The Gender Pay Gap

What You Need to Know About Gender Pay Gap Reporting

Posted on: 13 Jul 2017

If you work in HR, you should be aware of the government’s gender pay gap reporting requirements. But, unless you’re directly involved with the project, the finer points of the project and the report’s implications for HR might not be clear. To help you get ahead of the game, we explain the background, requirements, project steps and communication strategies you need to know.

What is Gender Pay Gap Reporting?

Almost 50 years on from the introduction of the Equal Pay Act there remains an overall gender pay gap of 18% (reducing to 9% for full time roles). To better understand how women are being disadvantaged, organisations with more than 250 employees are required to report pay differentials between male and female employees.

Organisations must take a snap shot of employee pay as at 31st March 2017 for the public sector and 5th April 2017 for the private and voluntary sectors. Employers will need to identify and publish the following three key findings on or before 30th March 2018, after which reports are required annually:

  1. The percentage difference in mean and median male and female pay
  2. The percentage difference in mean and median bonus paid to men and women, and what proportion of the male and female workforce are paid a bonus
  3. The numbers of men and women sitting in each pay quartile across the overall pay range of your business

Calculations will be based on a specific set of defined data (more on that in a moment) using gross hourly rate to ensure a like for like comparison.

Why is It Important?

Clearly, gender pay reporting builds on the Equality Act as another step towards fair pay.

However, it’s important to note that this isn’t an equal pay audit.

Employers are not required to analyse the data of individual men and women to establish ‘equal pay for work of equal value’. It’s the overall gender pay variance that is being established.

The resulting data should give employers a powerful way to assess gender pay differentials, think constructively about them and take action to resolve them. This can be beneficial for attracting talent, enhancing brand reputation and ensuring women’s pay is sufficient to provide a pension.

It’s estimated that 1.3-2% of UK GDP is lost because women’s skills are under-utilised. By identifying such issues and addressing them, it’s hoped an additional £41 billion of spending will be contributed to the UK economy annually.

What It Means in Practise

There are several stages to the project:

1. Reporting

You may be asked to help collate relevant data from multiple systems or conduct a data cleanse to ensure accurate reporting.

2. Preparing to Calculate

Certain employee categories and pay elements are in scope and others are out of scope. Your reporting team will need to establish:

  • The pay and bonus elements covered by the gender pay gap reporting requirements and the relevant pay period they should be taken from
  • Which employees are covered and which are excluded
  • How to calculate gross hourly rate as the basis for the gender pay gap analysis
  • How to report this data
  • For full details see the table on page eight of this KPMG gender pay reporting guide.

    3. Analysing

    Once the data is present and correct, the analysis can begin to establish any gender pay gap.

    4. Identifying the Underlying Issues

    Analysis now takes place to establish whether there is a gender pay gap, how big it is and the reasons for it. Large gender pay gaps may be demoralising for employees so understanding the underlying causes and establishing how to move forward is key.

    Gender pay gaps are sometimes caused by external factors outside of an organisation’s control like the makeup of the local labour force. However, often, organisations manage the following HR practices in such a way that they perpetuate or increase the gender pay gap:

  • Recruitment
  • Promotion
  • Bonus awards
  • Pay negotiations
  • Flexible working and return to work options
  • Organisational culture
  • These HR processes may need to be analysed and amended to ensure they are fit for purpose from a gender equality perspective.

    5. Publication
    Organisations are required to report their gender pay gap in two ways:

  • to the government, who will make your report available to the public and rank your business in a league table;
  • and on an easy-to-find area of your own website.
  • How This is Likely to Impact You

    If you haven’t been involved in the project so far, you will likely be involved in the later stages.

    As a member of the HR team, you will need to ensure the narrative around the report’s results is communicated carefully, particularly where a large gender pay gap is being revealed.

    Good practise is to discuss issues and their causes openly and honestly and set out how you to plan to move forward and address them. The excellent Hay Korn Ferry white paper contains insightful findings that could help your organisation take action to reduce any gender pay gap.

    Report findings can be published at any point between now and 30th March 2018 alongside an internal communications plan for all stakeholders including employees.

    Does a Gender Pay Gap Mean You Have an Equal Pay Risk?

    Equal pay cases account for a significant proportion of tribunal claims. However, this report is aimed at focussing on the overall gender pay gap at an organisational, not an individual level. A survey from Hay Korn Ferry found that, while women as a demographic group get paid less than men,

    “when compared like for like, the gender pay gap reduces to 1.6%. Put simply a man and a woman doing the same job in the same function and company, get paid almost exactly the same.”

    Research often indicates that gender pay differentials are caused because more of the top jobs, which carry higher salaries, are occupied by men. It’s often this glass ceiling effect that causes gender pay gaps rather than unfair pay within the same role. However, your organisation’s gender pay gap report will reveal the causes for any gap within your organisation.

    Of course, there is a risk that the focus on gender and pay could result in women seeking to understand their individual pay position relative to men doing equal work. However, that remains to be seen.

    Now you understand the background to gender pay reporting, you’re all set to support communications, roll out policy changes and participate in gender equality projects. If you want more detail on the process, put these handy guides from KPMG and the CIPD on your reading list.

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