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what the difference is between ‘Gender Pay Gap’ and ‘Equal Pay’

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What the difference is between ‘Gender Pay Gap’ and ‘Equal Pay’, and why it's important to distinguish between the two

The gender pay gap reporting regulations came into effect 5 April 2017, with organisations in Great Britain over 250 employees being required to publish their results on their website and upload them to the gender pay gap Service Government website by 5 April this year.

10,610 employers have revealed ther gender pay gap results, meeting the 5th April 2018 deadline, but there remains a lot of confusion both in the media and amongst the public as to what the gender pay gap means and why it is different to Equal Pay.

WHAT IS THE ‘GENDER PAY GAP’?

The gender pay gap is the difference between the gross hourly earnings for all men and the gross hourly earnings for all women. It is expressed as a percentage of men’s earnings.

It is made of 6 pieces of information on the total workforce population:

PAY GAP, MEAN AND MEDIAN - This is the difference in hourly pay of male and female full-time relevant employees, expressed as a percentage of the hourly pay of male relevant employees. This means that a positive number indicates men earn more than women; a negative number will mean the reverse.  Pay is defined as all cash earnings, so bonuses are included but non-cash benefits are not.

BONUS PAY GAP, MEAN AND MEDIAN - This refers to the bonus pay paid to men and women during the 12 months before the 5 April 2017, expressed as a percentage of the bonus pay paid to male relevant employees. Bonus mean all forms of variable pay - bonus, sales commission, recognition payments, stock awards and other types of long term incentives (so called LTIPs)

BONUS PAY PROPORTION - Bonus pay proportion refers to male relevant employees who received a bonus in the 12 months, expressed as a percentage of the male relevant employees; female relevant employees who received a bonus in the 12 months, expressed as a percentage of the female relevant employees.

QUARTILES (TOP, UPPER MIDDLE, LOWER MIDDLE, LOWER) – this is where all of the employees are  ranked from highest to lowest by hourly rate of pay (the gender pay gap number). Companies need to divide this list in 4 even groups and then report the split of men and women in each of the quarters.

WHAT IS ‘EQUAL PAY’?

Equal Pay is men and women being paid the same for like work, work rated as equivalent or work of equal value as set out in the Equality Act 2010. This is the protection against unfair pay that was been with us in the UK since 1975. It came about after our entry into the EU (or the EEC as it was then) as gender equality has been part of the EU constitution since its founding in 1957 (Treaty of Rome). Whereas gender pay mixes all earnings together, this is not the case with equal pay.  Each individual element - i.e. bonus, car, training etc. - has to be equal. If someone does not think they are being paid fairly then they can bring a case at a tribunal. Employers have a number of defences they can use but the onus is on them to explain the differences. The most significant reasons they can use to explain include: Level or grade in the organisation as defined by a factor based evaluation; performance; age and experience (but within reasonable limits due to age discrimination legislation), qualification and market forces (which would also cover location). If an organisation is found wanting in relation to equal pay the implications can be quite onerous beyond the individual case – a full review of equal pay and rigorous application of job evaluation could be order by the Tribunal

WHAT’S THE DIFFERENCE?

While the two are often confused, it must be reinforced that the gender pay gap is not the same as Equal Pay.

The gender pay gap is the difference between what men typically earn in an organisation compared to what women earn, irrespective of their role or seniority. Equal Pay is the legal requirement for men and women to be paid the same for performing the same or like work or work that has been rated of equal value e.g. by a factor based job evaluations scheme like Mercer’s IPE system.

One of the main reasons for the gender pay gap is that men are more likely to be in senior roles. An organisation that predominantly has men at senior levels and women in junior roles will have a gender pay gap.  However, wise organisations are aware of the heightened attention on equal pay as a result of the focus on the gender pay gap and frequent confusion of the terms. Their response is to undertaken audits of their pay for equality purposes, review their pay structures and analyse their pay

In contrast to equal pay, the gender pay gap is much more of a reflection of workforce profile than about unequal rewards for men and women doing the same job. It is about the work women do and their position in the company hierarchy – and in this area there is much room for improvement among UK employers. EU statistics show that 27% of UK board members in commercial organisations are women, according to the European Commission: Women and Men in Decision-making Database. Our own When Women Thrive research consistently shows female progression tails off at management level.

Employers can and should do more, but there is also much to be done in broader society in terms of the messages received by boys and girls at school and home about the world of work and their place in it. This is not wholly the responsibility of employers. Many companies in sectors where workforce competition is against them, for example engineering or high-technology where there are far fewer female STEM (science, technology, engineering and maths) graduates have spent many years encouraging female employment in their sectors. Some countries do not have this problem (e.g. 50% of Indian software engineers are women) so there is clear room for improvement in how certain subjects and careers are gendered.

Conclusion…

Many organisations are wrestling with their gender pay gap number and how this is being seen. As more and more organisations publish their narrative we are seeing a rising genuine desire of businesses to engage positively on the subject. They recognise the business benefits and the business risks of not ensuring that they are attracting, retaining and rewarding the best possible people. Attention to pay systems is a necessary fix; addressing the broader gender pay gap in any company is a much lengthier process and many organisations are recognising they need to start now in order to make sure they don’t fall behind.

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