4 April is the annual deadline for reporting UK Gender Pay Gap data. Despite 2024 being the seventh year of reporting in the UK, progress has been slow. Will the global trend for pay transparency really help drive change and what can employers in the UK expect in terms of future obligations?

Progress?

Although there has been some progress across most UK sectors in closing the gender pay gap, this has been slow and incremental. 

The chart below illustrates the mean and median gender pay gap[1] by sector for reporting periods 2017/18 to 2022/23. This captures all employing entities that have published gender pay gap data on the UK Government’s Gender Pay Gap service portal.

Across all sectors combined, the mean gender pay gap has decreased by 1.2% in the seven years since 2017 (from 13.4% to 12.2%). The median gender pay gap has decreased by only 0.1% in the same time period (from 9.4% to 9.3%).

This data reflects the fact that women continue to be under-represented in higher earnings brackets. Data from the Office for National Statistics shows that fewer women in their 40s and 50s are in occupations such as managers, directors and senior officials, at an age when pay for these occupations typically increases, which has a direct impact on the gender pay gap.

Looking at specific sectors:

• The mean gender pay gap decreased between 2017/18 and 2022/23 in 14 of the 17 sectors. The median gender pay gap decreased in only 11 of the 17 sectors.
• Manufacturing and Information and Communication were the sectors with the largest decreases in mean and median gender pay gap between 2017/18 and 2022/23.
• Financial Services, Mining and Quarrying and Construction were the sectors with the largest mean and median gender pay gaps.  However, all three were amongst the sectors with the larger decreases in mean gender pay gap between 2017/18 and 2022/23.
• Accommodation and Food Services and Health were the sectors with the lowest mean and median gender pay gaps.

EU and global trends

We are seeing a global trend of new pay transparency laws, with legislation implemented recently across the US, Canada, the EU, Australia and a number of other jurisdictions aimed at reducing the gender pay gap and bolstering equal pay protection. 

In particular, the introduction of the EU Pay Transparency Directive aims to bolster the existing laws on equal pay and to help reduce the gender pay gap across Europe, by introducing pay transparency measures and requiring employers to undertake gender pay gap reporting across the EU for the first time[2]. 

Employers with at least 100 workers in an EU member state will be required to report on the company's gender pay gap. However there are important differences from the existing UK gender pay gap obligations in four key ways:

1. The Directive requires employers to publish their pay gap by category of workers performing the same work or work of equal value (rather than publishing one pay gap figure for the whole organisation, as in the UK). This is much more detailed than the UK regime and more akin to a pay equity / equal pay analysis, therefore it could potentially be much more useful information for a worker when determining whether they have an equal pay claim.
2. The definition of “pay” under the Directive is broader and not limited to base pay and bonus but includes benefits-in-kind (such as share awards, private health care, car allowances etc). 
3. The consequences of having a gender pay gap are more substantial as employers with an unjustified pay gap of 5% or more in any job category will be required to carry out a “joint pay assessment” – in essence, an equal pay audit, in conjunction with employee representatives and remedy the gap. 
4. In order to truly understand what is driving pay gaps in the organisation and whether the gaps are justified by objective, gender neutral criteria, much more in-depth analysis is required, known as the “adjusted pay gap” which is typically calculated using a statistical regression analysis. You can find out more about the adjusted pay gap here.

What might this mean for the UK?

While the gender pay gap reporting requirements under the Directive are not applicable in relation to UK workers, it is relevant for employers in the UK who have workers in an EU member state or UK employers who may wish to align with the EU requirements as a matter of best practice and consistency in approach.

In the UK, the House of Commons Treasury select committee recently recommended as part of its inquiry into sexism in the financial services sector that gender pay gap reporting requirements in the UK should be widened to include companies with more than 50 employees, rather than the current 250 employee threshold in the UK and that further pay transparency measures should be introduced.

The Labour Party has also indicated that it would introduce pay transparency measures if it is elected into government, including ensuring that outsourced workers are included in the gender pay gap reporting and requirements to report on the ethnicity pay gap.

Final thoughts

Increased pay transparency is a growing global trend, as well as an increasing expectation among staff and new recruits more generally within the market. Employers should ensure they are ready to provide their UK gender pay gap report by 4 April and be mindful of future developments in the UK. 

It is advisable for employers to take a proactive approach in preparing for the upcoming changes brought about by the EU Pay Transparency Directive. Although the first gender pay gap report publication under the Directive is not due until 2027, the Directive will have a significant impact on a number of HR and reward policies, practices, and job architecture structures. Therefore, it is important for companies to start preparing for the Directive early to ensure that they have sufficient time to make the necessary adjustments and comply with the Directive when it comes into effect.

If you would like to discuss gender pay gap reporting or the requirements of the EU Pay Transparency Directive, please contact Kathryn Dooks, Gary Fereday or Chris Robson. 

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 [1] The “mean” is achieved by calculating the total of the values and dividing by the number of values in the data set. The “median” is achieved by finding the middle value in a set of data. 

[2] Note: the gender pay gap measures the disparity (if any) between men and women’s average pay whereas equal pay is a reference to the legal duty under the Equality Act 2010 that requires employers to give men and women equal pay if they are employed to do like work, work rated as equivalent or work of equal value.