At the end of October the ONS released their Gender Pay Gap results and once again the median pay gap for full time employees has come down, reducing to 6.8% from 7.2% in April 2025 and from 9.4% ten years ago.
However, although there is a downward trend, is a reduction of 2.6% really something to celebrate? When looking at all employees (full time and par time) the gap is much wider at 12.3% and has only reduced by 0.7% from April 2025. The pay gap is also still much higher for the top earners and has actually been widening over the last four years.
So, despite legislation being in place for nearly 10 years, why is the gap not closing faster? A common reason we see when working with clients to analyse their pay gaps is that their “leaky bucket”, otherwise known as out of cycle pay increases, is a big cause.
Out of cycle pay increases are often made with good intentions: to retain a talented employee, to reflect where a role has evolved. However, these actions taken in isolation can have a cumulative impact your gender pay gap. So, when situations like these arise, how can organisations prevent resolving one challenge only to create another?
Clear reward strategy and pay policies
Having a clear reward strategy and pay policy provides guardrails and parameters within which decisions can be made. It sets expectations and gives confidence to employees that pay is managed consistently. It’s not about being rigid and inflexible but about being clear where exceptions can be made, on what basis, and the governance process in place to approve any exceptions. For example, are they in a business critical role? Have they been identified as high performing or high potential talent? Are they part of a succession plan? Limiting role reviews to set points in the year can ensure that changes can be reviewed collectively with due consideration given to the organisational design impact and the impact on work of equal value.
Audit and review regularly
Keeping a track of out of cycle pay increases, who they are awarded too, the value, the reasons, can identify whether there are any trends or bias that need reviewing. Regular reviews of this data can help identify if out of cycle increases are disproportionately in favour of one gender or another. This information can then be used to challenge these decisions where appropriate and help surface any unconscious bias.
Reviewing your strategy and pay policies periodically can also ensure that they aren’t driving up the number of exceptions. If the number of out of cycle pay increases is growing, then it could be a sign that your policies and reward structures are no longer fit for purpose.
Consider other levers to pull
Before approving an out of cycle pay increase consideration should be given to other options. Could one off payments like retention bonuses be effective rather than permanently uplifting pay? Especially if they can also be aligned to specific outcomes or time periods. Are there development and mentoring opportunities that could be offered? Could a combination of different levers be more effective. It will depend on each individual situation, but a pay increase may not always be the best or most effective option.
Training and communication
Ensuring HR Business Partners and managers understand your pay policies and reward frameworks can help reduce the need for exceptions and help reduce frustration. Empowering managers with increased understanding of reward and the guardrails they can operate within can help them manage situations with their teams proactively, reducing the risk of raised expectations and frustration to build up.
If you'd like to understand how out-of-cycle pay decisions are affecting your gender pay gap, or want support building a fairer, more consistent approach to pay exceptions, we can help. To start the conversation, get in touch.
