Gender pay gap: how women are short-changed in the UK

With the deadline to submit salary details for male and female staff in the UK just days away, early findings show that almost 90 per cent of women still work for companies that pay them less than male colleagues

More than three out of four UK companies pay their male staff more than their female staff, and in nine out of 17 sectors in the economy, men earn 10 per cent or more on average than women.

With just days to go before the deadline for all employers in Britain with at least 250 staff to report the difference between what they pay their male and female employees, the numbers published so far provide big lessons for both companies and the government.

The data, the most comprehensive ever collected in any country, do not just reveal the UK’s worst and best-performing employers in the public and private sector, but also the main explanations behind the gender pay gap — and thus some of the most effective ways of closing it.

The year-long mandatory reporting exercise has also revealed major flaws in the way the process was designed by the government, serious anomalies in the data reported by some companies and question marks over the ability of the regulator, the Equality and Human Rights Commission, to enforce compliance with the law in this area.

Nine out of 10 women work for a company that pays them less

Chart showing cumulative percentage of men and women by median pay gap of their company
Chart showing cumulative percentage of men and women by median pay gap of their company

The clearest finding from the data is that women are overwhelmingly likely to work for an employer where, overall, men are paid more, and that the main explanation for the gap is the presence of more senior men than women.

Public sector employers must report by Saturday, while those in the private sector and charities have until Wednesday April 4 to file. But of the 4,428 employers — out of an estimated 9,000 total — who had reported by Tuesday at 2pm GMT, three out of every four pay men more on average, while only just over one in 10 pays women more, based on the median hourly pay gap. The remaining 1 per cent report no pay gap at all. The average, measured by the median, is 9.9 per cent.

The highest gender pay gap so far is 88 per cent, reported by the textiles group Rectella.

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The gender pay gap nationally stands at 18.4 per cent for full-time and part-time workers, according to the UK’s Office for National Statistics. But this number is not directly comparable since ONS data are taken from the annual survey of hours and earnings which covers all employers — a larger group than those which have to report on the government’s gender pay gap portal.

It is likely that these figures underestimate the gap, due to choices the government made at the outset about what to exclude from the calculations.

Professional services employers such as lawyers and management consultants do not have to include equity partners in their calculations because they are not technically classified as employees. Although some, like EY and Deloitte, have voluntarily disclosed more comprehensive figures including partners, only one of the five “magic circle” law firms has done so. Partners tend to be highly paid and are disproportionately male.

Financial Times analysis of the government data, combined with employee numbers provided by business information provider Duedil which cover two-thirds of employers, suggests that 89 per cent of women work for a company with a pay gap that favours men, and half work for a company that pays men at least 9 per cent more.Only 11 per cent of women work for an employer that pays them equally or better. By comparison, 93 per cent of men work for a company that pays them equally or better than women.

The shortfall in those yet to file reflects, in part, the difficulties that employers have found in tracking down the data — often for the first time — and organising it according to the government’s demands, which require the information to be broken down into 14 separate data points, including the mean and median hourly pay gaps, the proportion of men and women in four pay quartiles, the bonus gap and the proportion of men and women receiving a bonus.

Yet Peter Cheese, chief executive of the Chartered Institute of Personnel and Development, the professional body for human resources, warned in February of a different reason for late filing: companies were waiting until the last minute in the hope of hiding their results in a flood of disclosures.

“They’re thinking, ‘maybe I should hold off and when there’s the big tsunami of companies reporting I’ll bury it into that’,” he said, adding there is “trepidation in businesses about what the numbers will reveal”.

There are also questions over the quality of the data, and how its provision was designed by the government. To prepare the figures, base pay is calculated by hour, whereas bonus data are not prorated to account for part-time workers, who are in effect considered as full-time workers. Since more women than men work part-time, this means employers’ bonus numbers may overstate the gender pay gap.

The government also does not have a finalised list of those companies that must report. Its original estimate of 9,000 employers captured within the legislation requirements was based on outdated data, which also combine some businesses that are linked within group structures.

On the government’s gender pay gap portal, employers have to report by business unit, meaning that some companies such as BAE Systems have reported up to seven separate numbers. FT calculations suggest that the number of employers covered by the legislation could, in fact, be closer to 13,500.

The data reveal that the sectors in the UK economy with the worst gender pay gap, excluding those where fewer than 25 employers have reported, are construction, financial and insurance services and education.

Construction employers pay their male staff 23 per cent more, finance and insurance employers 22 per cent more, while education employers — predominantly academy trusts and universities — have a gap of 20 per cent.

Worst and best-performing sectors

Small multiple histograms showing best and worst performing sectors
Small multiple histograms showing best and worst performing sectors

Financial services companies have been under intense public scrutiny since the figures began to be reported. Goldman Sachs International reported a 36.4 per cent median gap, while banks such as Barclays, Lloyds, RBS and HSBC have gaps ranging from 14.2 per cent to 43.5 per cent.

Jayne-Anne Gadhia, chief executive of Virgin Money, has spearheaded a Treasury-backed initiative to urge more banks and financial services employers to address the lack of diversity in their ranks.

Earlier this month, the government announced the charter had more than 200 signatories, covering 650,000 employees, and including Goldman and UBS. Both groups, along with JP Morgan, had been criticised by Nicky Morgan, the chair of the House of Commons Treasury select committee, for their slow progress in backing the initiative.

Although no sector pays women more than men on average, accommodation and food services female employees earn just 1 per cent less than their male counterparts, while those working in health and social care earned 1.3 per cent less. Many companies in these sectors use flat pay rates, which may explain why the gender pay gap is so small.

The data show clearly which companies and sectors need to do most to address their gender pay gaps. But the process has also revealed that a significant number of employers have reported inaccurate information. This, in turn, has led to questions about the way the process was designed and whether the regulator tasked with enforcing the reporting legislation will be up to the job.

Of the 4,428 employers who had reported by 2pm on Tuesday, 38 have reported having an exactly zero gender pay gap by both mean and median measures, which is statistically implausible given that the two statistics measure different things. At least 216 employers have altered the data since it was first submitted.

One company, Rainham Industrial Services, has reported a mean gender pay gap of 106.4 per cent — implying that, for every £100 earned by a man, a woman would be “fined” £6.40.

Two companies have reported that they employ no women at all, despite the person reporting one of the companies’ data being a woman.

Even serious errors or omissions will prove difficult for ministers to question, FT analysis suggests, because the Government Equalities Office, which is responsible for the portal, did not ask for the data to be submitted in a format that allows it to be checked, and does not have a list of all the companies it expects to report.

What is more, the Equality and Human Rights Commission, which is responsible for enforcing the regulations, has been criticised for being “toothless” according to Maria Miller, the MP tasked with its oversight.

Rebecca Hilsenrath, chief executive of the EHRC, says it will be “fully enforcing” against all companies that did not report. Employers face potentially “unlimited” fines for breaching the regulations, the EHRC said in December.

“This legislation is in place to bring about better gender equality in the workplace and any employer not complying needs to ask themselves tough questions, rethink their priorities, be prepared for serious reputational damage and be ready to face a very unhappy workforce,” she says.

Why is there a gender pay gap?
Percentage of employees in each quartile, by gender

Chart showing the percentage of employees in each quartile by gender
Chart showing the percentage of employees in each quartile by gender

Some employers, and public policy experts, question the significance of the data, and the point of the reporting exercise, asking what steps the government will take once the first year of reporting is completed.

Kate Andrews, news editor at the Institute of Economic Affairs, says that it has led to a “mass influx of shoddy statistics” around women’s pay. “As far as meddling goes, the government’s pay gap reporting measures are particularly bad,” she says.

Ms Andrews argues that asking companies to publish the mean and median pay gap statistics, even factoring in hourly rates, overlooks the “myriad” of factors that go into determining a person’s pay, such as age and job comparison, and renders the statistics “next-to-useless”.

“This is not good for well-meaning companies, which are having their brand name smeared, but it is particularly bad for working women, who are being bombarded with misinformation about their standing in the workplace.”

The hourly average pay gap on the government’s portal does not compare the earnings of a man and a woman doing the same job. Here, the gap has narrowed significantly in recent years, particularly for younger workers. Women between the ages of 22 and 29, in fact, out-earn their male counterparts, and it is only in later decades that the traditional gap starts to widen.

The numbers themselves also give only a relatively superficial insight into the reasons why women continue to earn less than men in the UK.

Recent analysis by the ONS suggests that two-thirds of the gender pay gap cannot be explained by observed differences between men and women in terms of age, the types of jobs they do and the companies for which they work.

Campaigners on the issue argue that, despite its shortcomings, the number provides a salutary snapshot of the relative lack of diversity in most employers’ workforces, and one that will provide a spur to action.

Ms Gadhia says the requirement for gender pay gap reporting will drive transparency, accountability, action and improvement. “I believe that we will look back on the start of gender pay gap reporting as a watershed moment,” she says.

Employers in many other countries must also report their gender pay gap. In France, the government recently announced measures to force companies to close the gap within three years.

The UK’s national gender pay gap is higher than both the OECD and EU average and, now that the first year of gender pay gap reporting is nearly complete, the most important question is what the government does with the findings.

How does the UK’s gender pay gap compare with others around the world?

Diverging bar chart showing the gender pay gap of OECD countries
Diverging bar chart showing the gender pay gap of OECD countries

Employers want to avoid possible sanctions if they fail to close the gap in future, and would also like the opportunity to showcase progress on the government portal. Some, after years of failing to make the progress they want in diversifying their workplace, want the government to use the exercise as a way to disseminate best practice around which policies are the most effective.

The Government Equalities Office says it will use the results from the first year of reporting to “target our efforts effectively as we continue to work closely with employers towards eliminating the gender pay gap”.

Workforce diversity campaigners such as the 30% Club, which campaigns for more women in corporate leadership, say now is the time to knit together a range of initiatives across government, including the Women in Finance charter, the Hampton-Alexander review of women on boards and the gender pay gap reporting requirements.

“Change won’t come from beating up business leaders,” says Brenda Trenowden, chair of the 30% Club. “It has to be about finding ways to all come together to improve gender imbalance in the workplace.”

EasyJet: Budget carrier reported early and explained transparently how it is addressing the imbalance in pilot salaries

EasyJet has one of the worst gender pay gaps reported so far. At 45.5 per cent, the median gap between what the budget airline pays its male and female staff is strikingly large.

But also striking has been the way easyJet has presented its figures, reporting earlier than most and explaining transparently how it is addressing the significant gender imbalance among its pilots that is the main factor behind them.

Until recently, the airline points out, just 4 per cent of the global total were women. EasyJet performs a little better than that: 94 per cent of its pilots, who account for a quarter of its UK workforce, are male.

To tackle this, the airline launched an initiative — named after the pioneering pilot Amy Johnson — three years ago with the target of a fifth of new cadet pilots to be female by 2020. Last year, it recruited 49 new female co-pilots, a nearly 50 per cent increase on the previous year, taking the proportion of women among its new pilots to 13 per cent.

“This is a great achievement given the deep-seated view in society that being a pilot is a male job,” says David Morgan, easyJet’s director of flight operations.

EasyJet also has an unusually high percentage of women in its senior leadership.

Until recently it was run by a rare — in the FTSE 100 — female chief executive, Carolyn McCall. In November, the Women on Boards review, chaired by Sir Philip Hampton, ranked the airline fourth in the list of the top 10 best performers in terms of representation of women on boards and in leadership positions in the FTSE 100.

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Methodology
The FT uses the median measure, or the middle of the distribution, as a measure of average pay because it most accurately reflects the experience of most employees. The mean measure is easily skewed by a few high-earning individuals. But the median is very resistant to outliers. More on this here.

For the average of the pay gaps of multiple companies, we have used a median of medians. This is imperfect, but without individual salary information it is impossible to get a true average.

In our best/worst-performing sector analysis, we exclude sectors with fewer than 25 company submissions because a small sample size is more vulnerable to having its average skewed by outliers.

For the first chart in the piece we used DueDil data for the number of employees in the companies covered by the regulation. Data for some companies and certain public sector employers are not available. We believe a sample covering 65 per cent of employers is large enough to offer meaningful conclusions.

Data in the piece are accurate as of 2pm Tuesday, March 27 2018. We will be updating the data in the interactive histogram up until the reporting deadline of April 4.  

We will also provide a more detailed account of our calculations after this date.

Source: Gov.uk, DueDil, OECD

Development: Cale Tilford
Project management: Aleksandra Wisniewska