Equal pay, pay equity and the pay gap
- Equal pay is the same pay for the same or comparable work.
- Pay equity is the wider aim that pay differences are explained by legitimate factors, not by gender, background or other personal characteristics.
- The pay gap is a measured difference in pay between groups. It can exist even where equal pay is paid for the same job, because of who holds which jobs.
How to calculate the gap
Unadjusted gap = (median pay of group A − median pay of group B) ÷ median pay of group A × 100
The unadjusted gap measures the overall difference, including the effect of one group being concentrated in lower-paid roles. It shows where opportunity is uneven.
The adjusted gap compares people in similar roles, taking account of level, tenure, location and, where it is legitimate, performance. It shows whether like is paid like. A small adjusted gap with a large unadjusted gap points to a progression problem, not a pay-setting problem.
Running a pay equity review
- Define the groups and the comparison you will make.
- Group roles into comparable bands.
- Compare pay within bands, controlling for level, tenure and location.
- Investigate each unexplained difference.
- Correct what cannot be justified, and record why.
- Repeat on a schedule, and after changes in pay or structure.
Say who reviews it and how often. A review done once is a snapshot; one done regularly is a control.
Pay transparency: a spectrum
| Level | What is shared |
|---|---|
| Criteria | How pay is set: the factors and who decides |
| Bands | The pay range for each level or role |
| Position | Where an individual sits within the range, and why |
| Outcomes | Aggregate gap and review results |
Most organisations can share the first two without difficulty, and doing so builds trust: people accept a pay outcome more readily when they can see how it was reached. The Academy principle Pay Fairness covers this in practice.
Communicating the results
Share what was found, what was corrected and what will be re-checked. Do not publish an average without the method. Where a gap persists, say what is being done about it and by when.
Frequently asked questions
What is the difference between equal pay and pay equity?
Equal pay is the same pay for the same or comparable work. Pay equity is the wider aim that all pay differences are explained by legitimate factors rather than by personal characteristics.
How do you calculate the gender pay gap?
Subtract the median pay of one group from the median pay of the other, divide by the median pay of the first, and multiply by 100. That is the unadjusted gap.
What is an adjusted pay gap?
It compares people in similar roles, accounting for level, tenure and location. It shows whether comparable people are paid comparably.
Should companies share pay information?
At least how pay is set and the band for each role. People accept pay decisions more readily when the criteria are visible.
Written by the WCRC Culture Crest Research Desk, part of WCRC Intelligence. General information, not professional advice.
