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Pay gaps – some definitions

A pay gap, on whatever grounds, does not necessarily signify unequal pay for equal work. Pay gaps may or may not, indicate labour market or workplace discrimination, but their existence suggests that there are factors that need addressing if the chances for equality in work, including pay equality, are to be achieved.

Pay gaps are most commonly measured using median or mean gross hourly earnings excluding overtime.

When considering a pay gap it’s important to be clear about how it is defined. Of the definitions set out below, the definition of the gender pay gap has been in use for many decades and is used to calculate the official statistics on the gap. For the other equalities areas the definitions are the working definitions used by researchers; they compare the average full-time pay for men and women from each potentially disadvantaged group to the average pay of men from the majority group.

The gender pay gap refers to the difference between men’s earnings and women’s earnings as a percentage of men’s earnings.

The ethnicity pay gap refers to the difference between the earnings of men or women from various ethnic minority groups as a percentage of White British men’s or women’s earnings.

The disability pay gap refers to the difference between disabled men’s or women’s earnings as a percentage of non-disabled men’s or women’s earnings. Disability is defined as either causing limitations to daily activity or limitations to employment.

The age pay gap refers to the difference between the earnings of men or women from various age groups as a percentage of the earnings of men aged between 40 and 44.

The legal framework

The principle that women and men are entitled to equal pay for doing equal work is set out in sections 64 to 80 of the Equality Act 2010 (the ‘equality of terms’ provisions). With one exception (see Section 77 below) these provisions apply only to gender, but this does not mean that pay inequalities on other grounds cannot be challenged.

The right to equal pay for equal work is a contractual right enforceable through the Employment Tribunal, and while there is no parallel course of action available to an employee experiencing pay discrimination on grounds of any other protected characteristic, this means only that such pay inequalities are not challenged as a matter of contract, but as a matter of discrimination. However, while there is an extensive body of case law on equal pay between men and women, there is little or no case law to draw on in respect of pay gaps in the other equalities areas.

Section 77 of the Equality Act 2010 provides that an employer cannot prevent their employees from discussing or providing information about whether or to what extent there is unlawful pay discrimination on any of the protected grounds. Section 77 is the only section of the ‘equality of terms’ provisions which applies to all of the equality strands. All other provisions relate solely to gender (equal pay as between men and women).

The Public Sector Equality Duty

While the Public Sector Equality Duty has the potential to encourage attention to be paid to pay gaps more generally, mention of specific protected grounds is confined to Scotland and Wales.

In Scotland public bodies are required to gather employment information related to disability; to publish employment information in a ‘mainstreaming report’ every two years; and to publish equality outcomes relating to disability and report progress. From 2017, Scottish authorities with more than 150 employees have been required to publish a further equal pay statement containing information on occupational segregation and their equal pay policy which, for the first time, will include disability and race. The aim is to ensure that good quality information can be provided in a meaningful way to help assessment of progress on occupational segregation and equal pay policy for disabled and/or ethnic minority staff.

In Wales, public bodies are required to have “due regard to the need to have objectives that address the causes of any pay difference between employees who are from a protected group, and those who are not; if it appears reasonably likely that the reason for the difference is related to the fact that those employees share a protected characteristic, e.g. they are from a minority ethnic group”.

The Companies Act 2006

In so far as disability is concerned, a mechanism for reporting on any pay gap does potentially exist, in that the Companies Act 2006 requires companies employing more than 250 people to disclose in their directors’ reports information about their policy in respect of the employment, training and career development and promotion of disabled people. This could be read as including pay.

The Equality and Human Rights Commission

The Equality and Human Rights Commission has a strategy for tackling pay gaps across all the equalities areas. The Commission is calling on government, agencies and employers to take action in six areas:

Unlock the earning potential of education by:

Taking steps to improve attainment outcomes for pupils with a disability and/or SEND and holding relevant authorities to account when schools fail to make reasonable adjustments

Continuing to tackle stereotypes and encourage wider subject and career choice for women, ethnic minority and disabled students.

Improving the participation and progression rates for under-represented groups in apprenticeships

Improve work opportunities for everyone

Investing in regional economies and training in sectors and industries to offer skills and opportunities

Developing regionally-based labour market strategies with specific actions to tackle significant gender, ethnicity and disability employment and pay

Make jobs at all levels available on a flexible basis

Making the right to request flexible working a day-one right

Offering all jobs including the most senior on a flexible and part-time basis

Encourage men and women to share childcare responsibilities

Introducing a dedicated non-transferable, ring-fenced ‘use it or lose it’ parental leave for fathers with a meaningful pay rate

Assessing the impact of statutory childcare and different models of provision on women’s participation in the labour market and making changes to improve this

Reduce prejudice and bias in recruitment, promotion and pay decisions

Supporting a new national target for half of all new senior level appointments in FTSE 350 organisations to be women

Consulting with employers and relevant organisations on extending the statutory requirement to report on gender pay gaps to disability and ethnicity to encourage employers to consider the scale and causes of all their pay gaps

Using fair, transparent processes for recruitment and development decisions that tackle discrimination and bias

Report on progress in reducing pay gaps

Developing national action plans to close gender, disability and ethnicity pay gaps and report regularly on progress

Monitoring the effectiveness of mandatory gender pay gap reporting on closing pay gaps

Publishing statistical information on the scale and trends in disability and ethnicity pay gaps

Consulting with employers on the most effective way of extending reporting requirements to ethnicity and disability pay gaps

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