With Respect to Women: The higher the Level in the Hierarchy, the higher the Pay Disparity

The discussion surrounding salary differences between men and women is a subject of great interest to the public. Since the Act to Promote Transparency of Pay Structures took effect in July 2017, the topic has become even more visible.

The law is based on the question of whether employees performing the same or equivalent activity experience salary differences. To provide an approximate answer to this question, Kienbaum Personnel and Management Consultancy is comparing the compensation of male and female employees who are similar to each other in relation to a range of hierarchical factors, position within the company or seniority. The Kienbaum research is based on a database containing information on over 75,000 employees, half of whom are female.

In general, a distinction is made between unadjusted and adjusted gender pay gaps when quantifying compensation differences. The unadjusted pay gap makes a general comparison of the salaries of male and female employees. The adjusted pay gap, on the other hand, takes into consideration features specific to the position and the individual to permit men and women with similar activities and qualifications to be compared with one another. A matching procedure is employed in calculating the adjusted pay gap.

The assessment reveals an unadjusted pay gap of between 20 and 21 percent. “The adjusted pay gap in our data set amounts to around four percent and is thus somewhat smaller than in comparable studies and assessments, which generally yield an adjusted pay gap of five to six percent,” reports Dr. Katharina Dyballa, a compensation expert at Kienbaum.

In addition, the analysis reveals that the size of the pay gap is positively correlated with the position in the company hierarchy. “This means that the higher the position in the company hierarchy, the higher the adjusted gender pay gap turns out to be,” Katharina Dyballa states. For example: the adjusted pay gap at management level comes to around 11 percent, while at lower positions such as specialist or advisor, the gap is approximately four percent.

The analysis also indicates that company size plays a significant role in the size of the adjusted gender pay gap. The adjusted pay gap decreases as the size of the company increases: While the gap is approximately ten percent at companies with just under 100 employees, it shrinks to only around three percent at companies employing between 5,000 and 10,000 workers.

Katharina Dyballa interprets the findings this way: “The adjusted pay gap is comparatively smaller in larger companies. This is due to the fact that these companies frequently have well-structured and transparent salary systems.” “Overall, we find major differences between the adjusted and unadjusted pay gaps. This does not mean, however, that women experience no disadvantage. The adjustment process is based on the assumption that women and men have the same opportunity to move into positions when they become available. But is this the situation in all companies? In my opinion, there still remains significant room for improvement.”