Gender pay gap and equal pay: what's the difference?

Equal Pay Day, the day of the year on which women effectively stop earning money relative to men, falls on 10 November in 2016. It varies each year depending on the size of the UK's gender pay gap. This year, it is only one day later than in 2015.

But what is the difference between gender pay and equal pay? The two are frequently confused. Recent reporting of the equal pay claims brought against Asda is an example of this. However, there are key differences between the two, and employers need to be aware of their obligations in relation to both. Laura Merrylees explains.

Gender pay gap reporting legislation requires large employers to publish their overall mean and median gender pay gaps from 2018. Under the new laws, employers will have to calculate their gender pay gap from April 2017 and publish the details by April 2018.

Meanwhile, Asda is facing a mass equal pay claim in an employment tribunal. The claimants - predominantly female - are seeking to compare their jobs in retail stores with the jobs of colleagues who work in distribution centres.

What is an equal pay issue?

Essentially, it is where a person of one sex (more commonly a woman) receives less pay than a man for carrying out the same or a similar job. It concerns individuals or groups of workers performing the same or comparable work.

For example, in the Asda case the claimants argue that work done in retail stores has been perceived as "women's work" and was paid less than the work in distribution depots, traditionally seen as "men's work".

What is a gender pay gap?

A gender pay gap is the difference between the average earnings of men and women over a period of time, irrespective of their role or seniority. It therefore captures any pay differences between men and women on a broader level.

For example, an organisation that is over-populated by men in senior roles and women in junior roles will have a gender pay gap.

Is the intention behind the two measures the same?

On a broad analysis, yes. Measures designed to ensure equal pay and those aimed at closing the gender pay gap have the overall objective of eliminating sex discrimination in relation to pay.

However, at its core, the intention behind equal pay is to ensure that men and women are not paid differently for doing the same or similar work. This, on its own, does not prevent a gender pay gap.

Even if an employer has an effective equal pay policy, it could still have a gender pay gap if, for example, the majority of women are employed in lower-paid jobs.

The intention behind gender pay gap reporting is therefore to increase transparency of the differences in pay between men and women in the workplace with the aim of closing the gender pay gap.

How do the obligations on employers differ?

The legal right to equal pay has existed for decades and is now enshrined in the Equality Act 2010. It applies to all employers, no matter how small.

The requirement to report a gender pay gap will only apply to employers with 250 or more employees.

It is a reporting requirement and will require an organisation to publish specific data on its website, including the overall percentage difference in mean and median pay between male and female employees.

Employers will have 12 months to publish the information, meaning that first publication will be required in or before April 2018.

What sanctions apply to each?

Unlike an equal pay claim, where a financial award may be made against an employer, there is currently no financial sanction as a result of failing to publish a gender pay gap.

However, despite the current lack of any enforcement mechanism, employers need to be aware that there are risks in not complying with the duty.

Reputational damage may well be a consequence and the prospect of non-compliant employers being publicly "named and shamed" in the future cannot be ruled out.