The Gender Pay Gap and Inequality

As I write this, there are only 24 hours left before the deadline when all employers (public and private) with more than 250 workers must report on their Gender Pay Gap (GPG).

For those who haven’t been following too closely, the GPG is the difference between the average hourly pay of men and women. It takes no account of the jobs held by people and, therefore, will be skewed in businesses where men have a higher percentage of the management positions, for example. Critics argue it is a crude measure – and it is – but any measure is better than no measure.

Theresa May has described the GPG as “a burning injustice” that must be tackled (Daily Telegraph, 3rd April 2018) firmly placing the onus on employers to update their practices.

Highlights of the results reported so far are that 78% of employers pay men more than women, 13% pay women more than men and 8% report they have no GPG. At the extreme, Ryanair have reported a GPG of 71.8% citing the fact that the vast majority of their pilots are men while women make up a disproportionate number of lower paid Cabin Crew (all figures from BBC article on 4th April ).

The existence of a GPG is, undoubtedly, a sign of inequality. However, it goes further than just pay.

Workplace pensions are, for most people, run on a defined contribution (DC) basis. The eventual pot of money built up from which people will take their retirement benefits will be based on investment returns achieved on contributions that are paid in. Since contributions are usually expressed as a percentage of pay, it ultimately follows that those who receive lower levels of pay will have lower retirement funds and, hence, lower incomes in retirement.

So, a lifetime of low pay will lead to an equally low paid retirement. And for these people, the State Pension will be a proportionately larger part of their retirement income. So it is extremely important for these people that the State system is fair and equal.

The Government will argue that it is addressing inequality in State Pensions by its introduction of the flat rate State pension from April 2016. Eventual State Pension benefits will be based solely on the number of years a person has contributed to the system and not on what they have contributed (as happened prior to 2016 when there was an earnings-related element which most people would know as either SERPS or State Second pension).

These reforms are a step in the direction of equality but totally ignore the injustices done to women born after 1951 who have seen their State Pension Age move at breakneck speed from 60 to 65 and, in many cases, have lost out on substantial sums of money with little notice of change and no chance to put plans in place to address the shortfall (more details at ).

The State Pension reforms also do little to address the fact that women tend to have more intermittent patterns of work and may not qualify for the full State Pension as they will not achieve the 35 years of National Insurance (NI) credits required. Taking time off to bring up children is only allowed to count for a maximum of 12 years of NI credits, and little publicity is given to the fact that people giving up work to care for elderly parents can claim NI credits that would count towards their State Pension entitlement. As a result, fewer women than men are likely to achieve the 35 years needed and will, therefore, receive lower State benefits.

That inequality in the workplace exists, is a fact. GPG is just confirmation of this. The Government is placing the emphasis on employers to take action but it too needs to take a good look at itself and make sure inequalities built into State systems are addressed as well.

UPDATE – Has Workie been spotted?

My blog of 22nd March asked why the Government wasn’t doing more to publicise the increase in minimum pension contributions that come into force this month.

Well, Workie hasn’t had a resurrection but I have noticed an increase in the number of TV adverts encouraging people to find out more about their Workplace Pension. It appears to be a re-run of a previous campaign and makes no mention of the forthcoming increases.

I guess I should be acknowledge the Government’s effort on the basis that something is better than nothing but it does seem to come under the category of “It’s the least I could do – the very least!”.

Peter Murphy Dip PFS


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