As we approach the extended deadline of 4 October 2021, many organisations are preparing to publish their gender pay report. We recently looked at the pay gap issue and reminded our readers of the requirements and the method of calculating their gender pay gap. The purpose of this article is to look at different types of data that employers can use to publish their pay gaps and to outline the potential advantages that may arise from the report.

What is the gender pay gap?

The requirement to report on the gender pay gap came into force by way of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. It applies to companies with 250 or more employees. The gender pay gap is the difference in average earnings between women and men in the workplace. The gap is calculated by considering the differences in the mean or median hourly earnings and in bonus payments.

The purpose of requiring gender pay gap reporting was to drive down the difference in earnings between women and men. The Office for National Statistics (ONS) reported that the gender pay gap fell from 17.4% in 2019 to 15.5% in 2020. The 2020 data undoubtedly demonstrates a shift in the right direction; however, the disparity between the gender pay levels remains a topical issue. This is particularly important as society recovers from the COVID-19 pandemic.

Additional pay gap reports published by employers

In efforts to address the gender societal imbalance (amongst many others), a lot of employers have also focused increasingly on diversity and inclusion within the workplace. The collection of diversity data and external pressures has led to some employers publishing additional reports highlighting other pay gaps.

Ethnicity pay gap

The Confederation of British Industry (CBI), the Trades Union Congress (TUC) and the Equality and Human Rights Commission (EHRC) have recently petitioned for the introduction of mandatory ethnicity pay gap reporting to tackle racial inequalities in workplaces across the country. Reporting on ethnicity pay gaps is voluntary; however, a number of business, such as the BBC and PwC UK, already provide this information.

The ONS recommends that the ethnicity pay gap is calculated by measuring the difference between the median hourly earnings of a white British person and that of other minority groups. In 2019, the ONS reported that, whilst the ethnicity gap has narrowed to its lowest level since 2012, ethnic minority employees continue to earn less than their white British counterparts in the workplace.

One of the key challenges for employers that want to address this pay gap is the wide range of the potential criteria, in particular how to assess various types of ethnicity. In order for employers to understand the true ethnic pay disparity within their workplace, it is important to collect data relating to relevant ethnic groups to ensure the information is accurate and not distorted.

Disability pay gap

The figures published by the ONS in 2019 with regard to the disability pay gap in the UK for 2018 suggest a 12.2% pay difference in median hourly earnings between disabled employees and non-disabled employees. Disabled employees with a mental impairment were reported to have the largest pay gap at 18.6% compared with those with a physical impairment at 9.7%. As organisations strive for greater diversity and inclusion in the workplace, collecting and reporting data related to this pay gap may enable employers to understand where they fall short and to implement policies that will create a more diverse and inclusive working environment.

Socio-economic pay gap 

PwC UK recently went one step further and, in addition to publishing its gender pay gap, collected data from 80% of its employees in order to analyse their socio-economic diversity. The data collected indicated that only 14% of PwC employees come from a lower socio-economic background. In measuring its socio-economic diversity, PwC asked its employees to respond to questions covering a wide range of matters, such as:

• the occupation of the main household earner when the employee was 14;
• which type of school the employee attended for most of their time between the ages of 11 and 16;
• the employee's eligibility for free school meals; and 

whether either of the employee's parents attended university and gained a degree by the time the employee was 18.

The criteria adopted by PwC are recognised by the Social Mobility Commission as the best measurement of socio-economic diversity. The Commission released an updated report in 2021 providing ideas to employers on how to improve their socio-economic diversity. In doing so, it highlighted the following six key pillars:

• data measurement – businesses are recommended to focus on collecting a wide range of data throughout the organisation. The Commission recommends aiming for an overall response rate of at least 70%. The data collected will help employers to gain a better understanding of the workforce and therefore to implement change;
• culture and leadership – promote a clear, shared vision throughout the organisation;
• outreach – this focuses on attracting prospective employees who may not consider a career in their organisation. Employers are recommended to consider outreach programmes in local schools and communities, and provide mentoring and work experience, focusing on students from disadvantaged backgrounds;
• hiring – ensure the recruitment process is accessible and equitable to applicants. Employers should consider setting an internal benchmark to help track progress of prospective and current employees who come from a disadvantaged background;
• progression – supporting prospective and current employees through their careers. The aim of this pillar is to ensure employees from disadvantaged backgrounds are supported to progress and so become represented at senior levels within the organisation; and
• advocacy – share the vision and objective of inclusivity internally and externally. Doing this will strengthen all pillars and potentially influence wider change in the market.

The combination of data regarding socio-economic diversity will enable employers to review, strategise and implement appropriate policies to support their current and prospective employees. It is also designed to create equal opportunities for all candidates irrespective of their background, provide training and development opportunities and retain the best talent.

Why is reporting important?

As more companies report on a wider range of pay gaps, the increased transparency will undoubtedly help influence positive change in the market and workplace. It will be interesting to see which (if any) of the pay gaps described above for which reporting is not mandatory will follow in the footsteps of the gender pay gap report and eventually become legally required. 

If applied properly, pay gap reporting has great potential to help the growth and development of businesses and organisations. 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. They are already used by job seekers and business partners.