In Scotland, the public sector equality duty obliges public bodies to advance equality across all protected characteristics. This obligation is supplemented by the Equality Act 2010 (Specific Duties) (Scotland) Regulations, which introduced gender pay gap reporting (GPGR) obligations. Since 2017, a similar duty has been placed on employers across the UK, albeit on slightly different terms. Nonetheless, the relevant laws and corresponding obligations all seek to achieve the same goal: the eradication of the gender pay gap (GPG).

In this article, we look at the most recent 2021/2022 GPG statistics that show the GPG is reducing, albeit slowly. We consider the reasons for this, the steps a business can take to help close the gap and the potential consequences of getting it wrong.

What is GPGR?

Since 2017, all organisations with a headcount of 250 or more employees have been required to report and publish their pay gap between men and women on an annual basis. GPGR calculates the annual average difference between men's and women's pay as a percentage within an organisation, regardless of role or seniority. The 2021/2022 statistics show that there is still some way to go, with there being only a 0.5% decrease from when widescale reporting first began in 2017.

There is an important limitation to the GPGR statistics, in that each organisation reports the gap "within" their own business as a percentage. That means that, while we can use those figures to understand the average pay gap within businesses, the statistics cannot accurately show the overall pay gap across the UK or within Scotland.

For example, you may have two businesses:

  • Business A: employs predominantly male employees at an average rate of £20 per hour. They have some female employees who are also paid, on average, £20 per hour.

Business A's GPG is 0%.

  • Business B: employs predominantly female employees at an average rate of £10 per hour. They have some male employees who are also paid, on average, £10 per hour.

Business B's GPG is 0%.

Using those figures, we could say that there is a 0% GPG as there is no gap within either organisation. However, what is missing is the big-picture analysis that compares pay across all sectors and employers. In the above example, there could arguably be a 100% GPG. This big-picture analysis is what is missing from the statistics and can lead to a misunderstanding of what is actually being reported. Even if we get to the aspirational point of 0% GPG within organisations, it will still be necessary to step back and assess whether females are pooled towards lower paid sectors and lower-paying employers.

What is the difference between GPG and equal pay?

The GPG should not be confused with equal pay law which is the entitlement to an equal wage for the same/like work (or work of equal value). A GPG does not necessarily mean that there is a breach of equal pay law. Instead, it could mean that there are barriers to promotion for women, or that women are not accessing more skilled and better paid roles within an organisation.

The 2021/2022 figures

PwC has released some analysis of the 2021/2022 figures. Taking into account the words of caution above, the analysis still indicates that the overall GPG is reducing, albeit at a minimal rate.

  • The national average GPG is now 12.9%. This is down 0.3% from last year. The national average gender bonus gap is 32.5%.
  • Since reporting began five years ago in 2017, the average GPG has declined by only 0.5%.
  • 1,826 more companies reported their GPG details in 2021/2022, taking the total to 10,282.
  • Almost half (43%) of the companies disclosing their data reported an increase in their average GPG. This is a 2% increase from last year.

The Office for National Statistics has also released its report on what the 2021/2022 data tells us. The GPG is lower in Scotland than every region in England, but there is still much work to be done.

What can employers do to reduce their GPG?

Since mandatory reporting was introduced in 2017, the small overall reduction of the GPG has been achieved at a slow, if not glacial, rate. Worryingly, the number of companies reporting an increase in their GPG is now also on the rise.

It is no surprise that one of the main reasons the GPG exists and, indeed, remains fairly stagnant is due to the disproportionately high number of female employees filling junior and lower-paying positions. Many organisations will suggest that this recruitment of female talent in entry posts could have an initial impact of increasing their GPG but, over the long term, is the key to seeing it improve as they embark on long-term initiatives to develop female talent.

Now, more than ever, businesses should be giving serious thought to the steps they can take to reduce their GPG, including being aware of hidden practices that may result in their male employees being paid more than their female counterparts.

The UK Government has also published a list of possible steps a business could take to help close their GPG. These steps include:

  • Recruitment and promotion – making recruitment and promotion processes as objective and transparent as possible will help to reduce unconscious bias and increase the number of successful female candidates. Female employees should also be encouraged to apply for senior positions. It is also important for a business to have female leaders. This will set a good example to more junior members of staff and will hopefully encourage female employees to apply for promotions and more senior positions.
  • Diversity managers – appointing a manager or senior executive in charge of diversity (including the business's GPG) will help to give the business a structured approach to improving their GPG and diversity more generally. The diversity manager should be involved in setting GPG targets and implementing initiatives to help meet them. Having a senior executive in charge of diversity will also allow GPG issues to be discussed at board level – this is generally seen as crucial for a business to implement large-scale, positive changes.
  • Encourage pay negotiation – female employees are less likely to negotiate their salaries than their male counterparts. If the business allows salaries to be negotiated, the expected salary range should be communicated to employees. If women are encouraged to negotiate their salaries, this will help in reducing the GPG.

Large-scale pay equity reviews

In addition to the UK's and other jurisdictions' GPG/pay transparency reporting requirements (and equal pay laws), many organisations are choosing to embark on voluntary pay equity reviews. These will often focus on gender, alongside other characteristics (commonly race/ethnicity).

These voluntary reviews also tend to be a bit more focused than the very high-level statistical review required by GPGR which concentrates only on pay without drilling down into the types of roles. Pay equity reviews will instead normally rely on a data analytics firm to compare people performing similar jobs and consider (i) if they are paid the same; and (ii) if not, whether the difference can be explained by a neutral factor (higher pay in London than outside, for example).

There are significant similarities between these pay equity reviews and the classic "like work" equal pay claims and consideration of the "material factor" defence which seeks to explain any difference neutrally. However, these reviews do not go as far as comparing different jobs which may nonetheless have an "equal value" to the employer. Many Scottish organisations will be familiar with decades of public sector equal pay reviews both for like work and equal value/roles rated as equivalent under a formal job evaluation scheme and may, therefore, find these global exercises have many similar features.

A word of caution

Many companies have set targets in relation to pay gap percentages. However, care should be taken not to fall foul of discrimination law (for example, by attempting to reduce a pay gap by discriminating against male employees). A recent employment tribunal case, Bayfield and Jenner v. Wunderman Thompson (UK) Ltd and others [2019], found that two senior white male employees were made redundant in an attempt to lower the organisation's GPG of 44.7%. There are a wide variety of initiatives and ideas open to organisations to help them close their GPGs without discriminating against other groups of employees.

What are the consequences of having a high or rising GPG?

Now, more than ever, employees care about where they work and the culture of their workplace. The post-pandemic employment market means employees really do hold the power when it comes to employers retaining talent. Employers looking to retain the best talent will need to make their working culture as attractive as possible – this includes being transparent and proactive about their diversity practices, including their GPGR.

It is not only employees and prospective employees who care about how organisations are tackling their GPGs. Clients, customers and investors are just a few who also look closely at an organisation's diversity efforts. Now, as a minimum, it is expected that GPGR, and diversity and inclusion practices, will form part of an organisation's ESG strategy. This has become the standard, as opposed to the exception, and if a business's efforts are seen to be lacking, or indeed non-existent, it can have significant reputational and financial consequences further down the line.

If applied properly, pay gap reporting has great potential to help the growth and development of a business. It is a useful tool, providing data on how the organisation is progressing over time. The results of the report can help employers to understand more about their workforce composition, explore why disparities exist and implement organisational changes to address any particular issues.