Persistent gender pay gap a concern

Posted by Ian Jones on
A "wage penalty" for mothers and differences in promotion rates between men and women are significant factors in the persistent gender pay gap according to two recently published reports.

The report published by the Institute for Fiscal Studies (IFS), shows that the hourly wages of female employees are around 18% lower than men's on average. This indicates some progress because the wages were 23% lower in 2003 and 28% lower in 1993. This relatively good news ends there.

According to some of the key findings of the IFS report:

  • The gender wage gap widens significantly from a female employee's late 20s and early 30s (which often coincides with a woman's decision to start a family) and the arrival of children accounts for a gradual but continual rise in the wage gap. At this same stage of their careers, men's salaries continue to grow rapidly.
  • Women who return from maternity leave to work part-time lose out on subsequent wage progression and the difference in hourly wages between men and women increases steadily in the following years. By the time the first child is 12, women's hourly wages are a third below men's. By the time that child is 20, women on average, have been in paid work for four years less than men and spent nine years or less in paid work of more than 20 hours a week.
  • Where women take time out of paid employment, on their return, their hourly wages are on average about 2% lower for each year away from work. This trend is even more marked for higher- educated women, (those with at least A-levels) with a rate of 4%. The same does not apply to lower-educated women, and this is possibly because they have less wage progression to miss out on or fewer skills to depreciate.

But that's not all. The IFS says that women's potential earnings are affected by promotion opportunities. This was in fact the topic covered in the separate report by the Chartered Management Institute (CMI) and XpertHR which analysed the salary data of around 60,000 UK managers and professionals. The issue is not so much that the hourly rates for a job between men and women are different or that men and women are being paid differently for doing the same job. Rather, it is the difference in promotion rates that is a significant reason for the persistent gender pay gap.

According to the CMI report:

  • Male managers are 40% more likely to be promoted to higher roles and 14% of men in management roles were promoted last year compared to 10% of women.
  • Of managers who had worked for five years for their employers, 47% of men had been promoted compared to 39% of women.
  • The average full-time salary for male managers is £38,870, almost £9,000 more than the average female manager's salary. However, at a higher level, male CEOs or directors earn an average salary of around £131,673, which is £16,513 more than women at the same level.

As the CMI says, the gender pay gap starts to open up at a relatively junior level and the higher up the organisation you go, the more men will be found. However, it is not just promotion rates. The CMI found that there was a bonus gap too. Last year, 43% of men received an annual bonus but only 36% of women and the average bonus for men was £5,398 compared to £2,764 for women.

The Government's proposals to tackle gender pay inequality, with the introduction of gender pay audits, has attracted a great deal of media interest (and some controversy). The Equality Act 2010 (Gender Pay Gap Information) Regulations 2016 (currently in draft) will apply to private, voluntary and public sector employers with at least 250 employees. Under the Regulations, it is proposed that employers will need to calculate gender pay gaps using a snapshot of data on a specific date and this will commence on 30 April 2017. Employers will then be required to publish information about their gender pay within 12 months, that is, by 30 April 2018 and thereafter annually. In relation to bonuses, it applies to bonuses paid in the 12 months ending each 30 April, beginning on 1 May 2016. In other words, any bonus paid from 1 May 2016 must be taken into account in the calculation.

Employers will be required to publish data including the percentage difference in mean and median pay, the percentage difference in bonuses, and the proportion of men and women who receive bonuses. A particularly tricky issue for employers is that they will need to publish information about the number of men and women in each quartile of their pay band and it is still not clear what exactly is meant by that. Clarification by the Government is expected.

Significantly, the gender pay information needs to be published on the organisation's website which is accessible to both the employees and the public, it must be kept online for three years and uploaded to a Government- sponsored website. Whilst there may be no financial sanctions for failing to comply with the requirement to publish gender pay information, the Government is planning to make periodic checks to assess for non-compliance and potentially the media, members of the public, job applicants or trade organisations will all have a keen interest in seeing what the gender pay information reveals about a particular organisation. A negative audit could not only impact on reputation but create an adverse comparison with other employers which could impact on recruitment and retention, employee satisfaction, and a risk of grievances.

For these reasons, a dummy run of a gender pay audit prior to April 2017 is certainly advisable as this will give organisations the opportunity to identify any issues and to take remedial action if necessary.

For further details of our previous article on the topic of gender pay audits click here.

About the Author

Ian advises on all aspects of employment law with a particular emphasis on the termination of employment and the defence of employment tribunal claims.

Ian Jones
Email Ian
029 2068 6138

View Profile