The average female executive experiences a lifetime earnings gap of £423,390 when compared to a male worker with an identical career path, according to research by the Chartered Management Institute.
And the gap could begin when a woman graduates, according to separate research by the University of Warwick.
The CMI 2012 National management salary survey, published in November, found the average male executive earned a basic salary of £40,325 over the last 12 months to August 2012, while a female executive in the same type of role earned £30,265.
Futuretrack, an academic research study of 50,000 students carried out by the University of Warwick’s Institute for Employment Research, also published in November, found that female graduates earn, on average, between £21,000 and £23,999, compared with £24,000 to £26,999 for male graduates.
This suggests the gender pay gap starts long before anyone reaches boardroom level. Dawn Nicholson, HR consulting partner at PricewaterhouseCoopers, said: “So why does the pay gap happen?
“I actually do question, based on the Futuretrack research, whether women are coming in at parity to begin with and I think the problem is if you start with a differential, it will compound over a number of years.”
Denise Keating, chief executive officer at the Employers Network for Equality and Inclusion, said women who start on a lower salary with an employer that gives organisation-wide pay rises as a percentage of pay will have to continue at a lower pay level even after the rise.
This also applies when someone is given a promotion and a percentage pay rise, she said.
Linking pay levels to individuals rather than a job role can also affect pay for women. Keating added: “Some organisations have a rate for a job and that can work well, but other organisations do not, so they make an assumption as to what people need to earn.”
Declaring rates for jobs will add transparency to the market and allow workers to see what different employers are offering. If larger organisations take this step, then smaller businesses may follow suit in order to remain competitive, said Keating.
Equal pay reviews could lead to a levelling of pay. But Meena Tostivin, senior professional development lawyer at Ashurst, cautioned: “The ideal is to carry out a review to ensure everyone has equal pay, but employers need to think it through carefully because they don’t want to start something they cannot follow through as they will have created a possible liability for themselves by finding evidence that could be used against them.”
Council counts cost of equal pay
An equal pay case against Birmingham City Council has highlighted the potential cost of claims to employers.
The Supreme Court ruled on 24 October that claimants can bring equal pay cases to civil court rather than an employment tribunal, which means they will have up to six years to put in a claim, rather than six months.
Birmingham council has revealed in its annual accounts that it will need £757 million to settle actual and potential equal pay claims, and that fi gure could increase further if more claims are made.