Creating a fairer Britain
Having established where ‘significant’ pay gaps exist, these need to be investigated to explain them and to determine whether they can be justified on grounds other than sex, disability, ethnicity, or working pattern. Step 4 of this kit is concerned with establishing the causes of significant pay gaps.
Explanation will almost certainly involve a process of ‘drilling down’, in which more detailed analysis is undertaken beyond, for example, average-pay by grade.
That might involve analysis of average pay by job types within a grade across the entire organisation or in particular parts of it or, where practical, listing pay for individual employees for investigation. Clearly, the number of possibilities for drilling down may be large and you will need to decide what is likely to be the most productive and informative approach.
See an example extract from an equal pay audit, plus links to a full review.
To ensure comparisons are consistent, when calculating average basic pay and average total earnings for men and women separately, you should do so either on an hourly basis or, more likely, on a full-time equivalent basis (grossing up, or down, for those who work fewer, or more, hours - excluding overtime - per week than the norm).
Averages (means) are a useful step in identifying gaps between men's and women's pay, but averages can conceal important differences between individuals. For further guidance on the use of the mean and other measures see measures of central tendency.
Pay gaps can be calculated either by dividing the higher level by the lower or by consistently dividing, for example, male pay by female. See Calculating pay gaps.
It is advisable to record all the significant or patterned pay differences that have been identified. Step 4 of this kit explores the reasons for those differences and whether they can be explained on grounds other than sex.
There is no legal guidance on what constitutes a significant difference. The advice concerning ‘significance’ in the kit can be seen as a useful rule of thumb intended to be easy to understand and to operate. If you have the expertise and resource, it may be possible to adopt more sophisticated approaches to determining statistically significant pay gaps. See Technical note: comparisons between groups – finding ‘significant’ differences in average salaries.