Gender Pay Gap : Meaning, Causes, and Calculation

What is Gender Pay Gap?

Gender Pay Gap means the difference in the average income paid to men compared to the average income paid to women in a workplace, which represents that there are unequal economic opportunities on the basis of gender. It is not only about unequal pay for the same job, but it’s about the overall earnings gap between men and women in the workforce. It takes into account various factors, such as differences in average hourly or annual wages, bonuses, and other compensation-related benefits.

Gender pay gap is a problem that existed for many years. Before 100-200 years, women were discriminated against and were not allowed to do jobs. But after that, laws were made, which allowed them to work. Still, the problem of the Gender pay gap exists till now. In many organisations, women are paid less in the same job.

What is the Equal Remuneration Act, of 1976?

This act was brought by the government of India to reduce discrimination in salary or compensation paid to employees on the basis of gender. This act states that if a male and female are doing work of the same nature, then they should be paid the same compensation.

What does Work of the same Nature mean?

Here the same nature means even if the jobs are not identical, but require the same amount of skills, effort, responsibility, and working conditions then they would be considered similar and need to be paid similarly. For Example, there are two employees, Atul and Anjali, Atul is a graphic designer and his work is to create visuals for marketing materials, while Anjali works as a web designer, developing the company’s website. So, their job title is not of the same, but their nature is similar, so if they have equal responsibility and bring equal value to the company, so they should be paid the same.

Objective of Equal Remuneration Act, of 1976: In the early days, it seemed that women were paid less than men even if they were doing the same work. This was discrimination on the basis of gender. So, this act was brought to promote equal wages for men and women. It is a significant step towards tackling gender inequality. Its primary objective is that women should be discriminated against on the basis of gender and paid equally to men.

Applicability of Equal Remuneration Act, of 1976: The Act applies to all establishments in the organised sector (both public and private) in public sectors, there is a lesser gender pay gap in public sectors as compared to private sectors. That is why this act also applies to private organisations. They should maintain records of men’s and women’s employment and be made available for inspection by authorities. In this way, it prevents discrimination.

Equal Pay for Equal Work and No Discrimination: This means, that if an employee is working at the same job and doing the same amount of work in an organisation, then he/she should be paid equal to other employees. No unreal salary should be offered on the basis of any kind of discrimination

Penalties for Violations: Employers who are found guilty of provisions of this act would have to face legal consequences, fines penalties, etc. The bigger the violation, the bigger the punishment if the violation is big, it can lead to imprisonment.

Causes of Gender Pay Gap

These causes are mostly because women have gotten fewer opportunities than in earlier times. A smaller number of women are employed in leadership positions. Even women are not allowed to study in earlier times in many countries. But nowadays, people are taking the initiative. Women are getting education and understanding their rights, which is solving the problem slowly. There are different causes which promote the gender pay gap, which are as follows:

1. Fewer Women: As we know, historically for many years, there were jobs in industries and factories, which were dominated by men. Very few women were working in jobs, like factories, architects, electrical, construction workers, etc., because males were more capable due to more physical strength, which caused pay gap. There were less number of women in leadership roles, such as CEOs, founders, etc., which led to gender pay gaps.

2. Pregnancy: When women become pregnant companies might have doubts about their work and productivity because they have to do their caretaking responsibilities, like taking care of children, etc.

3. Society Norms: In some places, there are still societal norms that only men can do jobs and women should be housewives, also, some women don’t get equal opportunities due to societal pressure.

4. Preference of Flexible Arrangement: Women are more likely to work part-time than men or in flexible arrangements, often due to caregiving responsibilities. While these arrangements offer flexibility, they can also contribute to lower wages and reduced career progression.

Why should HR Leaders care about Gender Pay Gap?

HR officials of a workplace must take care of the pay gap in their workplace for the following reasons:

1. Employees Losing the Interest: If there is a high pay gap between genders, then employees who are paid less won’t show much interest and retention because they won’t get motivation as they are paid less, which will have direct negative effects on the company.

2. Loss of Reputation: Organisations having a high pay gap will face problems, such as loss of talent and reputation because top employees love to work in organisations where they have fair policies and no discrimination.

3. Legal Obligation: It can lead to legal risks for companies as a big gender gap is not only unfair but also illegal in many countries the Equal Remuneration Act, of 1976 in India prevents the discrimination on basis of gender.

4. Cutting the Poverty: It could reduce poverty and help in improving the living standards of women and their families.

How is Gender Pay Gap Calculated?

Gender pay gap can be calculated through two methods, one is mean, and the other is median.

Example:

Given the salaries of 10 employees, Calculate the gender pay gap through the mean and median method.

Employee	Gender	Salary
A	Male	50,000
B	Male	40,000
C	Male	45,000
D	Male	55,000
E	Male	60,000
F	Male	65,000
G	Female	35,000
H	Female	40,000
I	Female	45,000
J	Female	50,000

Solution:

I. Gender Pay Gap through Mean Method

Calculating the gender pay gap through mean method, we have to first find the average of the above-given salaries.

Average Salary for Men = 

Average Salary for Women = 

Mean Gender Gap = 

II. Gender Pay Gap through Median Method

Salaries of men in ascending order 40,000, 45,000, 50,000, 55,000, 60,000, and 65,000.

Middle Point = 

Salaries of women in ascending order 35,000, 40,000, 45,000, and 50,000.

Middle Point = 

Median Gap = 

How to Report Gender Pay Gap?

The Equal Remuneration Act does not provide the outline for reporting the Gender Pay Gap, rather it provides options for reporting unequal pay. But if you are having problems related to the Gender Pay Gap you can take the following steps,

1. You should contact the HR management of your organisation, they will provide you with information about policies, pay scales and existing mechanisms which help in reducing pay gaps.

2. You should access the pay data and calculate the pay gap for your workplace, whether it’s low or high.

3. If it’s too high, you can consult with HR Management to take action using internal grievance mechanisms to tackle gender gaps.

4. If they are not listening and your income is unequal and unfair compared to your male counterparts, then you can report that by meeting authorities of the Ministry of Labour and Employment (MoLE) in your area regarding this issue. You can also try seeking advice from a legal professional regarding this, other than that, you can also raise your issue in District Labour Offices.

What can HR Leaders do to Reduce Gender Pay Gap?

Following steps can be taken by HR leaders to reduce the gender pay gap,

• Promoting pay transparency means forming a culture where employees can freely talk about their pay scales, salary bands, and criteria for salary progression.
• Regularly audit pay structures and practices to identify and address any gender-based pay disparities.
• They should develop clear compensation policies, which are based on responsibilities and skills rather than on gender.
• Offer training to employees, especially women, on effective salary negotiation to ensure they are equipped to negotiate fair compensation.

Why should Eliminating Gender Pay Gap be a Part of Modern HR Strategy?

1. Talent Attraction and Retention: Top-skilled employees find the organisation’s reputation when they find that the organisation prioritise fair pay and does not discriminate on the basis of gender or any other means

2. Employee Engagement and Morale: If gender gaps are addressed properly, their proper impact is on employees’ morale, if they are not paid similarly, they won’t show that much motivation and engagement towards their work. If they are treated equally, then they will positively contribute to the organisation.

3. Legal Compliance: It is also a legal requirement in many countries that the gender pay gap in organisations is less, and both men and women get equal opportunities and wages. Elimination of the gender gap will ensure legal compliance and help avoid legal risks and consequences.

4. Positive Business Performance: It is found that companies with diverse leadership teams perform better financially. So, eliminating the gender pay gap can create more diverse leadership, which can positively impact overall business performance

Difference between Unequal Pay and Gender Pay Gap

Feature	Unequal Pay	Gender Pay Gap
Definition	Unequal pay means different income is paid to employees of the same skills and jobs.	Gender pay gap refers to the difference between the average wage of men and women in an organisation.
Nature of Discrimination	Direct and explicit discrimination where individuals are paid less for the same job based solely on gender.	Systemic and indirect discrimination is influenced by factors such as occupational segregation, career progression, and biases in hiring and promotion.
Focus	The biggest difference is that this is more focused on the individual pay of an employee rather than everyone.	It’s a broader term which refers to the difference between the average salary of all employees of an organisation.
Legality	Often illegal and a clear violation of anti-discrimination laws.	While not illegal in itself, some jurisdictions require reporting to tackle and reduce the gender pay gap.

Frequently Asked Questions

1. Why does Gender Pay Gap exist till now?

The gender Pay Gap is the difference between the average income of men and women. It exists due to reasons such as gender discrimination, women’s caregiving responsibilities, occupational segregation, etc.

2. What strategies can be implemented by companies to reduce the Gender Pay Gap?

They can promote fairness in job selection based on skills instead of gender, promote diverse cultures and address cases of unconscious bias in hiring and promotions.

3. How could technology help in reducing Gender Pay Gap?

Using technology we can provide study material to women in digital forms who face barriers such as infrastructure, or social norms.

4. What can females do if their salaries are different from their male counterparts for the same job?

They can learn to negotiate and ask for a fair amount when they receive the job offer.