The Gender Pay Gap Widens As Women Earn Less Bonus Pay

The Gender Pay Gap Widens As Women Earn Less Bonus Pay

ADP's new pay equity study shows a vast percentage difference between female and male compensation originates from a difference in bonus pay.

Women, on average, earn a 17 percent ($15,000) lower salary than men. However, when factoring in the gender pay gap for bonus pay (69 percent), the total earnings pay gap widens to 19 percent ($18,500).

These are the surprising findings from a new study released today by the ADP Research Institute® titled Rethinking Gender Pay Inequity in a More Transparent World. The ADP Research Institute studied both salary and bonus pay between genders at the time of hire and six years of tenure within the same firms. This new gender pay data shows that pay continues to worsen for women due to disparity in bonuses.

According to Ahu Yildirmaz, co-head of the ADP Research Institute, this study is unique in that it looked at pay equity through the lens of incentive pay and moment of hire together. The data isolates specific gender bias which directly correlates to employer recruiting practices and, consequently, impacts performance management and promotional practices.

Additionally, while it has been believed part of the wage disparity is due to women assuming the role of family caregiver and therefore prompted to leave the workforce, the findings show there is minimal evidence women are more likely to quit their job compared to men.

Differing Gaps Exist Across Age Groups

When categorizing new hires by age and income, women aged 20 to 30 with a low starting salary had near-equal base pay of men; however, the base salary gap worsened for women after six years. Additionally, when bonus is factored in, young women fared the worst with a 21 percent lower bonus-to-base ratio compared to their male counterparts.

For the 40-50 age group, men and women started their careers with almost no base salary gap for all income groups, and women did well keeping up with men in base salary growth for the next six years. In fact, in most groups, they closed the base salary gap. The disparity here is with incentive pay, especially with the lower income group. In the $40,000 to $60,000 income range, female workers received an average bonus of 8.5 percent, whereas men received 11.4 percent — a gap of 74 percent.

Pay Gaps Fluctuate Across Industries

When looking across industries, incentive pay made some very distinct impacts. Women working in the Information sector make 7 percent more in bonus to base ratio than men, which helped to improve their overall gap in total earnings. In contrast, women in the Finance and Real Estate industry are earning 21 percent less in their bonus to base ratio compared to men. The industry has the largest pay gap for women with and without incentive pay.

The average bonus amount for women was less than two-thirds the amount paid to men who had equivalent base pay, age and tenure. This incentive pay disparity was observed across all age, salary and industry groups from moment of hire and persisted throughout the six-year study window.

In conclusion, a gap in bonus pay during hiring may represent only a small fraction of total income in the first year. Years down the road, however, the incentive pay gap continues and may create a significant shortfall in total average earnings over five to 10 years.

As men and women establish proficiency in their current roles, the lower incentive pay assigned to a woman may create a natural barrier to promotion, while higher incentive pay may confer a natural advantage to the male co-worker.

More About the Gender Pay Gap in Bonuses

To see detailed pay equity bonus study components, including data broken down by gender, age, and industry, please see the ADP RI study, Rethinking Gender Pay Inequity in a More Transparent World.