The gender pay gap is a measure of the difference between typical earnings for men and women. It can be calculated as the median gender pay gap, as follows:
Or the mean gender pay gap:
Typically, reporting requires both the mean and median gender pay gap to be calculated (e.g. UK gender pay gap reporting, EU Pay Transparency Directive). Ravio uses the median gender pay gap in their compensation benchmarking platform, because the median is less prone to outliers.
The figure resulting from the calculation above is sometimes known as the ‘unadjusted pay gap’ because it uses the raw data to give an overall view of the gender pay gap at a company – but does not ‘adjust’ that data to account for other factors that contribute to unequal pay between men and women e.g. job role and responsibilities, education level, work experience.
Calculating an ‘adjusted pay gap’ means taking into account those additional factors to look at systemic pay differences between men and women when doing equal work (or work of equal value), typically calculated by running a regression analysis on the unadjusted pay gap data to understand how one variable relates to another.
The adjusted pay gap can be more valuable for companies to identify where pay discrepancies between men and women are driven by systemic discrimination and, therefore, where the company should take action to rectify issues.
<aside> 💡 Further reading:
On its own, the gender pay gap doesn’t tell us everything we need to know about gender inequality in pay with a company.
The number of women in different roles is also important to monitor, because it’s often the case that there is not equal representation of women across teams and levels.
For example Ravio’s data shows that only 19% of executive level employees in European companies identify as women. So, even though there is a 0% gender pay gap at this level, the lack of women represented in the roles means there is still a gender equality issue at play.
This is why the Northzone Impact and ESG report also looks at the gender diversity of teams (the % of teams in the portfolio where at least one co-founder identifies as a woman) and boards (the % of total board members identifying as women).
It’s also where the difference between the ‘adjusted’ and ‘unadjusted’ arises.
