Pay gap guide
What is the gender pay gap?
The gender pay gap is the difference in average hourly earnings between men and women. On average, in 2018 women in Scotland earn 15% less per hour than men. The pay gap is the key indicator of the inequalities and differences that still exist in men’s and women’s working lives, and is caused by three main factors: job segregation; inflexible working practices; and pay discrimination. Although there will be differences between different organisations, these three causes are common across all workplaces and sectors.
The gender pay gap is not the same as equal pay, although unequal pay between men and women is a major cause of pays gaps at the enterprise level. Equal pay law covers the concept of equal pay for equal work, rendering it unlawful to pay a woman less than a man (and indeed vice versa) for the same job or jobs of equal value. Equal pay for equal work is only one small piece of the pay gap picture, and tackling this alone is not enough to close your gender pay gap.
Closing your pay gap requires an understanding of its causes, and solutions to tackle those. The Close Your Pay Gap tool can help you do this.
How to calculate your pay gap
There are two measures of the pay gap, mean and median.
The mean average is calculated by adding all individual employees’ hourly rate of pay and dividing by the total number of employees. The mean is a useful measure as it includes the highest and lowest rates of pay, and because those on the highest rates of pay tend to be men, and those on the lowest are more likely to be women, it captures a more complete picture of the pay gap.
The median average is calculated by listing all employees’ hourly rate of pay, and finding the midpoint. The median is not skewed by very low hourly rates or pay or very high hourly rates of pay, and gives a more accurate representation of the ‘typical’ difference. However, because of this, it can obscure gendered pay difference.
The pay gap regulations require you to calculate and publish both figures.
Calculating the pay gap
The single pay gap figure should include all employees, including those in senior grades, even if pay in those grades is determined in a different way from other employees. It should also include all full-time and part-time employees, and employees on permanent and fixed term contracts.
Calculating hourly rates of pay
Determine the basic (excluding overtime) hourly rate of pay for each employee. If the basic pay data is expressed an annual salary, then employers should divide this until they have an hourly rate. This will enable the pay of part-time employees to be compared with full-time employees.
Calculating the mean pay gap: example
The graphic above shows the hourly pay for employees A to G. To calculate the mean hourly pay rate, use the following formula.
The mean hourly pay rate is therefore £18.57.
Use this calculation to determine the mean hourly pay rate for female employees, and the mean hourly pay rate for male employees.
To calculate the mean pay gap, use the following formula.
A = mean hourly rate of pay of male employees
B = mean hourly rate of pay of female employees
Calculating the median pay gap: example
The graphic above shows the hourly rate of pay for employees A to G. The circle marks the midpoint, and the median hourly rate of pay is therefore £16.00.
To calculate the median pay gap, use the following formula.
The pay gap regulations also require you to publish your mean and median gender bonus gap figures, and the proportion of men and women who received bonus payments. You can use the same method detailed above to calculate these figures. Simply substitute the mean average bonus paid to men for the mean hourly rate of pay for male employees, and the mean average bonus paid to women for the mean hourly rate of pay for female employees, to calculate your mean gender bonus gap. Follow the same method for your median gender bonus gap.
If you haven’t calculated your gender pay gap and gender bonus gap figures yet, or you want to check your calculations, you can use our handy calculators.