How is the Gender Pay Gap Calculated in 2025? With Examples

The gender pay gap is calculated by comparing the average earnings of men and women, highlighting disparities in pay across industries and job roles. In 2025, data sources provide a clearer picture of wage differences, considering factors like experience, education, and job level.

Explore how to calculate gender pay gap and see real-world examples to illustrate its impact.

What is gender pay gap?

The gender pay gap refers to the difference in both the average wages between men and women, typically expressed as a percentage of men's earnings. It highlights disparities in pay that can result from various factors, including differences in education, experience, job type, gender bias, and unequal access to leadership opportunities. Addressing the gap often involves promoting pay transparency, equitable policies, and greater diversity in the workplace.

Gender wage gap can be calculated by using the mean earnings of both male and female or using their median earnings. The gender pay gap formula is:

For the mean: [(Mean male earnings – mean female earnings)/mean male earnings] x 100 = Gender pay gap (%)

And for the median: [(Median male earnings – median female earnings)/median male earnings] x 100 = Gender pay gap (%)

Research in 2024 highlighted that organization facing a gender pay gap issue may encounter:

• Diminished employee morale and trust, especially among female employees,

• Affects overall productivity and engagement,

• Difficulties attracting and maintaining top talents,

• Risks reputational damage, and

• Potential legal challenges

It is important to assess your pay level to see whether there is a pay gap and does your pay level aligns with your business goals and initiatives. Salary.com’s pay gap assessment can expand your analysis to include all dimensions and variables that may affect compensation.

Why is there a gender pay gap?

Numerous studies and research have discovered several factors that contribute to the gender pay gap, some of which are:

• Gender Discrimination and bias: Employers may engage in pay discrimination beyond apparent efforts to undercompensate women by using previous salary history when making hiring and compensation decisions. This practice disproportionately affects wage and salary workers, particularly in industries where women work in lower-paying roles. As a result, working women face persistent income disparities, contributing to overall gender inequality in the labor force.

• Occupational Segregation: Women and men frequently engage in different industries and professions, with women being more prone to occupy lower-paying positions. Despite similar educational attainment, the wage gap persists as women are often concentrated in lower-paying fields. Additionally, even among full-time workers, female-dominated occupations such as teaching and nursing generally offer lower earnings compared to male-dominated professions like engineering and finance.

• Work Experience: Women tend to be more inclined to pursue career breaks or part-time employment due to caring obligations, resulting in lower work experience and a slowed career advancement. Additionally, part-time workers often work fewer hours, which can further contribute to reduced earnings and limited opportunities for promotions.

Upon completion of the gender pay gap assessment, it is important to address any issue regarding pay equity. Pay equity remediation is the subsequent step to fix any indefensible discrepancies in a company.

How to calculate gender pay gap

Calculating the gender pay gap allows organizations to identify pay disparities, thereby promoting equitable compensation and ensuring equality in the workplace.

Here’s how to calculate the gender pay gap using the mean earnings:

1. Step 1: Calculate the total male Earnings

   Compile a list of all male employees who receive compensation. Next, sum up their individual earnings, including salaries, wages, bonuses, and any other forms of compensation, to determine the total earnings.

2. Step 2: Find the average male earnings

   To determine the average (mean) earnings for male employees, take the total earnings of all paid male employees and divide it by the total number of men in your company.

3. Step 3: Determine the average female earnings

   Do the same for all the women’s wages in your company. Gather the total wages of all female employees in your company. Divide this total by the number of women to calculate the mean (average) earnings for female employees.

4. Step 4: Subtract the average earnings

   After getting the average earnings for both men and women employees, subtract the average (mean) earnings of women from the average (mean) earnings of men.

5. Step 5: Calculate the gender pay gap percentage

   Take the difference between the average earnings of men and women, divide that by the mean earnings of men, and then multiply the result by 100. This will give you the gender pay gap as a percentage.

   Here's an example:

   A company has 7 employees, with four of the employees are men earning $20, $25, $20 and $30 per hour, respectively. The remaining three are all women earning $20 per hour, respectively.

   Find the mean earnings for men:

   ($20 + $25 + $20 + $30)/4 = $23.75

   Find the mean earning for women:

   ($20 + $20 + $20)/3 = $20

   Now, follow the gender pay gap formula:[(Mean earning for men – mean earning for women)/ mean earning for men] x 100 = Gender pay gap (%)

   [($23.75 - $20)/$23.75] x 100 = 15.79%

   This means that, using the mean, the average pay gap interprets that women are paid 15.79% less than men. This figure is quite concerning and may indicate pay inequities.

   If your organization faces such challenges, Salary.com's Pay Equity Suite provides tools to address gender pay gaps, raises, and overall pay fairness.

   Now, let’s calculate the gender pay gap using the median earnings:

   The median represents the central value of a sequentially ordered set of numbers. If the range has an even number of values, the median is the average of the two middle numbers.

   1. Sort all the earning of men employee in order, with the lowest paid first and the highest paid last.

   2. Identify the figure in the middle of the list. The figure is the median earning for men.

   3. Do the same for all the women in your company. The figure is the median earning for women.

   4. Take the median earning for men and subtract the median earning for women.

   5. Divide the result by the median earning for men.

   6. Multiply the result by 100.

   Here's an example:

   A company has 7 employees, with four of the employees are men earning $20, $25, $20 and $30 per hour, respectively. The remaining three are all women earning $20 per hour, respectively.

   Find the median earning for men: $20, $20, $25, $30

   Median = ($20 + $25)/2 = $22.5

   Find the median earning for women: $20, $20, $20

   Now, calculate using the gender pay gap formula:[(Median male earnings – median female earnings)/median male earnings] x 100 = Gender pay gap (%)

   [($22.5 - $20)/$22.5] x 100 = 11.11%

   The result indicates that, using the median, women are paid 11.11% less than men.

Gender pay gap examples

According to the United Nation’s report, globally, women earn about 20% less than men, highlighting a persistent gender pay gap. In the United States, wage differences are even more pronounced for women of color, with Black women earning only 63.7 cents, Native women 59 cents, and Latinas 57 cents for every dollar earned by white men.

Carrie Gracie, a prominent BBC journalist, resigned after discovering a significant gender pay gap within the organization. She learned about the salary disparity only when the BBC released the earnings of its highest-paid employees in 2017, revealing that male colleagues in similar roles were earning significantly more.

Prioritizing equal pay improves employee satisfaction, retention, and overall organizational success. Salary.com’s Pay Equity tool can help attain and maintain pay equity to address issues like gender pay gap.

Transparency, proactive measures, and policy modifications are necessary to mitigate the gender pay gap and guarantee equitable compensation. By cultivating a more inclusive and productive workforce, pay equity helps employees, businesses, and economies.