What If My Pay Gap Isn’t Gender-Based?

While you prepare for the EU Pay Transparency Directive, you may discover something unexpected in your data: pay gaps that aren’t caused by gender. Maybe factors like age, tenure, education level, or even location are emerging as key drivers of pay disparities. And while the Directive specifically targets the gender pay gap, these findings present both challenges and opportunities for organizations committed to fair compensation practices.

You might be wondering: “If our analysis shows that gender isn’t the main factor in our pay differences, do we still need to report this? And what actions should we take?” These are great questions! The difference between what’s legally required and what is best practice isn’t always clear, especially when your data tells a more nuanced story. So this week I’ll answer questions on what to do when it’s not gender.

What other main factors can cause a pay gap?

When you begin to analyze pay gaps, you often discover it’s not just gender or it isn’t gender at all. There are multiple contributing factors that can contribute to a pay gap. Key drivers include tenure and age differences (longer-serving employees typically earn more), occupational segregation (concentration of demographic groups in differently-compensated departments), geographic location, educational background requirements, and performance ratings. Career interruptions, negotiation pattern differences, part-time versus full-time status, and varying industry experience levels also significantly influence compensation outcomes.

Even if you find multiple factors (and it’s very likely you will) it doesn’t excuse pay disparities. It enables you to determine where you need to develop more targeted remediation strategies. Think about creating development programs for underrepresented groups, reviewing promotion criteria for hidden biases, or offering negotiation training where needed. This nuanced approach addresses both immediate pay differences and the systemic issues that create them over time.

Our pay gap is caused by age and tenure. Do we still need to report?

Yes, absolutely. The EU Pay Transparency Directive requires reporting on gender pay gaps regardless of their underlying causes. Even if your analysis shows that gender differences disappear when controlling for age, tenure, or other factors, you must still report your gender pay gap as the Directive mandates. The law focuses on the outcome (the difference in average pay between men and women) rather than the underlying causes of that difference.

Remember that the purpose of the Directive is transparency: you must provide clarity on pay differences that exist in your organization, regardless of why they exist. Your reporting should accurately reflect your gender pay gap data, while your action plan can address the true drivers you’ve identified through your analysis.

Our pay gap is caused by non-gender factors. What does it mean for the EU Pay Transparency Directive?

While the Directive specifically addresses gender pay transparency, most EU countries have broader equality legislation prohibiting discrimination based on other protected characteristics, including age, disability, race, religion, and sexual orientation. This creates a complex compliance landscape where your response should consider multiple legal frameworks.

For example, if you discover age is a significant factor in your pay differences, you need to consider both the gender reporting requirements of the Directive and the age discrimination provisions in your country’s equality legislation. The ideal approach is to develop comprehensive equal pay strategies that address all potentially problematic pay disparities, not just those explicitly covered by the Directive.

Keep in mind that if you are aware that pay discrimination exists in our organization, and you do not fix it, you might be liable when an employee finds out and takes you to court. Consult with legal experts familiar with both EU-level requirements and your specific country’s implementation (including broader equality laws) to ensure full compliance across all relevant legislation.

Tenure causes our pay gap: men have been in the company longer. Is this discrimination?

No, this is not necessarily, discrimination but this finding still requires careful examination. A tenure-driven gap raises important questions about your organization’s retention and career progression patterns. Ask yourself: Why do women have shorter tenure? Why do they not stay? Are there barriers to women’s career development in your organization? Are family leave policies and flexible work arrangements adequately supporting retention across genders?

What might look like a simple tenure gap could reflect historical hiring practices (perhaps your industry traditionally hired more men), different retention rates between genders, or disparities in career interruptions. While this might not explicitly show gender discrimination in compensation, these patterns might indicate systemic issues that disproportionately impact women’s earning potential over time.

How should we communicate about non-gender factors when reporting?

I always recommend that you be as transparent as possible and include the full picture. While you must comply with the legal reporting requirements, you can also provide context about what your detailed analysis has revealed. A communication approach might look like:

“Our gender pay gap reporting shows women earn on average 12% less than men across our organization. Our comprehensive analysis indicates this gap is primarily associated with differences in tenure and departmental distribution rather than different pay for the same work. We’re committed to addressing these underlying factors through improved recruitment, retention, and advancement initiatives for underrepresented groups.”

Be careful not to present this context as an excuse or dismissal of the gap. Instead, frame it as deeper understanding that informs more targeted solutions. Follow up with appropriate actions. Your communication should acknowledge the reality while demonstrating your commitment to addressing root causes.

Our pay gap is due to age and older employees (mostly male) earn more than younger employees. What should we do?

This is a common pattern and it reflects historical workforce composition changes. As your organization and industry have likely become more diverse in recent hiring of younger employees, you may find your senior ranks (and higher compensation levels) still reflect past demographic patterns. Consider these actions:

• Accelerate development programs for high-potential employees from underrepresented groups
• Review promotion criteria and processes for potential biases
• Create mentorship and sponsorship programs that connect senior leaders with diverse talent
• Analyze recent promotion data to ensure younger diverse talent is advancing proportionally
• Consider whether experience is appropriately valued versus other contributions in your compensation structure

Remember that time will naturally address some of this disparity as your workforce evolves, but proactive measures can speed this process and demonstrate your commitment to creating a more balanced organization at all levels.

If factors like education or specialized skills drive our pay differences, do we need to address these?

I hope you have a pay philosophy that determines the factors you pay for. Remember that the basic premise of the directive is that you can explain to every employee “why you pay what you pay” in objective terms. When education and skills are part of your pay philosophy, they represent legitimate differentiators in compensation. You can pay more for specialized skills or advanced education that adds value to certain roles. That is generally acceptable under both the Directive and broader equality laws. However, it’s worth examining whether access to these qualifications is equitable across demographic groups. Consider:

• Are training opportunities and educational support equally available to all employees?
• Do hiring requirements (like specific degrees or certifications) potentially create unnecessary barriers for certain groups?
• Could skill development help diversify your talent pipeline for specialized roles?

While differences based on qualifications are usually defensible, you should look beyond current qualifications. Is it really necessary for the role that candidates have a degree? Do you require college degrees where you shouldn’t? This might be the cause of potential systemic barriers in your hiring practices.

Final thoughts

The EU Pay Transparency Directive specifically targets gender-based pay differences. But as you prepare, identifying and addressing all factors that drive pay disparities represents both good compliance practice and good business. If you find that you do not have a gender-based pay gap, but other factors do contribute to it, don’t let that stand. Once you start to communicate about pay transparency, employees will have more insights, and it will come out. By taking a holistic approach, you create a more fair, engaged, and high-performing organization while meeting your legal obligations.