Understanding the Gender Pay Gap and How Small-Cap Companies Are Performing
Over the last few weeks the ONS have published their annual summary of the UK’s gender pay gap and the 20th November was this year’s National Equal Pay Day; the day in the year when, based on the gender pay gap, women overall in the UK stop being paid compared to men.
The pay-gap in the UK follows a trend of slow decline; over the last decade it has fallen by approximately a quarter among full-time employees, and in April 2024, it stood at 7.0%, a small improvement from 7.5% in 2023.
How do small-caps compare to this national average? What does the Addidat data tell us about institutional progress being made across sectors? What are the trends in diversity reporting? And, what does this mean for leaders of small-cap companies?
A quick reminder: what is the gender pay gap?
The gender pay gap refers to the average difference in earnings between men and women across an entire organisation. It is a measure of overall disparities in pay, reflecting the distribution of men and women across various roles and levels, but counter to the common misconception - it does not indicate differences in pay for comparable jobs; unequal pay for the same or similar work has been illegal for over 45 years under equal pay laws.
In the UK, all public, private, and voluntary sector organisations with 250 or more employees within a legal entity are required to report. The mandated data to report includes the mean and median gender pay gap, a summary of how pay and bonus pay is distributed across genders within the company, alongside information on proportion of men and women across pay quartiles.
Key themes from the ONS national report:
Overall Trends
The gender pay gap among full-time employees improved slightly from 7.5% in 2023 to 7.0% in 2024.
For all employees (including part-time), the gap dropped from 14.2% in 2023 to 13.1% in 2024.
Among part-time employees, the gender pay gap was negative 3.0%, indicating women earned more than men in part-time roles.
Age, Occupation & High Earners
The gap is notably higher among employees aged 40 and above, with a significant increase for those over 50.
Skilled trades had the largest gender pay gap, while caring, leisure, and other service occupations had the lowest gap.
The gap is more pronounced among higher earners, with those in the top 10% (90th percentile) experiencing a 15.5% gender pay gap—more than double the median earners.
Progress Over Time
The report highlights a slow but consistent decline in the pay gap over the past decade, with a decrease of roughly 25% for full-time employees.
Gender pay gap data in UK small-caps
Looking at the performance of AIM listed companies offers a unique perspective into the struggles growth companies appear to be having in lessening the gender pay gap.
The first challenge is the level of disclosure. Currently, 32% of AIM companies disclose the proportion of women in employment, typically the simplest data to calculate and report, on a firms gender equality performance.
Whereas only 17% of companies take the next step to disclose their gender pay gap, more complex to calculate and is typically only disclosed when it has to be.
What does the data tell us?
Across the 32% of AIM companies that report the proportion of women employed in their organisations, on average across all sectors, firms employ 34% women.
By sector, the highest percentage of women is found in Health Care (45%), followed by Consumer Discretionary (42%) and Consumer Staples (39%).
Analyzing the available gender pay gap report data shows us that the average difference in hourly median pay between men and women on AIM is 16%, a significant increase compared to the national average, 7%.
By sector, the largest gender pay gap is observed in the Financials sector, followed by the Telecommunications sector, with a 31% and 25% difference in median pay respectively. Sectors like Consumer Staples (4%) and Health Care (5%) show a smaller difference in median pay between genders.
Target pay gap is 0. Those with a negative pay gap are paying women more than men on average. Those with a positive pay gap are paying men more than women on average
Digging deeper into the data
Pay gap reporting includes the proportion of men and women in each quartile of earnings; i.e. the ratio of men to women in the the top, upper middle, lower middle, and bottom 25% of earners.
Usefully, by reporting the proportion of men and women in each quartile, companies provide a more detailed picture of the gender pay gap. It highlights whether women are underrepresented in higher-paying roles and/or concentrated in lower-paying positions. Ideally there would be a 50:50 gender distribution in all four quartiles. Monitoring the gender distribution between each pay quartile can provide a useful view into a company's pay gap and progress being made over time.
When we look at the difference between the female representation in the highest and lowest paid roles, there is a 16% difference between the proportion of women in the highest and lowest earning quartiles; meaning there is a significant reduction on the number of women in higher paid roles than those in the lowest, independent of the starting point.
The average across all sectors is 16%
The largest representation gap is observed in the Financials sector, with a 32% difference between the top and bottom quartiles. Sectors like Health Care, Basic Materials, and Consumer Staples show a smaller difference in female representation between the highest and lowest earning quartiles for women.
What are small-caps doing to address the pay gap and why is this especially important now?
Our data shows that whilst narrowing the pay gap appears to be challenging for small-caps, there is evidence of various structured programmes to understand diversity challenges and affect focussed improvement. 47% of AIM listed firms disclose having diversity initiatives in place and 7% now have set themselves structured targets for improvement.
This comes at a crucial moment as the Labour Party’s proposed Employment Rights Bill aims to address such inequalities with new measures that could directly impact employers, including small and mid-cap companies. Key points to note are:
Outsourcing to become in scope: The bill proposes to close loopholes around outsourced workers, who would be included in gender pay gap and pay ratio reporting. This targets the tendency to use outsourcing as a way to bypass pay equity regulations, pushing employers to ensure outsourced staff receive comparable pay.
New Reporting Requirements: Under Labour’s proposal, pay gap reporting would not only continue but expand to include detailed equality action plans. These plans would require companies to outline concrete steps to close gender pay gaps and support employees facing challenges, such as menopause. This mirrors the EU's Pay Transparency Directive, emphasising a push towards greater transparency and accountability. These are likely not going to be targeted at small caps but are an indicator of direction of travel scrutiny to come across a wide variety of stakeholders
Beyond Gender: The government is also advocating for expanded pay gap reporting to include ethnicity and disability—mandating large employers to report both mean and median pay gaps across gender, ethnicity and disability. For small-cap businesses on the growth trajectory, anticipating these regulations could help them stay ahead of compliance requirements.
Conclusion
The gender pay gap, while slowly declining, remains a challenge in the UK. While the national picture shows progress, the data from AIM-listed small caps highlights a more pronounced disparity.
The UK government's increasing focus on pay equity, as evidenced by the proposed Employment Rights Bill, underscores the ongoing relevancy of creating diverse workforces. For many small-caps, while not directly targeted by the current bill, they should be mindful of the evolving regulatory landscape and consider implementing proactive strategies.
Measurement is a key step. By understanding the extent of the gender, ethnicity and disability pay gaps and the factors contributing to it, companies can develop targeted interventions to drive change. Whether it's through setting clear targets, investing in training and development, or creating truly flexible and inclusive workplaces, see Addidat’s recent post on equal parental leave, small caps have the power to make a difference.
Contact Beth Scaysbrook if you'd like to see how our data and expertise can accelerate your progress in measurement and developing right-sized interventions and targets to affect change.
To discuss further, please get in touch with the team.
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