How should companies calculate gender pay gaps?

The EU Pay Transparency Directive will require employers to report both unadjusted and adjusted gender pay gaps. These two figures tell different but complementary stories: 

• Unadjusted pay gap → the average difference in pay between all men and all women.
• Adjusted pay gap → an analysis that factors in role, experience, or working hours, to show whether differences are structural or due to bias. 

While this is true of Europe, Ireland’s Gender Pay Gap Information Act 2021 only requires reporting of unadjusted pay gaps (mean and median hourly, bonus, etc.). Adjusted pay gap reporting is not required under Irish law. It is possible that Adjusted reporting may be added in 2026. 

 

Unadjusted gender pay gap: The raw average difference in gross pay between men and women, regardless of role or seniority. A high-level snapshot of gender equality. 

Adjusted gender pay gap: Goes deeper by factoring in variables such as: 

• Job role or category
• Seniority or tenure
• Education or qualifications
• Performance (depending on national rules)
• Working hours (e.g. FTE adjustments) 

The aim is to show the “unexplained” portion of the gap, which can highlight inequality or bias. 

Statistical methods: 
The Directive suggests using the Oaxaca-Blinder method, which splits results into “explained” and “unexplained” parts. In practice, most organisations will use regression analysis or simpler tools, often with support from external providers. 

Reporting requirements include: 

• Mean and median pay gaps for base salary
• Mean and median pay gaps for variable salary
• Pay quartiles, by gender
• % of men and women receiving bonuses 

 If gaps of 5% or more can’t be justified, employers must: 

• Conduct a joint pay audit
• Develop a corrective action plan within six months
• Consult with employee representatives (in most countries) 

While the EU Directive recommends audits and action plans for unexplained gaps over 5%, Ireland’s current legislation does not mandate this, though future updates may introduce such requirements. 

Calculating pay gaps isn’t just a compliance exercise. To get credible results, you’ll need to: 

• Ensure data is clean, complete, and consistent.
• Use objective, transparent job categories.
• Be prepared to explain not just the numbers, but the reasons behind them. 

 Small sample sizes, inconsistent titles, or missing data can skew results, so preparing your systems now will make compliance smoother later.

In Ireland, gender pay gap reporting is governed by the Gender Pay Gap Information Act 2021. Employers must report unadjusted pay gaps - including mean and median hourly pay, bonus pay, and pay quartiles - but are not currently required to calculate adjusted pay gaps. While the EU Directive encourages deeper analysis, these are not mandatory under Irish law. Employers may still choose to conduct adjusted analyses internally to better understand the root causes of pay disparities.