Gender pay gap and equal pay – Beginners Guide
Why it is vital that we understand the difference between the gender pay gap and equal pay.
The gender pay gap and equal pay gap persists and in some cases, continue to widen.
You know that a topic is becoming mainstream because hitherto unlikely middle-aged men start showing public support. So what, you might be thinking, that’s great we have allies and champions, finally. The cynic in me is skeptical about last minute conversion to gender balance, diversity and inclusion, which I suspect maybe possibly more motivated by a need to stay relevant. With even greater cynicism it’s about revenue flow because it's the current hot workplace topic. But, if anyone is going to go down that path, regardless of their motivation, it's vital that they all understand the difference between the gender pay gap and equal pay.
Sadly in many cases they don't.
At a conference recently I heard a man from the above described demographic casually group women with other diversity interest groups such as those with learning differences and gender identity issues. This is not to detract from the challenges that these groups face in the workplace. They have significant hurdles. But gender balance is not a diversity issue. Women make up 52% of the population. It’s a balance issue. One thing that this gentleman got spectacularly wrong was the he hadn’t understood the difference between the two very different concepts of the gender pay gap and equal pay. Since then I’ve discovered that this is more common that you might think.
This post is an attempt to clarify that miscomprehension.
Definition of the gender pay gap
The gender pay gap is the average difference between hourly wages for men and women who are working. There are two distinct categories regarding the pay gap:
2. Adjusted pay gap. This typically factors in differences in the total hours worked, occupations chosen, education and job experience. A woman who has a career gap - for example for maternity leave or parenting, will typically earn less than an employee who does not take time off from work. In the US the non-adjusted average woman's annual salary is frequently quoted as 78% of the average male salary, compared to 80–98% for the adjusted average salary.
Despite significant campaigns at all levels from women’s groups and international bodies as well as national governments, the gender pay gap and equal pay gap persist and in some cases, continue to widen.
The calculation of the gender pay gaps looks at five factors:
1. Mean gender pay gap. This is an average of all earnings. It’s calculated by adding up income of all employees, male and female and dividing it by the number of employees to calculate the average (mean). The pay gap is the difference between the mean figures for men and women, which is reported as a percentage.
2. Median gender pay gap. The median gender pay gap is calculated by listing the income of all employees from highest to lowest and comparing the number that sits in the middle for each gender.
The difference in salary between those two levels is the pay gap figure. This doesn’t account for age, previous experience of differences in job roles. It is still regarded as the best representative calculation, in that the mean gender pay gap figures can be distorted or misrepresented if the list includes highly paid individuals who might be remunerated above the norm. It’s for that reason that the more frequently quoted figure is median gender pay gap.
Other areas which come under review are :
3. Mean bonus gender pay gap.
4. Median bonus gender pay gap.
5. Proportion of males and females receiving a bonus payment and proportion of males and females in each segment.
Definition of equal pay
The gender pay gap is NOT the same as equal pay. Unequal pay is when women are paid less than men for doing the exact same work. Despite legislation to make this illegal in many jurisdictions, the problems is still prevalent. For women to take action on the question of equal pay, there needs to be transparency. They need to know what their male colleagues are earning. The recent well publicised legal action in a landmark case a BBC presenter was paid six times his co-presenter for equal work. One of the reasons quoted by the defence team was that Mr. Vine (the male presenter) had “a naughty glint in his eye” when he read the news. Yep! Seriously. A six figure glint.
The real gap closer
The real way to close the gender pay gap is essentially about economic empowerment and the redistribution of wealth by creating equal access to employment and promotion opportunities to senior roles which pay more. Women (and minority demographics) have to overcome significant systemic and cultural barriers to win the most highly remunerated roles in the workplace. These include STEM jobs and roles that grow into leadership roles. This is why most well paid jobs in organisations are predominantly occupied by one demographic. Men.
So although we can't make the world an more equal place, we can all play a part in building work places that are more inclusive and lead to more equitable outcomes for a greater number.
Ways to close the gender pay gap and achieve equal pay
1. Systemic changes to recruitment systems
There is compelling research to suggest that diverse and inclusive organisations are better for business. Yes many businesses fail to move away from tried and tested ways of recruiting new hires and continue to source candidates in the same places. They value nebulous characteristics mainly associated with alpha males - charm, charisma and executive presence. Research examining employee referrals found that referral systems disproportionately favour white men. Essentially they had put in place a the 3M cloning system. Mini-Male-Mes. Referral systems can be very effective, but try replacing specifically with a request for a female candidate.
The World Economic Forum proposes in its paper How to close the Gender Pay Gap in 3 steps to examine "the distribution of employee segments across all levels of the organization. Analyze the pipeline for midlevel and senior leaders. Ensure executive sponsorship of inclusive and diverse pools of talent across all parts of the business."
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2. Salary offers based on the job not the person
Although it is becoming outlawed in several places it is still common to ask candidates for their salary history specifically their current salary. For many candidates there are historical reasons why women are paid less than men for largely equivalent work. The real approach should be to “Price the job, not the person.” Each role should have a salary range and hiring manager should decide where a candidate falls on that range, subject to their background and skills and possible time required to onboard into the role. Very often candidates who have moved between multiple organisations have negotiated higher salaries than existing employees. This is a call only the hiring manager can make.
Recruiters frequently make assumptions that a person who has a career gap, for example for parenting, will bring less to the table than the employee who has been consistently employed. The World Economic Forum proposes "Make adjustments where necessary and short-circuit policies and practices that perpetuate unintended pay differences (e.g., promotional increase limits, overemphasis on tenure or experience as a driver of higher pay). "
As employee productivity is at an all time low, that thesis may no longer be applicable. Maybe a fresh face with renewed energy and drive, someone who has taken time to learn new skills (parenting) has the potential to work at a higher level than the person who has been "docked" in a job for the same time period. In the US productivity growth is at the lowest ever at 1.2% which would suggest we need to think of different ways to stimulate employee engagement.
3. Ongoing pay equity analysis
Organisations should be looking at how they can achieve pay equity. In the same paper the World Economic Forum suggests "Examine pay practices at every level to ensure fairness across employee segments. Pay special attention to highly-populated roles, key business roles and top executive roles. "
In some geographies this is a statutory obligation and tends to be easier than closing the gender pay gap. This means making sure that intakes in all areas are gender balanced. It requires both men and women to have equal shots at senior roles and promotions. Parenting leave should be open to men and women equally. As new generations of men are making the same demands on the systems for work life balance and in some cases being equally penalised, maybe we will start to see a shift.
But before we go any further we have to make sure that those less informed don't conflate the gender pay gap and equal pay.
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