The 3 types of gender pay gaps that exist in the workplace

In fact, there are three different types of gender pay gaps that can exist within an organisation: like-for-like gaps, by-level gaps and organisation-wide gaps. Any organisation can have more than one type of gender pay gap, and potentially all three.

In this blog, we’ll take you through the three types of gender pay gaps with examples of each to help you get a better understanding of their differences.

What is the gender pay gap?

The gender pay gap is the difference in the average earnings of women and men. It is a measurable statistic that demonstrates how women and men are valued differently in the workforce. This measure, usually shown as a percentage or a dollar figure, shows how the country is tracking in terms of gender equality in the workforce.

There are many complex factors that cause the gender pay gap, and these are often driven by social and cultural gender stereotypes that reinforce harmful biases. Closing the gender pay gap is incredibly important, not just for the country’s future economic growth, but because closing it would mean that we are a step closer towards reaching gender equality.

How is the gender pay gap in Australia calculated?

You may have seen two different statistics for Australia’s gender pay gap. That is because there are two separate data sets with different information on employee wages.

The national gender pay gap is calculated from the ABS data using a sample of employers from the Australian Business Register. The data is released in February and August each year, and there is a slightly different sample every time the data is collected.

This data set estimates the full-time weekly base salary of employees in both the public and private sectors. It excludes overtime, salary sacrifice pay and superannuation and does not include junior and part-time employees.

The WGEA gender pay gap is calculated using data from the organisation’s annual Employer Census, which is released in November each year. The information comes from private businesses in Australia with 100 or more employees that are required to report their workforce data and performance against key indicators of gender equality to the WGEA each year.

WGEA’s data set includes total remuneration, (including superannuation, overtime, bonuses and other additional payments) and surveys full-time, part-time and casual employees. It excludes the salaries of CEOs, heads of business, casual managers and employees who were furloughed.

According to the ABS’s most recent data from February 2023, the national gender pay gap is 13.3%. WGEA’s gender pay gap, last calculated in November 2022, places it at a much higher 22.8%.

No matter which data set you look at, the bottom line is clear – men are paid more than women across every occupational category.

Beyond the national gender pay gap, organisations should develop a deep understanding of their own numbers. Knowing the different gaps that can exist within the workforce is a good place to start.

3 types of gender pay gaps that exist in the workplace

1. Like-for-like pay gaps

When two people are performing the work of equal or comparable value, but are not earning the same amount of money, this is an example of a like-for-like pay gap. 

Like-for-like pay gaps can affect anyone within an organisation, especially women. Receiving equal pay for the same job is not just about salary, but also takes into account:

• discretionary pay
• allowances
• performance payments
• merit payments
• bonus payments
• superannuation

Example of a like-for-like pay gap

Two people – Alishia and Mo – are hired by A-Tech Engineering as senior engineers. They have similar educational backgrounds and work experience. The company chooses to offer the role to Mo for $10,000 more than what they have offered Alishia, as they feel he is more likely to accept the role if they do. Both accept the roles with the salary they have been offered.

This is an example of a like-for-like pay gap because both people are working in a similar role but Mo is being paid more than Alishia.

Another example would be if Mo is hired on a full-time basis, and Alishia is hired on a part-time basis but is paid less by the hour. This means that if Alishia were to take on full-time work, she would be earning less money than Mo.

The most common causes of like-for-like gaps are:

• Inequality in starting salaries/lack of formal remuneration framework or banding
• Bias in performance management structures, pay increases and bonus payments
• The impact of long term leave or part-time employment

2. By-level pay gaps

When two people perform similar work of comparable value at the same organisational level, but they are not paid the same, this can be an example of a by-level gap. Typically, these people will be at a similar level in the organisational hierarchy and have similar responsibilities. It helps to group these roles together to perform an analysis, such as managers, graduates, extended leadership team, etc.

This is different to a like-for-like gap because the comparison is made by organisation level.

Example of a by-level pay gap

Priyanka and Greg work for an insurance company. They each manage a team of ten people in the call centre but in different departments – Greg manages a sales team, and Priyanka manages a customer support team. They have both worked for the company for four years and both have similar levels of education. Despite the fact their jobs require the same skills and effort and have the same responsibilities, Greg is paid more than Priyanka.

This could be an example of a by-level gap, as Priyanka and Greg have similar skills and experience and are performing work of comparable value, but are receiving unequal pay.

However, it’s important to note that sometimes there may be a valid reason for this difference. If organisations identify a by-level pay gap, it’s important they interrogate the reason behind it and demonstrate that the difference in wages is not due to gender bias or discrimination but an external factor that is out of their control (such as labour market supply).

The most common causes of by-level gaps are:

• Inequality in opportunity for career progression
• The impact of long term leave or part-time work
• Gendered stereotypes towards suitability of men and women for certain types of roles (i.e strategic roles vs support roles)

3. Organisation-wide pay gap

This refers to the gender pay gap across an organisation and compares the wages of women in the company to those of men. It can also be used to find the gender pay gap within a department.

Organisation-wide pay gaps examine the difference between the average remuneration of women and the average remuneration of men across the entire business.

Example of an organisation-wide pay gap

Thomasina works as an architect for a mid-sized design firm which is pretty evenly split between male and female employees. But while most people have similar qualifications and work experience, men are more frequently promoted over women and are offered more training and development opportunities. In addition, most of the senior management and C-suite roles are held by men.

As a result, there is an organisation-wide gap of 10% when the business compares the wages of male and female employees.

In this case, the company culture may be influenced by unconscious bias and gender stereotypes, which could come from the top down. Stereotypes about what kind of people are better suited to management roles and biases against women, in general, can lead to more women missing out on training and development opportunities, meaning fewer opportunities for promotion.

The most common causes of organisation-wide gaps are:

• Disproportionate number of men in senior positions
• Inequality in promotions, career progression and leadership opportunities
• Limit on career progression because of a lack of flexible work options

The importance of data to tackle your company’s gender pay gap

The hard numbers behind your gender pay gap can help you tell a story that will influence the decisions of the leadership team, enabling them to lead by example when it comes to closing the gap. Data can help you craft a holistic and insightful story that gives context to these statistics, opening up communication pathways and influencing discourse around discrimination in the workplace.

Gathering the right data is critical when assessing your gender pay gap, as it’s the only way to ascertain the size of the gap and what’s influencing it. And once you’ve identified the gap and the factors behind it, it’s time to begin working on an actionable strategy to close it.