Almost 64% of the Gender Pay Gap Cannot Be Explained

Below Lawyer Monthly hears from Lorraine Heard, Legal Director at transatlantic law firm Womble Bond Dickinson, on the challenges faced by ONS when it comes to justifying the gender pay gap across the UK.

The Office for National Statistics (ONS) has adopted an experimental statistical analysis to gain an insight into the reasons for the national gender pay gap, currently 18.4% for all employees and 9.1% for full time employees (calculated on a median basis).

The resulting report "Understanding the gender pay gap in the UK" makes interesting reading for those keen to understand just how far the national gender pay gap reflects factors that can be explained in gender neutral terms.

In summary, the ONS concludes that 36.1% of the gender pay gap can be explained by age, tenure, working pattern, occupation, work region, business size and sector. Of course this also means that almost 64% of the national gender pay gap cannot be explained by any of these factors.

There are other interesting points noted in the ONS analysis:

• Working pattern – More than 90% of men in their 30s and 40s work full time. However only 61% of women in their 30s, and less than 58% of women in their 40s, work full time. Part time workers are paid less per hour, on average, than full time workers, placing women who work part time at a disadvantage as compared with equivalent male employees.
• Occupation – This accounts for 23% of the pay gap, according to the ONS analysis. Of the 11 occupation groups, men dominate in 6 and women in 2, the remaining 3 having roughly equal numbers of male and female employees. However, in every occupation group the gender pay gap is in favour of men. In addition, where the pay gap is the highest, men have the highest full time employment share (92% in skilled trade occupations). Where the gap is the smallest (sales and customer service occupations) the gender split is close to 50:50.
• Age – For full time workers below the age of 40 the gender pay gay is relatively small (never more than 2.4%) and the part time gap is negative. In older age groups, 40 to 60 years and over, the gender pay gap is significantly higher, ranging between 21.8% and 27.2% for all employees and between 10.8 and 18.3% for full time employees (ASHE Survey 2017 provisional results ONS). One possible reason is childcare. The employment rate for women with dependent children is 73.7% with 51.8% of jobs being part time. The employment rate for men with dependent children is 92.4% with 90.1% of jobs full time.
• Tenure – Male full-time employees are paid more on average than female full time employees regardless of their length of service. Women who work part time are paid on average more than men who work part time, until they have been employed for five years when men begin to be paid more than women. After 20 years' service women who work part time are paid over 28% less than their male counterparts.

It is highly unlikely that all of the 64% of the gender pay gap that cannot be explained by the detailed analysis carried out by the ONS is due to sex discrimination by employers. As the report points out, factors such as family structures, education, the number of children and other caring responsibilities will have an impact.

Employers with more than 250 employees have to publish their gender pay gaps soon and are encouraged to provide an explanation for any gap they uncover. The difficulty encountered by the ONS in seeking to explain the national gender pay gap, despite the raft of data it has available to it, highlights the nature of the challenge employers face. At the same time gender pay is becoming a key employment theme and it is likely that it is not just the BBC that will face questions in the coming months on the subject of equal pay.

To minimise the risk of a gender pay related challenge employers should:

• Ensuring they are clear about what is required of them when publishing their gender pay gap results. Problem areas include the correct handling of salary sacrifice schemes; accounting for employees who do not have regular weekly working hours; and confusion regarding the handling of bonus payments as part of the gender pay gap figures.
• Publish correct information. The Financial Times has already named and shamed some employers for publishing inaccurate results. In addition the Equalities and Human Rights Commission ("EHRC") has indicated that it will focus its attention in the coming year on employers that fail to publish their results.
• Ensure that the reasons for the gender pay gap are understood (as far as possible) by means of the careful collation and analysis of relevant material.
• Take suitable steps to address any issues that ought to be addressed.
• Produce a report that puts the figures into context and consider how best to tackle the challenge of explaining the results.

Many of the 14 countries in the World that achieve better gender gap results than the UK are close neighbours (World Economic Forum Global Gender Gap Report 2017). The pressure exerted by the better overall gender equality results achieved by Germany, France, and the Scandinavian countries will have an impact on the approach the UK adopts in future, regardless of its status within or outside the EU.

Norway's decision to pay its female footballers the same as male footballers and Iceland's commitment to eradicating its gender pay gap altogether by 2022 will contribute to an increased focus on the achievement of gender pay equality in the UK.

Although employers are not currently required to analyse and address their gender pay gaps the logical next step will involve the UK government requiring employers to be more proactive in future, perhaps adopting the Icelandic approach of requiring even smaller employers to obtain certification that their pay arrangements ensure that men are paid the same as women. Employers may find that they have a limited time to address an issue that requires time to resolve. Forward planning may be key and engaging positively and proactively with the gender pay gap reporting requirements now may turn out to be time well spent.