The gender pay gap vs the right to equal pay

Posted on 29 January 2018

The gender pay gap vs the right to equal pay

Carrie Gracie's recent high profile resignation from her role as China editor at the BBC has highlighted once again the issue of inequality of pay between men and women in the UK.  It has resulted in extensive media coverage, parliamentary debate and, now, the commissioning of a select committee hearing to examine the problem at the BBC. Meanwhile, large businesses are beginning to report their gender pay statistics for the first time. Here, we set out the fundamental differences between the long-standing legal right to equal pay and the concept of a gender pay gap. We also explain why the two should not be confused: a large gender pay gap does not necessarily indicate an equal pay issue; nor can employers use a small gender pay gap as a defence to an equal pay claim.    

The gender pay gap and the right to equal pay – how do they differ?

Whilst the legal right to equal pay and the concept of the gender pay gap both deal with the disparity of pay between sexes in the workplace, they are two different issues:

  1. Equal pay means that men and women in the same employment, performing equal work, must receive equal pay; and
  2. The gender pay gap is a measure of the difference between the average earnings of men and women across an organisation.

Having a gap between average pay for men and women is not illegal. Paying men and women differently for doing equal work, however, is. 

The right to equal pay is enshrined in the Equality Act 2010 and has been a fundamental tenet of anti-discrimination legislation in the UK since the early 1970s.  The legislation came about at a time when it was not uncommon for employers to openly pay women less than men. 

In successful claims, the law implies a sex equality clause into a woman's contract to address the disparity and up to six years' back pay can be awarded.  However, an employer can defend its pay decisions and defeat a claim for equal pay if it is able to show the difference is due to a material factor which is not discriminatory (such as a specific skill set, seniority or past performance).

A gender pay gap – what does it mean for an organisation?

In July 2017, the government demanded that the BBC disclose the names and pay bands of those earning more than £150,000 as part of its new royal charter, which guarantees that the corporation will receive the licence fee for another 11 years. It was the release of this 'high earners list' that revealed, for the first time, the substantial pay disparity between men and women at the corporation, and which triggered the BBC's equal pay crisis.

Whilst the onerous reporting obligations on the BBC, as a public sector organisation funded by licence fee payers, are unique, there is a requirement – introduced in April 2017 - for all companies with 250 or more employees to publish and report specific figures about their gender pay gap by April 2018. A pay gap is not illegal and it may be explained by many different factors that are not discriminatory. In many of the reports we have seen to date, a gender pay gap is explained by a lack of senior women within the business.

EasyJet recently reported a pay gap of 51.7%, which is well above the national average of 18.1 %. Easyjet accounts for this discrepancy by explaining that most of the airline’s pilots are male. The average salary for such a role is over £90,000. More than two-thirds of EasyJet cabin crew are women. The average salary for crew is less than £25,000.  While this raises the question of why so few women are pilots, and suggests that Easyjet should look at how to attract and retain female pilots, it is not necessarily indicative of discriminatory practices, and nor does it tell us that EasyJet has an exposure to equal pay claims.

Earlier this month, the Office for National Statistics reported that the gender pay gap widens from the age of 40 and reaches a peak between the ages of 50 and 59. This widening pay gap throughout a woman's career means that, not only do fewer women hold senior positions,  senior women also earn less than their male contemporaries.

Even where pay gap figures can be accounted for, they should not be ignored.  The requirement to publish the gender pay gap is about transparency, and encouraging businesses to be aware of and take steps to improve their own gender pay gap by addressing pay, promotion, recruitment, family friendly and flexible working policies.  There is currently no enforcement mechanism for failing to publish, and it is hoped that reputational risk will prompt businesses to act on a large, unexplained gender pay gap.  The government promises to publish sector tables, highlighting where employers are under-performing in their sector, which may drive positive change to boost recruitment and retention.

While a large unexplained gender pay gap may well prompt employees to question whether they are the victim of discriminatory pay practices, the statistics will not provide the data necessary for individuals to establish whether they have an equal pay claim.The ongoing lack of transparency around specific pay data remains one of the biggest challenges for potential claimants and may explain why so few equal pay claims are litigated. 

Narrowing the gap – the future

Political reaction to the issue of equal pay at the BBC has been swift. This is because the BBC is accountable to the public.  It is also subject to the public sector equality duty under the Equality Act which requires public sector organisations to have due regard to the need to limit discrimination and advance equality of opportunity.  These developments, combined with the approaching deadline for publishing the first set of mandatory gender pay statistics, will keep the issue of pay equality between men and women firmly in the spotlight. Employers in all sectors will be required to address unexplained gender pay gaps and the questions this may raise among staff who are concerned about equal pay.  Ultimately, however, the potential for reputational fallout – as seen with the BBC - is likely to be the main driver for employer action.