What is Gender Pay Gap Reporting?

Pay inequality has been a prominent, ongoing issue in the UK economy for years. Not only through gender, but the government has recently found disparities within ethnic and disability demographics.

Under employment law, certain businesses are legally obliged to publish their pay gender gap reports publicly. Any evidence of negligence of this duty may result in causing reputational damage, as well as losing valuable employees to rival companies.

In this guide, we’ll look at what pay gap reporting is, what the law covers, and how to conduct reports to help promote equal pay.

What is the gender pay gap?

The gender pay gap is the difference between the average pay of men and women in a company. These reports cover disparities in basic pay, allowances, bonuses, and other forms of finances.

The main reason behind the report isn’t to find out who earns what. It relates more to understanding what women earn compared to men. The report also helps employers uncover where they’re coming from and how they should be managed.

It’s important to note that gender pay gap reports solely focus on pay disparities within gender categories. However, the government is focusing on pay gap disparities found in ethnicity and disability groups, through the Equality (Race and Disability) Bill 2024.

Why do gender pay gaps happen?

Gender pay gaps occur mainly due to three categories: a labour market disadvantage; a workplace disadvantage; or a difference in individual earnings between women and men.

From here, employers will be able to pinpoint real-time causes behind gender pay gaps found within their business. Some of the main reasons behind pay disparities can include:

• Taking unpaid time off for dependents.
• Being in part-time work positions.
• Facing differences in human capital.
• Experiencing workplace segregation.
• Undervaluing women’s work and output.
• Discovering pay discrimination.

What information is included in a gender pay gap report?

Along with duties to report your gender pay gap, employers may also need to submit or publish the following:

Written statement: This is a declaration that states the report data is accurate.

Supporting narrative: This is a detailed analysis behind the report data.

Action plan: This is a procedure that demonstrates how you plan to tackle pay disparities.

Employers must report the data through the gender pay gap service via the GOV website. You’ll also need to publish your gender pay gap data on your own website; or online somewhere employees have access to it for at least three years.

Who needs to publish gender pay gap reports?

Businesses with 250 employees or more are legally obliged to publish gender pay gap reports per year. This must be done within respected ‘snapshot dates’:

• 31 March: This applies to most public authority employers.
• 5 April: This applies to private, voluntary, and all other public authority employers.

Employers must report and publish gender pay gap information within a year of their snapshot date. The reporting deadline is 30 March and 4 April. This must be done for every year that you have 250 or more employees. 

What happens if you breach gender pay gap report requirements?

In the UK, pay gap reporting is a legal requirement for certain businesses. This includes publishing before or on their respected deadline. Failing this could lead to employers facing enforcement actions from the Equality and Human Rights Commission (EHRC).

Employers may also receive a ‘late badge’ that’s visible to the public. In the end, such consequences can lead to reputational damage and high turnover.

Can you publish gender pay gap reports early?

Employers can publish their gender pay gap reports earlier than their respected snapshot date. Publishing reports earlier allows employers to make necessary changes to their reports.

It also promotes a proactive approach towards dealing with pay disparities – resulting in a positive influence for your staff and overall brand-name. However, they must not be published later – or else you risk facing serious penalties.

Do you need to include other genders in a gender pay gap report?

It’s important for employers to be sensitive about how an employee identifies their personal gender. The gender pay gap regulations do not define the terms ‘women’ and ‘men’. So, it’s advisable not to single out employees regarding their gender.

To reduce this risk, employers should try to use information already available provided through HR services or payroll records. If the employee doesn’t self-identify as their gender, you can exclude them from your gender pay gap report calculations.

How to prepare your data for a gender pay gap report

Before you start making their calculations, employers need to gather payroll data for individual employees. Let’s look at how employers can prepare their data for a gender pay gap report:

Step 1: Make a list of employees to include and their gender

Employers should start by collecting data for two types of employees: relevant employees and full-pay relevant employees.

Relevant employees are either contractually employed or are self-employed. Employers need to count relevant employees on an individual basis; for example, two people sharing a job should be counted as individuals.

Full-pay relevant employees are paid their usual basic pay or paid through piecework. Employers need to exclude any full-pay relevant employees if they weren’t paid their usual full basic pay or piecework rate.

Employers shouldn’t include any full-pay relevant employee if they’re not paid their usual full pay because they were on leave. This includes employees on annual leave, family leave, sick leave, or other forms of bereavement leave.

Step 2: Add ordinary pay to your report

The next step involves adding the amount of ‘ordinary pay’ from full-time relevant employees. Employers need to use the employee’s gross pay:

• After any reduction for a salary sacrifice scheme.
• Before deductions such as tax, National Insurance, and workplace pension contributions.

At this point, employers don’t need to add ordinary pay for those who count as ‘relevant employees’. Ordinary pay includes things like basic pay, allowances, piecework payments, shift premiums, and pay from leave. It doesn’t include things like overtime pay, redundancy pay, or financial benefits (like company cars or medical insurance).

Step 3: Add bonus pay to your report

Employers should then add any information regarding bonus paid to staff. Bonus pay can include things like commission, profit sharing, and long service awards. To add bonuses into gender pay gap reports, you’ll need to consider the following:

• Bonuses that are paid to each full-pay relevant employee within the pay period included in the snapshot date.
• Bonuses that are paid to all employees in the 12 months ending on your snapshot date. (This includes all relevant employees and full-pay relevant employees).

In both cases, employers should only include bonuses that were actually paid during this time. Only use the employee's gross bonus pay after any reductions for salary sacrifice scheme; and before tax deductions (like pensions, National Insurance, etc).

Step 4: Add weekly working hours

The next step involves adding your employees’ weekly working hours. Employers should only add hours from full-pay relevant employees. You’ll use this to later to work out their hourly pay. (Note that you shouldn’t include paid or unpaid overtime done during weekly working hours).

To add weekly working hours, employers should include the following areas:

• Employees on regular working hours
• Employees on variable working hours.
• New employees and those whose roles have changed.
• Employees who are on-call or have sleeping-in arrangements.
• Employees paid for piecework.

Step 5: Work out your employees’ hourly pay

Employers should lastly take the information from Step 1-4 in order to work out their employees' hourly pay. You only need to do this for full-pay relevant employees.

Employers don’t need to make special calculations for employees with regular working hours who:

• Didn’t receive any bonuses, allowances, or other variable pay during the pay period that includes their snapshot date.
• Have a fixed hourly rate of basic pay.

If employees receive bonus pay, they’ll need to add both ordinary pay and bonus pay paid in that specific pay period.

How to make calculations for a gender pay gap report

Employers need to make some calculations before they can send their gender pay gap report. You need to work out the:

• Mean (average) and median gender pay gap for hourly pay and bonus pay.
• Percentage of men and women in each hourly pay quarter.
• Percentage of men and women receiving bonus pay.

Your findings will either be a positive or negative percentage. A positive percentage shows that women have lower pay or bonuses than men in your business. A negative percentage shows that there is equal pay or bonuses between men and women in the business.

There are six calculations employers need to consider. Let’s take a look at how to make calculations for a gender pay gap report:

Calculation 1: Percentage of men and women in each hour pay quarter

This works out the hourly wage percentage of men and women. It's split into four equal groups: lower, lower-middle, upper-middle, and upper hourly pay quarter. This is only done for full-pay relevant employees. For this calculation, employers should:

1. Sort your employees from highest to lowest hourly payment.
2. Divide the list into quarters.
3. Check the gender distribution if employees have the same hourly rate.
4. Work out the percentage of men and women in each quarter.

Calculation 2: Mean (average) gender pay gap for hourly pay

This works out the average hourly pay for full-pay relevant employees. For this calculation, employers should:

1. Add together the hourly pay of all men in your list and divide the figure by the number of men. This gives you the mean (average) hourly pay for men.
2. Repeat this for all women in your list. This gives you the mean hourly pay for men.
3. Take the mean hourly pay for men and subtract the mean hourly pay for women.
4. Divide the result by the mean hourly pay for men.
5. Multiply the result by 100.

Calculation 3: median gender pay gap for hourly pay

This works out the median hourly pay for full-pay relevant employees. For this calculation, employers should:

1. Sort all the men in your list in order of their hourly pay, with the lowest paid first and the highest paid last. Identify the man in the middle of the list and write down this hourly pay. This figure is the median hourly pay for men.
2. Repeat this for the women in your list. This figure is the median hourly pay for women.
3. Take the median hourly pay for men and subtract the median hourly pay for women.
4. Divide the result by the median hourly pay for men.
5. Multiply the result by 100.

Calculation 4: percentage of men and women receiving bonus pay

This works out the percentage of men and women who received bonus payments in the 12 months ending from the last snapshot date. For this calculation, employers should:

1. Add together the number of male employees who received a bonus in the 12 months from your last snapshot date. (This gives you the percentage of men who received bonus pay).
2. Repeat this for all women in your list. (This gives you the percentage of women who received bonus pay).

Calculation 5: mean (average) gender pay gap for bonus pay

This works out the difference in the average bonus pay paid to men and women. For this calculation, employers should:

1. Add the bonuses paid to male employees in the 12 months from your last snapshot date. Divide by the total number of male employees who received a bonus.
2. Repeat this for all women in your list. This gives you the mean bonus pay for women.
3. Take the mean bonus pay for men and subtract the mean bonus pay for women.
4. Divide the result by the mean bonus pay for men.
5. Multiply the result by 100.

Calculation 6: median gender pay gap for bonus pay

This works out the difference in median bonus pay paid to men and women. For this calculation, employers should:

1. Create a list of all male employees who received bonus pay in the 12 months from your last snapshot date. Sort them in order of highest to lowest bonus pay amounts. Identify the middle person and write their bonus pay.
2. Repeat this for women. This figure is the median bonus pay for women.
3. Take the median bonus pay for men and subtract the median bonus pay for women.
4. Divide the result by the median bonus pay for men.
5. Multiply the result by 100.

Get expert advice on gender pay gap reporting with Peninsula

The legislation on gender pay gap reporting aims to narrow the gap both in businesses, as well as the wider economy. Failure to complete proper reporting steps puts employers at the risk of financial penalties, reputational damage, and high turnover.

Peninsula offers expert advice on gender pay gap reporting. We offer specialised guidance on HR contracts and documentation – ensuring your business meets all its HR compliance. Want to find out more? Contact us on 0800 028 2420 and book a free consultation with one of our HR consultants today.