According to our 2023 Workforce Analytics report, men generally earn higher average salaries than women in most positions. As there are more men than women in certain functions: like Business management strategy, Data Science, Information Technology, and Transportation, you might think this sounds logical.
However, in sectors such as Human Resources, Legal, Marketing and Communication, there are more women than men. But, even in industries with more female employees, such as the Legal industry, men’s average salaries are still 12.3% higher than women’s. So, not quite so logical.
While the difference in pay between genders in some functions should have improved, we’re instead seeing that the gap has widened – as seen in sectors such as Finance and Controlling, Information Technology, Legal, Marketing and Communications. In fact, last year the pay gap in these sectors reached 22.5%, 9.6%, 12.3%, and 11.4% respectively.
So, what are the key factors potentially contributing to this gap?
Many of the key factors contributing to the gender pay gap are centred around biases or historical trends. Change needs to happen from the top, so that biases are challenged and unable to filter through to pay decisions and so that historical trends remain just that- history.
How can we address these issues to implement fairer pay going forward?
The EU Pay Transparency Directive, coming into effect in 2026 gives employees in the EU extensive new rights to information about their own pay and the pay of male and female peers.
As part of the requirements, employers will need to make information easily accessible on the criteria used to determine pay, pay levels and pay progression. Additionally, workers will have the right to request information from their employer on their individual pay level and on the average pay levels, broken down by gender, for categories of workers doing the same work or work of equal value.
Employers with at least 100 workers must submit information on the pay gap between female and male workers in their organisation to the relevant authority and may make it publicly available. In addition, employers must also submit information on the pay gap between female and male workers in the same category of workers and provide this information to all employees.
All these measures will put employees in a far better position to assess if they are being paid fairly and employers will need to be confident that they deliver pay equity.
Getting the right structures in place is a core foundation of pay equity for any company. Organisations should have a clearly designed job architecture and levelling framework that identifies employees doing comparable work using objective and gender-neutral criteria. Are these aligned with pay ranges?
While it is acceptable to have pay differences based on objective factors, such as location and performance, these parameters should be clearly defined as part of the rewards approach. The key issue to avoid is any unexplainable difference in pay.
Employers should design consistent and fair pay processes that they follow in all pay decisions and for all employees, both current and new and whether on recruitment, on promotion or as part of pay review.
Education is another key lever in the process of becoming more transparent and ensuring the delivery of fair pay. Making all stakeholders such as leaders and managers fully aware of the company’s pay management philosophy and approach and how to use the companies’ structures and processes to make pay decisions that are fair and consistent will be critically important.
Organisations should strive to build inclusive cultures that offer flexibility to support employees with family responsibilities while they continue to progress their career and ensure career opportunities are based on competence and ability at all levels including leadership. Offering more learning and development opportunities internally - particularly related to returning from career breaks - rather than relying on external qualifications is a way to bridge the gap that has often led to under representation of women.
A work environment that values everyone's contributions and ensures equitable compensation is crucial – and to change these patterns we need to understand why they exist – and then take the steps towards making a fairer future.
Article published in UNLEASH magazine on March 12, 2024.
