Out-Law / Your Daily Need-To-Know

UK gender pay gap continues to narrow on five-year anniversary of reporting

Out-Law Analysis | 20 May 2022 | 2:46 pm | 6 min. read

Although the average hourly median gender pay gap (GPG) in the UK has further narrowed in the past year, many businesses are now taking stock and are disheartened that their GPG has remained relatively static despite the significant investment they have made in diversity initiatives.

Nearly five years on from the implementation of mandatory GPG reporting, many businesses are undertaking a more in-depth analysis of where their challenges lie in respect of diversity and inclusion (D&I), with a view to taking more targeted actions to drive progress. Brook Graham’s D&I maturity assessment tool can support this process

Emerging trends from the 2021-22 GPG reporting cycle

In the fifth annual cycle of mandatory GPG reporting, the average hourly median GPG was 12.2%, down from 12.8% in 2019-20 and 12.4% in 2020-21.

The average GPG reported by the 10,283 employers submitting data to the government portal was lower than the national average median GPG of 15.4% reported by the Office for National Statistics (ONS) in 2021. However, the ONS includes figures for all employees and companies, not just those with 250 or more employees who have a legal obligation to report their GPG data under the Equality Act 2020 (Gender Pay Gap Information) Regulations 2017.

The number of companies complying with the reporting duty has remained relatively consistent since its introduction in 2017-18.

Donaldson Susannah

Susannah Donaldson

Legal Director

Whilst the initiatives implemented by businesses to increase female representation at senior levels have had some impact, there is still much more to be done to level the playing field

The average median bonus gap for 2021-22 is 0.8% for the companies who have reported. This gap has narrowed from 1.5% reported in 2020-21 and 10.1% in 2019-20.

Financial services was the sector with the highest median hourly GPG, at 21.9% based on the companies who reported on the portal; the ONS reported the average median hourly GPG for this sector as a whole was 32.2% for 2021. The infrastructure sector also reported a significant hourly median GPG of 21.3% for 2021-22 based on the data submitted to the portal, or 16.6% for the sector as a whole as reported by ONS.

Overall, the proportion of women holding positions in the top quartile of employees has very slightly increased from 39.18% in 2017, to 40.54% in 2021. This shows that whilst the initiatives implemented by businesses to increase female representation at senior levels have had some impact, there is still much more to be done to level the playing field.

Many companies seem to have improved their gender pay gap statistics since the reporting obligation was introduced in 2017, with most sectors reporting at least a slight reduction of 1 or 2% to their GPG figures since 2017-18.

However overall progress is slow. The median pay gap for FTSE 100 companies has only reduced by 1.2% since the GPG regulations were introduced, and the median GPG has increased for 30% of FTSE 100 companies since mandatory reporting was introduced.

Taking stock

Pay gap reporting is not meant to generate a quick fix. Rather it is intended to shine a spotlight on pay disparities in the workforce and drive progress over time. The data for 2020 and 2021 was impacted by the Covid pandemic, in terms of wages and hours worked in the economy, and also disruption to the collection of data from businesses, and so looking at longer-term trends can provide more insight. The ONS statistics show a downward trend in the national average median GPG from 18.4% in 2017 to the current national average median GPG of 15.4%. For full-time employees, the ONS reported a national average median GPG in April 2021 of 7.9%, down from 9.1% in April 2017.

The GPG is higher for all employees combined than it is for full-time employees or part-time employees as individual groups. This is because women fill more part-time jobs, which in comparison with full-time jobs have lower hourly median pay and may well be seen as being less valuable than roles which men would typically occupy.

Women are also much less likely to study subjects which are traditionally higher paid, such as science, technology, engineering, and mathematics subjects. This leads to horizontal occupational segregation with women being concentrated in roles that are traditionally paid less and valued less than the roles traditionally undertaken by men. By way of illustration, women make up 92% of secretaries and 94% of childcare assistants, but only 20% of architects and 7% of engineers.

The clearest insight into the GPG is provided by analysis across age groups. For age groups under 40 years, the GPG for full-time employees is low, at 3% or below. This has been the case since 2017.

However, for those aged over 40, the GPG for full-time employees is much higher, at approximately 12%. The ONS’s 2019 analysis explored the types of occupation that men and women work in, by age group. In particular, it flagged a lower incidence of women moving into higher-paid managerial occupations after the age of 39 years, at which point pay in these occupations increases.

These statistics demonstrate that even if they manage to break into the workplace, women generally do not make it as far up the career ladder as men. This is thought to be for a wide range of reasons, including women taking time out to have children, bearing the brunt of childcare responsibilities once those children arrive, and a lack of quality flexible working opportunities, particularly at more senior levels.

Research by the Equality and Human Rights Commission has found that half (51%) of women reported discrimination or disadvantage as a result of requesting flexible working arrangements, or are given fewer developmental opportunities if working flexibly.  

Looking at the regional picture is also very insightful. The GPG is higher in every English region than it is in Wales, Scotland and Northern Ireland. For full-time employees in London the GPG is 12.4%, compared to just 3.6% in Scotland.

One reason that has been identified is that when changing jobs women are more likely than men to accept lower pay in favour of a shorter commute, which is more of a factor in London and the southeast. The growing acceptance of remote and flexible working in the wake of the Covid-19 pandemic may help to address this issue.

The GPG also varies by sector, with finance and insurance having a median pay gap of 32.2% compared with 16.6% in construction, 15% in manufacturing and 12.3% in agriculture. Even in female-dominated sectors like the care sector there is still a pay gap in favour of men at 1.6%.

The good news is that the GPG has fallen in most sectors since mandatory GPG reporting was introduced, even in those sectors that are traditionally male dominated.

What’s next?

In its 2019 report setting out a roadmap for change in gender equality, the government promised to review the GPG reporting regime to assess how effective it had been at addressing the underlying causes of the pay gap.

Due to the pandemic the original timeline for the review was delayed. If the review does take place one possible outcome is that the government will require greater transparency from employers around the steps being taken to drive gender equality, such as making details of their family friendly policies publicly available and disclosing retention rates of employees returning from family leave.

More change is happening organically as employees, shareholders, customers and clients are increasingly choosing to work for and do business with companies based on actual diversity credentials.

With this in mind a growing number of employers are voluntarily reporting on a broader range of diversity pay gaps. According to a February 2022 report from the House of Commons Women and Equalities Committee, in 2021 19% of employers in the UK reported on ethnicity pay, up from 11% in 2018.

Many businesses have gone further and reported on other diversity pay gaps such as disability, sexual orientation and for the first time this year socio-economic or class, including PWC, KPMG and Penguin Random House.

Most progressive employers are also taking the opportunity to see GPG reporting as a valuable tool to scrutinise their wider diversity data to identify the underlying causes of pay disparities and translate their findings into targeted actions which form part of their wider equality, diversity and inclusion (EDI) strategy.

The most common action being taken by FTSE100 companies to drive down their GPG is the setting of diversity targets. The next most common measures are geared at bringing more women into the business and into more senior roles, for example through talent development and leadership programmes or mentoring.

Meanwhile the UK government is coming under increasing pressure to publish its proposals in relation to mandatory ethnicity pay gap reporting, three years on from the end of the consultation on this issue. It has cited a wide range of technical and data challenges as one of the reasons for this delay including statistical robustness, preserving anonymity, data protection, the burden on business and the challenges of categorising ethnicity.

However, the fact that an increasing number of businesses are now voluntarily reporting on a wider range of diversity pay gaps demonstrates that these hurdles are not insurmountable and the government is increasingly coming under pressure to ensure that the legislative framework keeps up pace with market trends.