reporting regulations are what has led to companies producing a gender pay gap report. But there are other protected characteristics and it is important to understand if there are pay gaps for those too. Plus the intersectionality between the protected characteristics is important to understand.
The main reason that many companies do not look at other characteristics is that they do not have the data for others. Gender information was traditionally required when starting work for pension purposes, as the pension ages were different for men and women, so most companies have gender data for their employees. Employers have not traditionally asked employees to declare their ethnicity, LGBTQ+ status or disability status, and many employees are not keen to provide them. Therefore companies need to prove to employees that they are collecting this information in order to ensure that there is no bias within the organisation before they can start reporting on the pay gaps.
The UK government is committed to bringing forward legislation to add ethnicity and disability to the pay gap reporting requirements.