Need to explain how to calculate a gender pay gap? Here's the mathematical equation.
The gender pay gap is the difference between the average or median pay for women and men, expressed as a percentage of men’s pay.
You may see different figures for the gender pay gap. The calculation doesn’t change. What changes is how people define ‘pay’ or ‘remuneration’.
Pay can be defined as base salary or total pay, which includes superannuation, performance bonuses and overtime. It could be what someone earns in an hour, a week or a whole year. It can be full-time workers only or include part-time and casual workers too.
Average gender pay gap calculation
The average gender pay gap = (average pay women - average pay men) / average pay men. To obtain the percentage figure, the result of this calculation is multiplied by 100.
To calculate an average, you add up all the items and divide by the number of items you have. The final value can be skewed higher or lower by small groups of extremely high or extremely low salaries concentrated in one gender, like a few high earning men senior executives.
Median gender pay gap calculation
The median gender pay gap = (median pay women - median pay men) / median pay men. To obtain the percentage figure, the result of this calculation is multiplied by 100.
Median: To get a median, you organise the numbers from smallest to largest and find the middle number. This means it is rarely affected by a small group of very high or very low salaries.
WGEA calculates and publishes both average and median gender pay gaps. If the average and median are quite different, it can indicate the employer has a concentration of one gender earning either very high, or very low pay.
What's the difference between the ABS and the WGEA gender pay gap?
The ABS and the WGEA gender pay gaps are different because of the way ‘pay’ is measured in the datasets used to calculate these numbers.
WGEA publishes both average and median gender pay gaps for base salary and total remuneration using information private and Commonwealth public sector employers with 100 or more employees report directly to the Agency annually.
Total remuneration includes base salary payments as well as superannuation, bonus payments, overtime and allowances. As such is gives a more complete picture of an employee's pay. When calculating gender pay gaps, WGEA includes full-time, part-time and casual employees. The pay for any employee who is not working full-time is converted to an annualised full-time equivalent. You can read more about the details of the inclusions and exclusions in WGEA's Gender Pay Gap Technical Guide.
The ABS gender pay gap calculates pay based on the Survey of Average Weekly Earnings. This data comes from a sample of employers selected from the Australian Business Register, with a slightly different sample taken each time. It estimates full-time weekly base salary employees in the public and private sector, excludes overtime, pay that is salary sacrificed, and superannuation and excludes junior and part-time employees.
Excluding these datapoints from the gender pay gap calculation results in a lower gender pay gap.
The Australian Bureau of Statistics provides a helpful guide to all the different approaches to measuring a gender pay gap in Australia.
Regardless of what measure of pay you use, in every industry in Australia, the gender pay gap favours men.