How to Conduct a Comprehensive Gender Pay Gap in Australia

A gender pay gap analysis should tell you much more than whether men earn more than women across the organisation.

The headline percentage is useful, but it does not explain why the gap exists.

A business might have a 10% gender pay gap because women are underrepresented in senior roles. Another might have a much smaller overall gap but still have individual women and men doing comparable work on materially different remuneration.

That is why a proper review needs to look at both the overall gender pay gap and pay equity within comparable jobs.

WGEA distinguishes between the two. A gender pay gap measures the difference in average or median remuneration between women and men, while pay equity is about equal remuneration for work of equal or comparable value.

Start with clean remuneration data

Before calculating anything, build a reliable employee dataset.

Useful fields include:

• gender
• job title
• job family
• job level
• full-time or part-time status
• base salary
• superannuation
• bonus or commission
• total remuneration
• location
• hire date
• promotion date
• performance rating

The most important thing is consistency.

Make sure part-time salaries are converted appropriately, remuneration definitions are consistent and job levels are accurate.

Poor data will produce poor conclusions.

Calculate both base and total remuneration gaps

Do not look only at base salary.

Differences can also arise through bonuses, commission, overtime, allowances and other payments.

Calculate:

Average gender pay gap

and

Median gender pay gap

for both base remuneration and total remuneration.

The basic formula is:

Average male remuneration − Average female remuneration

divided by

Average male remuneration

multiplied by 100.

If men earn an average of $130,000 and women earn $117,000, the gap is 10%.

That figure tells you there is a difference, but not what is causing it.

Look at representation by level

One of the biggest drivers of gender pay gaps is representation.

Create a table showing the gender mix at each organisational level.

For example:

If women are concentrated in lower-paid levels and men dominate senior roles, the organisation-wide pay gap may be structural.

That type of gap cannot be solved simply by adjusting a few salaries.

It requires action on recruitment, promotion, succession planning and career progression.

Review the pay quartiles

Rank employees from highest to lowest total remuneration and divide the workforce into four groups.

Then look at the gender mix in each quartile.

For example:

This gives a very clear picture of where women and men sit across the remuneration distribution.

Analyse the gap by level and function

The next step is to look beneath the organisation-wide number.

Calculate gender pay gaps by:

• job level
• business unit
• function
• location
• management level

For example, the company-wide gap may be 8%, but the Finance function may have a 2% gap while Sales has a 15% gap.

That helps identify where further investigation is needed.

Conduct a like-for-like pay equity review

This is one of the most important parts of the exercise.

Compare women and men doing equal or comparable work.

Do not rely only on job titles.

Look at:

• job level
• responsibilities
• scope
• people management
• decision-making authority
• experience requirements
• technical complexity

Suppose two employees are doing substantially the same job.

One woman earns $112,000.

One man earns $127,000.

That difference should be investigated.

There may be a valid explanation, but the organisation should be able to identify it.

If there is no defensible reason, there may be a pay equity issue requiring remediation.

Review salary range position

If the organisation uses salary ranges, compare where women and men sit within those ranges.

A useful measure is:

Compa-ratio = Employee salary ÷ Salary range midpoint

For example, if the midpoint is $120,000:

A woman earning $108,000 is at 90%.

A man earning $126,000 is at 105%.

One case may not mean much.

However, if women consistently sit lower in salary ranges than men, there may be a systemic issue.

Look at starting salaries

Starting salary decisions can create future gender pay gaps.

Review employees hired during the last 12 to 24 months and compare:

• starting salary
• position in range
• sign-on payments
• bonus opportunity
• level at appointment

If men are consistently hired higher in the range, the organisation may be recreating its pay gap through recruitment.

This can often be addressed through clearer salary approval rules and tighter controls on exceptions.

Review remuneration increases and promotions

Look at the most recent salary review and compare:

• average increase for women
• average increase for men
• promotion rates
• promotion increases
• market adjustments
• retention increases

Do not stop at the first difference.

If men received larger increases because more men were promoted, the next question is why more men were promoted.

The analysis should keep moving from the result to the underlying cause.

Look closely at bonuses and commission

Variable remuneration can create significant differences even where base salaries are similar.

Review:

• who is eligible
• target bonus opportunity
• actual payout
• sales commission
• discretionary awards

If men receive materially higher incentive outcomes, examine whether this is explained by role mix, performance or other legitimate factors.

Where significant management discretion is involved, check whether the pattern differs by gender.

Review promotion and career progression

Promotion outcomes are particularly important because they affect both current and future remuneration.

Look at:

• promotion rates by gender
• time at level
• promotion into senior roles
• promotion salary increases

Do not only count the number of promotions.

Compare the number promoted with the number of employees who were actually eligible.

Check part-time work and parental leave

Part-time and parental leave arrangements can influence career progression over time.

Review whether employees working part-time or returning from parental leave are:

• less likely to be promoted
• receiving smaller remuneration increases
• missing performance reviews
• concentrated in lower-paid roles
• excluded from senior opportunities

If most of these employees are women, the impact can become a long-term driver of the gender pay gap.

Separate the findings into three categories

At the end of the analysis, most issues will fall into one of three groups.

Individual pay equity issues

Women and men doing equal or comparable work are being paid differently without a clear reason.

Remuneration process issues

Differences are being created through starting salaries, bonuses, promotions or salary review decisions.

Structural representation issues

Women are underrepresented in higher-paid and senior roles.

These three problems require different solutions.

Build a practical action plan

Do not create an action plan with dozens of items.

Focus on the areas having the greatest impact.

Possible actions might include:

• correcting unexplained pay differences
• tightening starting salary approvals
• reviewing bonus outcomes before payment
• introducing pay equity checks during annual remuneration reviews
• improving female representation in senior talent pipelines
• reviewing promotion shortlists
• improving access to flexible senior roles

Each action should have an owner and a timeframe.

Put a dollar value on remediation

Where individual remuneration corrections are required, calculate the cost.

For example:

This helps management separate immediate remediation from longer-term structural actions.

Give leadership a clear explanation

The final report should not simply contain charts and percentages.

It should explain what is driving the gap.

A useful summary might say:

The organisation's total remuneration gender pay gap is 9.8%. The largest driver is the underrepresentation of women in senior management and executive roles. Like-for-like analysis identified a smaller number of individual remuneration differences requiring review, while starting salary analysis shows men are entering some professional levels at a higher average position within the salary range.

That gives management something practical to act on.

Repeat the exercise each year

A gender pay gap is created by many employment decisions over time.

Recruitment, promotion, salary reviews, bonuses, parental leave and turnover all affect the result.

For that reason, the review should become part of the annual remuneration cycle rather than a one-off project.

The most important question is not simply:

What is our gender pay gap?

It is:

Why do we have the gap that we have?

Once the organisation can answer that properly, it becomes much easier to decide what needs to change.