Gender pay equality – what is the United Kingdom waiting for?

Lucy Gordon^[1]
Walker Morris, Leeds
Lucy.gordon@walkermorris.co.uk

Equal pay legislation was first enacted in the United Kingdom (UK) in the 1970s. However, legislation has traditionally been slow to keep pace with the rate of social change and for the previous 50 years, policy has failed to tackle an inherent issue: women are generally paid less than men in the workplace. Despite it being unlawful to pay a woman less than her male equivalents for doing ‘equal work’ or ‘work of equal value’, the gender pay gap, which analyses trends across hierarchies of employment, rather than direct equal pay issues, remains. In 2022/2023, the average UK pay gap across all industries was still unbalanced by 11.7 per cent in favour of men.

It has been confirmed that throughout 2023, the pay gap remained strained at 14.3 per cent in favour of men, which has been particularly stark in the part-time sector. The part-time discrepancy plays into a wider societal norm that a larger proportion of females than males will be engaged on a part-time basis. The reason for the female part-time phenomenon is unsurprisingly the prevalence of female childcare responsibilities. An analytical breakdown by the Institute for Fiscal Studies (IFS) of the payment for part-time work shows that the practice tends to attract a lower wage per hour than full-time equivalents. The IFS also found that ‘child penalties’ and ‘parenthood’ were the main reason for the overwhelming majority of gender pay gaps in business.

Despite the wide recognition that the gender pay gap is inexcusable and the legislative action taken by government, the UK appears to be on a slow and gradual shift away from unequal treatment and payment of women in the workplace. One might expect the rate of change to be more apparent given an almost universal agreement about unequal conditions, but changing historical patterns and expectations proves more difficult in practice. However, increasing parity in the share of part-time and full-time workers in the UK is improving. From 1997 to 2023, the share of part-time employees who were men increased by ten per cent. In the same period, the proportion of full-time employees who were women increased from 36 to 41 per cent.

EU Member States – ahead of the curve

In 2017, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 (Equality Act)^[2] came into force in the UK, with a pioneering requirement that all UK employers who engage 250 or more employees were required to report on their gender pay gap. However, overseas countries appear to have been tackling the issue of inequality in numerous, more successful ways than the UK. An example of best practice to assist the reduction in the gender pay gap can be found in the multi-jurisdictional European Union (EU) superstate. Using supra-national directives that are enacted in every Member State of the EU, at least 20 countries recorded a lower average pay gap across all industries than compared with the UK in 2022. Examples such as Luxembourg, in which women are, on average, paid (0.7 per cent) more than men prove that the gap can be bridged. The UK has some catching up to do and may be able to achieve its goal of equality if it were to adopt similar approaches as its EU neighbours.

That being said, in both the EU and the UK, the gender pay gap is noticeably more apparent in the private sector than the public sector. In April 2023, the public sector in the UK experienced a pay gap of 9.6 per cent in comparison to a whopping 12.8 per cent in the private sector. Across the EU in 2022, the same story was seen in 21 of the 24 Member States involved in a study reporting that the gender pay gap was higher in their private sector than their public sector. As an example of a private sector industry, the financial services sector in the UK has recently come under close scrutiny as a result of the ‘Sexism in the City’ Parliamentary Report 2023 ('the Report').^[3]

The Report confirmed that the UK financial services sector has the largest pay gap in any UK sector. One of the main objectives of the Report was to assess the current state of gender equality, average pay between men and women and the underrepresentation of women in senior positions in the financial services sector. Unfortunately, marked against a 2018 report ran by the same Parliamentary committee, the Report summarised that the conclusion to its investigation was that ‘not much’ had changed since 2018, despite the efforts made in legislation such as the Equality Act.

In contrast, it is important to compare how the private sector and financial services sectors overseas shape up against the recent disappointing findings in the UK. The short answer is that the actions taken by EU Member States in recent years are considerably more advanced than the UK. Specifically, one example is the EU Corporate Sustainability Reporting Directive (CSRD)^[4] which came into force in 2023 and quadrupled the number of EU companies required to report on ESG (rising from 11,700 to 50,000). Job applicants in the EU are now also offered protection by the CSRD in respect of employers no longer being able to enquire for information regarding an applicant’s salary history. Furthermore, employees can request information on their individual and average pay levels, categorised by gender, for workers doing the same work or work of equal value, an initiative neglected by the UK. For women, revealing salary history tends to confirm to a prospective employer that they have been paid less than men and so by reflecting that in job offers, the cycle of the gender pay gap is perpetuated. As explained, this is an unlawful practice in other jurisdictions.

The EU Pay Transparency Directive^[5] is another policy step to reduce inequality across European Member States and requires gender pay gap reporting on a smaller threshold than seen in the UK. Whilst not mandatory until 2026, the Directive will require Member States to share information for businesses with at least 100 workers. This is less than half the threshold in the UK, which requires reporting for companies with 250 or more employees. It is clear to see that the EU is taking much bolder and more proactive steps in enforcing gender pay equality in a manner much more aggressive than the UK.

International trailblazers – sport and the power of the employee

There is a similarly high pay for both UK and EU sports people (and globally). The difference between male and female competitors’ salaries in all jurisdictions though is vast. To take a popular example, the average yearly salary of a male footballer who plays for a top-league club in the UK is £2,800,000, whereas the equivalent for a female footballer playing in the Women’s Super League is £30,000. In this respect, it is hard to understand how regulations have constrained the inequality and how mandated policy is to be the sole driver for a shift in inequality or unequal pay conditions.

There has been a very recent rise in employee self-help action which has led to success for sportspeople who have directly, and successfully, challenged the status quo of their industry. In the past few years, the popularity of female sport in the UK has rocketed. The increased interest and viewership of female sports has highlighted the harsh reality of the gender pay gap between men and women in the industry. The high-profile case of the US women’s football team suing their employer ‘US Soccer’ on the basis of gender discrimination is a brilliant example of employee-led change. The employees cited in their claim that their US football male counterparts earned a $5,000 bonus for a loss, while the women earned nothing for a loss or a draw. Moreover, the women received $1,350 per win, whereas the men could earn as much as $17,625. In February 2022, the parties reached a settlement of $24,000,000, based on gender pay inequality which included bonuses matching those of the men’s team.

Where the UK has previously been behind the curve in enacting legislative and policy change, employees who are treated unequally could jump on the momentum of seismic shifts in attitudes and trends to demand equal treatment and pay. However, by relying on employees to bring about change, there are arguments that policy and legislation have failed and are no longer fit for purpose. There should not need to be a grass roots movement to promote equality without the appropriate matched governmental response.

Trends and suggestions

There is now an opportunity for the UK to analyse, review and learn from examples such as the US women’s football case. We have witnessed the harnessing of litigation to secure equal pay and we should expect more employee-led claims through the next few years. Additionally, current UK legislation only requires employers with 250 or more employees to report on their annual gender pay gap. To align with the success of the finely tuned policy in the EU, a reduced reporting threshold would demand a greater scrutiny of inequality for women at work. Protection should also be extended to salary history disclosure during an application process, as seen in the EU. The trend appears to be shifting towards a desire for equality more so than we have ever seen, and it looks to be the failure of UK legislation and policy that is holding progress back.