Gender Pay Gap Reporting: A Step-by-Step Guide for UK SMEs
Pay equity is about more than compliance. It is a matter of trust, and organisations that understand their gender pay data tend to use it productively rather than treat it as a hurdle. For businesses approaching the 250-employee mark, or those that have recently crossed it, getting a clear picture of what reporting involves makes the process considerably less daunting than it first appears.
When it is approached in the right way, gender pay gap reporting can be much more than a statutory task. It helps you see what is really happening across pay, progression and opportunity in your business, and gives you a useful starting point for better conversations with your people. It can also help build trust with employees, clients, investors and future candidates, who increasingly want to understand how a business is looking after its people.
In this guide, we walk through what reporting involves, how to calculate the key figures, what is changing from 2026 onwards, and how businesses can use the data in a practical and meaningful way.
Why does gender pay gap reporting exist?
In the United Kingdom, gender pay gap reporting involves calculating the average difference in pay between men and women across the organisation as a whole. It is not the same as equal pay.
Equal pay is a legal right under the Equality Act 2010: men and women must be paid the same for the same or equivalent work. The gender pay gap is a broader, organisation-wide measure that can exist even when every individual job is paid fairly. It typically reflects structural differences such as more men than women in senior roles, more women working part-time, or differing patterns of career progression over time. The gap is not illegal in itself. It is a transparency tool that reveals how pay and opportunity are distributed across the workforce.
Gender pay gap reporting has been a legal requirement since April 2017 for organisations with 250 or more relevant employees. For most private, voluntary and public authority employers, the snapshot date is 5 April. Some specified public authorities use 31 March instead. Reports then need to be published the following year: by 4 April for private and voluntary sector employers, and by 30 March for most public sector employers.
Does your business need to report?
The legal duty applies when you have 250 or more relevant employees on the snapshot date. If you are below that number, reporting is voluntary. That said, many growing businesses choose to start early so they can get familiar with the process, build good habits and avoid a last-minute rush when reporting becomes mandatory.
There are a few areas that can be easy to miss, especially if your business is growing quickly:
Headcount is measured by each legal entity, rather than across the group as a whole. This means each subsidiary needs to be checked separately against the 250-employee threshold.
“Relevant employees” can be wider than your payroll list. It includes full-time and part-time employees, apprentices and, in some cases, self-employed contractors who are engaged to do the work personally. Employees on maternity, paternity or sick leave are included in the headcount, although only employees on full pay are included in the hourly pay calculations.
Job-sharers and part-time workers count as one employee each, rather than as a fraction of a role.
Agency workers usually count towards the agency’s headcount, not yours.
If you are likely to reach 250 employees in the next two to three years, it is worth getting ready now. Starting early can take the pressure out of the first reporting year and give you time to spot any patterns before they become harder to address.
How to calculate the gender pay gap: the six figures
When you report, there are six figures you need to publish. They all come from your data on the snapshot date:
Mean gender pay gap: this looks at the average hourly pay for men and the average hourly pay for women, then shows the difference as a percentage of men’s pay.
Median gender pay gap: this compares the middle hourly pay rate for men with the middle hourly pay rate for women, after each group has been lined up from lowest to highest paid.
Mean bonus gap: this uses the same average comparison, but looks at bonus payments made over the previous 12 months.
Median bonus gap: this looks at the middle bonus figure for men and women, using the same median approach.
Bonus proportions: the percentage of men who received a bonus and the percentage of women who received a bonus.
Pay quartiles: the percentage of men and women in each of four equally sized pay bands, from the lowest paid group through to the highest paid group.
It is also worth being clear from the start about what should be included in each calculation. Most contractual payments, such as location or car allowances and pay for leave, usually form part of ordinary pay. Redundancy pay, benefits in kind and overtime are not included. Getting these definitions right early on helps avoid corrections later, which can attract more attention than an accurate report that simply shows a gap.
A note on recording sex. Following the Supreme Court's ruling in For Women Scotland v Scottish Ministers in April 2025 on the meaning of sex in the Equality Act 2010, the government updated its reporting guidance in 2026. Employers are now asked to record employees by sex. The current GOV.UK guidance sets out how to treat employees who hold a Gender Recognition Certificate, and checking the latest version before running figures is worthwhile.
Worked example: mean versus median
Imagine 300 employees. You arrange all full-pay employees from lowest to highest hourly rate. The median gender pay gap is the percentage difference between the hourly rate of the man who sits in the middle of the men's list and the woman who sits in the middle of the women's list. If she earns 90p for every £1 he earns, the median gap is 10%. The mean is different: average the hourly rate for all men, then for all women, and express the difference as a percentage of men's average pay. The mean is more sensitive to a small number of very high earners at the top, so it can tell a different story from the median. That is why both are required. Together, they give a more complete picture than either alone.
What is changing from 2026 onwards?
Gender pay gap reporting is evolving. Two developments are worth planning for.
Equality action plans
Under the Employment Rights Act 2025, the reporting duty is moving from publish your numbers to publish your numbers and explain what you are doing about them. From April 2026, employers are encouraged to publish voluntary equality action plans alongside their gender pay gap data and menopause support. Subject to secondary legislation, the government intends to make equality action plans mandatory from spring 2027 for employers with 250 or more employees, with the first mandatory plans falling due by April 2028.
Each in-scope employer will need an action plan setting out steps to address the gender pay gap and measures to support employees through menopause, signed off at senior leadership level. The government has noted that only around half of currently reporting employers publish any accompanying action plan. Starting to draft one now, even informally, is sensible ahead of the mandatory requirement.
Ethnicity and disability pay gap reporting
Reporting is not stopping at gender. On 25 March 2026, the government announced its intention to introduce mandatory ethnicity and disability pay gap reporting for employers with 250 or more employees, using broadly the same six-figure framework that applies to gender. The confirmation followed a public consultation that closed in June 2025 and attracted strong support across the proposals.
No firm start date for mandatory ethnicity and disability reporting has been set in law yet, as the Equality (Race and Disability) Bill still needs to pass through Parliament. The direction is clear and arrival is unlikely before 2027 at the earliest.
The practical implication for businesses building data infrastructure now: do not set up your systems for gender reporting in isolation. If you are putting HR systems in place to capture pay by demographic, make room to collect ethnicity and disability data at the same time. Doing it once is considerably simpler than retrofitting the same process twice.
What organisations are doing with the data
Numbers on their own only matter if they lead somewhere. The organisations getting the most from gender pay gap reporting share a few things in common.
Transparency builds trust
A number of large UK employers have moved to voluntary reporting on ethnicity and disability pay gaps well ahead of any legal requirement, including KPMG, BT and Aberdeen. The consistent finding across these businesses is that voluntary disclosure builds trust internally and improves the quality of the data they hold, as more employees feel confident sharing demographic information when they understand how it will be used.
The same principle applies to the gender pay gap itself. Publishing an honest narrative alongside the numbers, rather than bare figures without context, consistently generates more confidence among employees and external audiences than staying silent or publishing minimally.
Flexible working can make a real difference
Flexible working can be one of the most practical ways to support women to stay and progress in senior, higher-paid roles. Research has shown this consistently over time, including Deloitte’s Women @ Work reports: when women have genuine access to flexibility, they are more likely to want to stay with their employer.
The important point is that flexibility needs to feel real, not just sit in a policy. If people worry that working flexibly will quietly affect how they are seen or how quickly they progress, it will not have the same impact. This is where senior leaders and managers can make a big difference by modelling flexible working themselves and talking about it positively and consistently.
Look closely at where the gap is coming from
Headline figures are useful, but they rarely tell the whole story. A business might have an overall gap that looks manageable, while the real issue is sitting within a particular grade, team or stage of progression. Looking at the data by level can help you see whether women and men are applying for promotion in similar numbers, whether they are progressing at the same rate, and where the picture starts to change.
This does not need to be overly complicated. Even a business just over the reporting threshold can start by tracking who is eligible for promotion, who applies, who is successful and how flexible working is being used across different levels. Small, regular checks like this can give you much better insight and help you take action before patterns become harder to shift.
A practical checklist for businesses approaching the threshold
For businesses building toward the 250-employee mark, or those preparing for their first report, these are the steps worth working through:
Confirm your snapshot date and keep an eye on headcount throughout the year, not just on the date itself. Growth can move quickly, so it helps to know early if reporting is likely to apply.
Check who counts as a relevant employee, using the legal definition rather than relying only on your payroll categories. This may include apprentices and some contractors who are engaged to do the work personally.
Clean your pay data before you start calculating. Separate ordinary pay from bonus pay, and make sure items such as redundancy pay, benefits in kind and overtime are excluded from ordinary pay.
Run the mean and median calculations separately for hourly pay and bonus pay, then build your four pay quartiles. This gives you the full set of figures you will need to publish.
Look at the data by grade or level, not just across the organisation as a whole. This helps you understand where any imbalance is coming from, rather than relying on the headline figure alone.
Draft your internal narrative before you publish. A clear, honest explanation of what is driving the gap, and what the business is doing about it, will usually build more confidence than numbers on their own.
Think about starting voluntary ethnicity and disability data collection now, with clear employee communications and the right data protection safeguards. Building a clean baseline early can make future reporting much easier.
Review the data every year, not only when a report is due. Pay gaps tend to shift slowly, and the work between reporting deadlines is often where the most meaningful progress happens.
Final thought
This does not have to be a compliance exercise. The organisations that get the most from gender pay gap reporting are the ones that treat it as a source of genuine business intelligence rather than a requirement to manage. The data shows where pay and values have drifted apart. Done carefully and honestly, it gives you the information to have better conversations with your people and make more informed decisions.
If you would like support with gender pay gap analysis, equality action plans, or preparing for the ethnicity and disability reporting requirements, we can help. Get in touch: enquiries@journeyhr.com or journeyhr.com
FAQs
Do businesses with fewer than 250 employees have to report their gender pay gap?
No. The legal duty only applies once you have 250 or more relevant employees on your snapshot date. Below that, reporting is entirely voluntary. Many growing businesses choose to start early to build good habits before it becomes a requirement, and because some clients, investors and larger supply-chain partners may request this information as part of ESG or supplier due diligence processes.
How is the gender pay gap different from equal pay?
Equal pay is a legal right under the Equality Act 2010: men and women must be paid the same for the same or equivalent work. The gender pay gap is a broader, organisation-wide measure that can exist even when every individual job is paid fairly. It typically reflects differences in the roles men and women hold, part-time working patterns, and seniority rather than direct pay discrimination.
Should I focus on the mean or median gender pay gap?
Neither gives the full picture on its own. The mean is sensitive to a small number of very high earners and reflects the overall average. The median reflects the typical employee and is less affected by outliers. Most organisations report both, because together they are more revealing. A large mean gap alongside a small median gap, for instance, often points to a concentration of high-earning roles held predominantly by one gender.
Will businesses eventually have to report ethnicity pay gaps too?
The government has announced its intention to introduce mandatory ethnicity and disability pay gap reporting, although the necessary legislation has not yet been passed and no implementation date has been confirmed. The proposals mirror the gender pay gap approach and apply only to employers with 250 or more staff. The Equality (Race and Disability) Bill still needs to pass through Parliament, so no start date is confirmed in law yet. Businesses approaching that threshold should start collecting ethnicity and disability data now so there is a clean baseline when the requirements land.
What happens if we report late or publish incorrect figures?
There is no direct financial penalty in the regulations, but late reports are publicly flagged as non-compliant on the government's reporting service, and the Equality and Human Rights Commission can take enforcement action since failure to report is unlawful. A late report, or one that requires correction after publication, tends to draw more attention than an on-time report showing a gap with a clear explanation.
