How Covid has impacted the gender pay gap

Tom Heys outlines how the pandemic, particularly the furlough scheme, has affected businesses’ efforts to close their gender pay gaps

The gender pay gap has been decreasing over time, but last October, the Office for National Statistics reported that it had widened slightly from 14.9 per cent in 2020 to 15.4 per cent in 2021. The increase is due to the impact of furlough; in 2020, more men than women were furloughed and experienced reduced pay. This explains why the gender pay gap in 2020 shrank by the largest amount ever recorded. The reverse then occurred in 2021. Although fewer people were furloughed overall, more were women, so the gap expanded again. Next year we’ll see the first gender pay gap data in the ‘new normal’. Will the longer-term trend to lower gaps continue?

Although national gender pay gaps have widened, at the employer level they have generally reduced. This is because of differences in calculation methods. UK figures look at total earnings, whereas the employer gender pay gap reporting regime requires adjustments for part-time workers – someone whose hours reduced from 40 to 10 a week is still earning the same. 

At the UK level, all age groups saw increases in their gender pay gaps but the biggest increase was for young people. This may be because they tend to occupy roles that were most likely to be furloughed and so saw reductions in overall pay.

Why are there gender pay gaps? 

There are many factors contributing towards gender pay gaps, but the ‘parenthood penalty’ is well recognised as one of the biggest barriers to progression. It explains why there is such a difference in the gender pay gap for those aged over and under 40; the gaps are around 3 per cent for under 40s but around 12 per cent for over-40s.

Research shows that, by their early 40s, women who have children before their early 30s will be earning less than childless women. However, those who have children after their early 30s will be earning more than childless women. One reason is that women who have children earlier are more likely to leave the labour market entirely. Given the high costs of childcare, it may not make financial sense to return. Younger mothers also report being twice as likely to experience discrimination. 

This might suggest a window of opportunity for women to establish themselves in their careers that subsequently closes – those that prioritise careers before kids do better in the long run. 

What should employers do to accelerate closing of gender pay gaps?

Gender pay gaps are generally caused by underrepresentation of women in highly paid or senior roles. To close gaps, employers must therefore recruit, retain and promote more women into these areas. 

To achieve this, employers must adopt a range of strategies: advertising roles in new places, using gender neutral language in job adverts, including multiple women in shortlists, having gender-balanced selection panels, changing their culture, providing mentoring and networking opportunities, diversity training, and setting public targets for their gender pay gaps.

In addition, employers are increasingly providing better paternity leave benefits for men. Generous ‘use it or lose it’ paternity leave encourages men to take it – and do more childcare. Perhaps ironically, improving men’s benefits could help women, as it neutralises the parenthood penalty and helps men understand the difficulties in balancing work with family life.

Although the short-term impact of the pandemic has been to increase gender pay gaps, in the longer term there could be a Covid dividend. The mass home working experiment created by the pandemic showed that many roles could be performed from home. Now more than ever, work is a thing you do, not a place you go to. With a study for Zurich demonstrating that the advertising of roles with flexible working options leads more women to apply, employers could access untapped female talent by adopting a ‘flexible by default’ approach to senior roles and see their gender pay gaps fall.

Tom Heys is a legal analyst at Lewis Silkin