Gender Pay Gap
Also known as Pay Gap, Gender Wage Gap
The gender pay gap is the difference between average pay for men and women across an organisation, expressed as a percentage of men's pay. It is a measure of workforce composition and progression, and is distinct from equal pay, which concerns whether people are paid differently for the same work.
Formula
Mean Gender Pay Gap (%) = ((Mean male hourly pay − Mean female hourly pay) ÷ Mean male hourly pay) × 100Report the median alongside the mean. The mean is sensitive to a small number of very high earners; the median describes the typical employee and is the figure most statutory regimes lead with.
Worked example
- Scenario
- Mean hourly pay of £34.20 for men and £30.10 for women across the organisation.
- Calculation
- ((34.20 − 30.10) ÷ 34.20) × 100
- Result
- 12.0% mean gender pay gap
What good looks like
National gaps vary widely by country and are typically in the high single digits to mid teens for the median. Within an organisation, the meaningful analysis is not the headline gap but the gap remaining after controlling for level and role — an adjusted gap near zero with a large unadjusted gap points squarely at progression rather than pay-setting.
Why gender pay gap matters
The unadjusted gap is a structural diagnostic: it is large mainly when senior roles are disproportionately held by one group. Treating it as a pay-setting problem leads to the wrong intervention. Splitting it into an adjusted gap (equal pay) and a composition gap (representation by level) tells you which problem you actually have.
How to improve it
- 1Report mean and median, unadjusted and adjusted, plus the distribution of each gender across pay quartiles.
- 2Analyse promotion rates by gender at each level — that is usually where a composition gap originates.
- 3Check starting-salary offers by gender for equivalent roles, where gaps are introduced at the point of hire and then persist.
- 4Review compa-ratio by group as an ongoing control rather than an annual reporting exercise.
Common mistakes
- Conflating the pay gap with equal pay. They are different measures with different legal meanings and different remedies.
- Reporting only the mean, which a handful of senior earners can dominate.
- Reporting the adjusted gap alone, which controls away the representation problem that the metric exists to expose.
Frequently asked questions
What is the difference between the gender pay gap and equal pay?
Equal pay asks whether two people doing the same or equivalent work are paid the same — a legal requirement in most jurisdictions. The pay gap compares average pay across the whole workforce regardless of role, so it is driven mainly by which roles and levels each group occupies.
Can an organisation have equal pay and still report a large gap?
Yes, and it is the most common situation. If every role is paid equitably but senior positions are held disproportionately by men, the headline gap will still be substantial. That gap is a representation problem, and closing it requires progression change rather than pay adjustment.
Related metrics
Compa-ratio compares an employee's actual pay against the midpoint of their salary band, expressed as a decimal or percentage. A ratio of 1.0 means the person is paid exactly at midpoint; below 1.0 means below midpoint, above means beyond it.
Promotion RatePromotion rate is the percentage of employees promoted to a higher level during a period, measured against average headcount. It quantifies how much upward movement an organisation actually delivers, as distinct from how much it describes in its career framework.
Workforce Diversity RatioWorkforce diversity ratio is the share of employees belonging to a given demographic group, reported by level and function rather than as a single company figure. Reported by level, it shows where representation is lost as seniority increases — which a company-wide percentage cannot.
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