UK gender pay gap reporting vital tool amid cost-of-living crisis

It has also led to increased calls for the UK to follow Europe’s lead in introducing more onerous reporting requirements to speed up progress.

Gender pay gap across all sectors

Of the companies that reported their GPG in 2022-23, the average hourly median gender pay gap is 11.96%. This represents a decrease of 0.2% from the data reported in 2021-22 and is indicative of an encouraging downward trend year on year since the Gender Pay Gap Regulations were enacted.

This is lower than the national average median pay gap reported by the ONS for 2022 at 14.9% although it should be noted that the ONS includes figures for all employees and companies, not just those with more than 250 employees who have a legal obligation to report their GPG data. In contrast, the average median bonus gap has grown year on year. For 2022-23, the gap was 6.28% – up 0.8% on the figure reported in 2021-22.

Overall, the proportion of women that hold positions in the top pay quartile has increased to 41.07%. This is an increase from 39.18% in 2017 and 40.54% in 2021. At the same time, women still represent well over half (54.92%) of employees in lower quartile jobs – an increase of 0.2% from 2022.

At a sector level, women in the financial services sector are paid almost a quarter (22%) less than their male counterparts, according to the latest mandatory reporting – an increase of 0.1% from the previous year. That is the largest gap of any sector when compared with figures for the infrastructure, energy, manufacturing, universities and telecommunications sectors. The ONS reported an average median hourly pay gap of 31.2% for the financial services sector as a whole.

Many companies across the board seem to have improved their gender pay gap statistics since the reporting obligation was introduced in 2017, with most sectors reporting at least a slight improvement in their gender pay gap figures since 2017-18.

Companies operating in the telecommunications (TMT) sector have made significant improvements. Based on data provided by the ONS, the TMT sector has improved its median gender pay gap from 16% in 2017 to 11.9% in 2022 and its mean gender pay gap from 15.7% in 2017 to 8.9% in 2022.

Increase in companies reporting

A total of 10,799 employers reported their gender pay gap figures for the year 2022-23. This represents an increase of over 500 employers from 2021-22 – and an increase of over 3,000 employers in comparison to the number of employers which reported in 2019-20.

In 2017-18, when the reporting obligation was first introduced, 10,577 reported their gender pay gap figures. Except for a significant drop during the pandemic, when mandatory reporting was suspended, the number of employers reporting on GPG has stayed relatively consistent.

Responding to the cost-of-living crisis

Because women still make up a majority of low-paid workers, they are more likely than men to be disproportionately affected by rising costs of essential goods and services brought about by the cost-of-living crisis. This is a particular issue in the financial services and university sectors, where 56.7% and 66% of women respectively are currently in the lowest paid quartile of jobs.

A 2023 survey commissioned by the Chartered Institute of Personnel and Development (CIPD) found that only 42% of female employees are able to pay their bills and maintain financial commitments without difficulties. This figure drops to 34% for female employees earning less than £20,000. Strikingly, only 23% of female workers said that their pay was enough to cope with a sudden financial emergency costing £300 without having to resort to savings, compared to 64% of their male counterparts.

Some employers, like Sainsbury’s, have reacted by raising pay. Since January, the supermarket’s direct employees have been paid £11 per hour – the ‘real living wage’ – matching the rate paid to staff by rival brand Aldi. With the annual rate of CPI inflation increasing by 7.8% in April 2023, companies are required to navigate one of the most challenging periods of high inflation in recent memory. However, while not all employers have been able to raise their fixed wages, there are several ways in which businesses have been able to provide support to their most financially vulnerable employees.

Extra support being provided to employees includes one-off cash payments, 0% interest hardship loans and money management tools and advice. Some employers, like Everton Football Club, have adopted new financial wellbeing tools that aim to assist employees understand where they spend their money, where the pressures on their savings are and subsequently points them in the direction of services which can support them. Meanwhile, Aviva is now one of several companies to permit staff to sell back unused annual leave.

Some companies with frontline workers employed on a shift basis are adopting tools that offer instant access to earnings. But the Financial Conduct Authority (FCA) has warned that there is a risk that employees will become dependent on repeated uses of salary advance schemes that could leave them with less money towards the end of the next payday.

Wider voluntary reporting

Unlike GPG reporting, there is currently no statutory requirement for employers to measure and report pay gaps relating to other diversity strands such as ethnicity, disability and sexual orientation. However, many companies now voluntarily publish information outlining diversity-related pay gaps in their organisations such as BP, Barclays, Sainsburys and Centrica, and it is anticipated that this will become a growing trend - particularly now that the government has published its guidance on voluntary ethnicity pay gap reporting.

Taking stock

The Trades Union Congress and campaign groups such as the Fawcett Society have expressed frustration and disappointment at the lack of meaningful progress that has been made since mandatory reporting was introduced and have called on the government to introduce mandatory action plans to set out the steps they will take to address gender inequality in the workplace. 

Whilst the vast majority of employees do produce a contextual narrative to accompany their figures and explain the positive actions they are taking to tackle the root causes of the gap, these reports vary in terms of the level of detail and are not a mandatory requirement under the current legislative framework. 

The GPG Regulations are currently being reviewed and a response will be published in due course. The introduction of mandatory GPG reporting across EU member states from the start of the 2024 financial year under the Corporate Sustainability Reporting Directive, as well as the enactment of the EU Pay Transparency Directive ('the Directive') which must be implemented by EU member states by 2026, will inevitably ensure that pay transparency remains a focal point for law makers and businesses alike and place mounting pressure on the UK government to take a more proactive approach to mirror the EU approach

The reporting threshold under the Directive is lower than in Great Britain: it will eventually capture businesses with 100 or more employees; in GB the reporting threshold is 250 or more employees. The reporting requirements under the Directive are also much more onerous. The Directive makes provision for reporting based on ‘categories’ of workers who perform the same work or work of equal value. It includes the ability for employers to be questioned by workers and their representatives, labour inspectorates and equality bodies about their figures, as well as a requirement to remedy gender pay differences which cannot be justified by objective and gender-neutral factors. The Directive also introduces of a compulsory ‘joint pay assessment’ – similar to an equal pay audit – where the figures reveal a gender pay gap of at least 5% in any category of workers, the employer cannot justify the gap based objective gender-neutral factors, and the unjustified difference has not been rectified within six months.

The EU regime is likely to be regarded as the ‘gold standard’ and could become the approach adopted voluntarily by some employers in UK, particularly those with operations in Europe that want to take a ‘one-business approach’ to GPG in the spirit of transparency.

Co-written by Lesley Finlayson and Fraser Godden of Pinsent Masons.