How can benefits help to close the gender pay gap?

In April 2025, the UK median gender pay gap was 12.8% in favour of men, as reported by the UK Parliament in November 2025. While this has narrowed over time, it creates an opportunity for employers to continue to reduce the gender pay gap where they can with the tools at their disposal, such as their benefits offering.

How to narrow the pay gap

Benefits have the power to tackle pay gaps because they can address disparities and barriers to equal progression and representation within the workforce. More equal parental leave, flexibility and childcare support can help improve the presence of women in senior roles and, in turn, reduce pay gaps.

Jobs board Five Hour Club’s May 2024 Five hour work day global survey found 69% of working parents said they wanted more sick pay so they can take time to be with their sick child if needed. Additionally, 42% wanted increased annual leave and 23% wanted improved maternity leave.

The running theme through the findings is that working parents want more family-friendly benefits from employers. In turn, providing more opportunities for additional annual or parental leave can widen an organisation’s potential talent pool and attract a larger variety of people.

Employers that offer flexible working and more generous family leave provisions are recognising that this can attract those unable to frequently come into an office, explains Amy Grilli, co-founder of Five Hour Club.

“It raises the question of what is flexibility, is it an employee benefit or a way of working that can attract and retain staff?” she says. ”Benefits should be equal, offered as a menu and dependent on individual needs. Both higher and lower-paid staff will probably want extra annual leave or better parental leave and should have the option within their benefits package.”

Organisations should actively promote support and time off for fertility, childcare and menopause. Benefits of this kind tell prospective applicants, particularly women, that their employers are there for them, which can increase the diversity of candidates applying. They can also support women in the earlier stages of their careers to progress within an organisation.

David Collington, partner and head of benefit consulting at Barnett Waddingham, says: “Offering online tutoring for children can free up time for parents to keep working for longer if needed. Employers could provide workplace savings vehicles, legal assistance for those going through a divorce, and salary sacrifice technology schemes that offer refurbished technology at cheaper prices to support lower-paid staff and help narrow the gender pay gap.”

Melissa Blissett, pay gap analytics lead at Barnett Waddingham, adds: “If pay gaps are found among lower earners, organisations could offer employer-funded or cheaper benefits. The government is bringing in equality action plans from 2027 for the menopause, so employers may want to get ahead and ensure they’re offering the right support to attract female employees.”

Differences in benefits eligibility or levels, such as if senior employees receive more generous benefits and men are overrepresented at this level, can create pay gaps if the benefit received is related to pay. One example would be private medical insurance, as if this is only offered to senior employees, some junior staff on lower pay may struggle to pay for treatment. Benefits that are offered to all staff on a non-discretionary, consistent and uniform basis support pay equity and help limit the gender pay gap when total compensation includes the value of benefits.

Benefits of fixed amount, such as meal or transport allowances, can also narrow pay gaps, because these have a greater impact on employees on lower pay grades, which are often female dominated, explains Cloe Cerracchio, director of international benefits at Willis Towers Watson. 

“This is because a small, fixed addition represents a greater percentage increase compared with higher salaries,” she says. ”Lower-paid employees tend to value benefits that are expensive or difficult to obtain individually, such as life insurance, and employer-arranged group life cover is usually cheaper. They also typically appreciate non-taxable benefits, since taxable benefits reduce net pay.”

Impact on other pay gaps

Organisations can explore their data to see where gaps are within certain cohorts of staff and identify which benefits would help to narrow these. Understanding which groups have the widest gaps can help determine benefits provision.

Employers that provide benefits which attract diverse groups to their organisations may find they narrow their pay gaps because their workforce representation has increased.

“Pay gaps typically arise from differences in workforce distribution,” says Cerracchio. ”Reducing or removing variations in eligibility and benefit levels can apply to ethnicity, disability, or other demographic pay gaps when these groups are unevenly represented across job levels.”

Blissett adds: “We do see greater numbers of ethnic minorities in lower-paid roles, so to narrow ethnicity pay and health gaps, employers should offer a range of health benefits, virtual GPs and lower-cost healthcare, with some, if not most, employer funded.”

Tackling progression barriers

To ensure women do not suffer from their career levelling off after becoming a parent, employers need to ensure there are clear progression pathways for them and detail how they can get there, regardless of how long it takes.

Increasing representation of women, ethnic minorities and people with disabilities in senior roles can help to narrow pay gaps where distribution is currently uneven. Providing flexible working and more part-time senior roles can support this, making it feasible for women to hold higher-paid positions.

This can also support individuals with caring responsibilities and disabilities who may need adaptable working patterns. By facilitating progression for all employees, pay gaps can be reduced over time.

“Employers should encourage women to get to senior leadership, C-Suite or board positions, but not exclude those with children or are part-time,” says Grilli. “At the mid-level, some women need flexibility and reduced hours to continue their careers.”

Using benefits to attract a diverse range of staff and increase representation within their workforce is worth considering for employers that want to narrow or close their gender pay gap.