The UK gender pay gap might be worse than we thought

The Office for National Statistics (ONS) might have been consistently underestimating the UK’s gender pay gap by one percentage point since 2004, a new report suggests.

Over the bank holiday, the British Journal of Industrial Relations (BJIR) shared findings that suggest the ONS may have been overly-reliant on payroll data from large businesses in its Annual Survey of Hours and Earnings (ASHE).

The paper reveals how this has skewed the results of the ASHE for the past 20 years, and potentially influenced how policymakers, employers, and the public understand progress toward pay equality.

What is the UK’s gender pay gap?

The gender pay gap refers to the difference in earnings between men and women employees. In 2024, the mean gender pay gap for full-time employees was 7.0%, meaning on average, women earn 93p for every pound that men earn.

Since records began in 1997, the gender pay gap has been closing. But the BJIR report suggests we might actually need to take a step back in 2025, as the ONS course corrects on what may have been a flawed methodology.

When gathering its statistics from companies, the BJIR alleges that the ONS did not properly take into account that most of its data came from big firms, where the gender pay gap is narrower. In smaller businesses, women are often paid less and underrepresented.

The BJIR findings were first reported by the Financial Times. According to the Financial Times, the ONS said the ASHE survey was under review, and that some of the issues raised in the report had already previously been addressed.

“Weighting schemes are just one aspect of the methodology of a complex survey such as Ashe, and we regularly scrutinise these methods to ensure they continue to be relevant and aligned to best practice,” the ONS said.

However, this is not the first time that the government body has faced accusations of sharing flawed data. In October 2023, the ONS suspended its monthly Labour Force Survey (LFS) due to concerns about data accuracy. This suspension lasted until February 2024.

Incoming pay gap data law changes

Trust in the government’s earnings data will be paramount ahead of incoming changes to pay gap reporting, which are set to come into force from next year.

Large employers will be asked to create action plans on addressing gender pay gaps, at first on a voluntary basis, before being made mandatory in October 2027. 

In June, the government launched a consultation on extending existing pay gap reporting laws to require large employers (those with 250 or more employees) to publish data on disability and ethnicity pay in their organisations.

It is hoped that these law changes will improve pay transparency in the UK. But, if the BJIR is to be believed, the ONS might need to get its own house in order first.

Reliable data matters in today’s labour market

The ASHE survey is used to produce comprehensive statistics on the earnings, hours, and gender pay gap in the UK for employees. Its findings are commonly used to inform decisions related to pay and working conditions, including over the future level of the minimum wage.

The reliability of these statistics matter not only to policymakers but also to employers and workers navigating an increasingly difficult labour market. 

In the hospitality sector alone, 4% of jobs have reportedly been lost since the Budget, in part because employers have struggled to absorb rising costs from higher minimum wages and National Insurance contributions, set by policymakers.

Ahead of changes to pay gap reporting in the forthcoming Employment Rights Bill, the demand for trustworthy wage reporting has never been greater. Without it, firms may end up making decisions on incomplete or misleading evidence.