Official data “significantly underestimates” the extent of low pay and the gender pay gap in the UK, according to research published in the British Journal of Industrial Relations.
As a result, HR leaders are being urged to look beyond headline ONS statistics when benchmarking pay and shaping reward strategies.
The research paper found that the Annual Survey of Hours and Earnings (ASHE) (the dataset most commonly used by employers, government and pay review bodies) paints too rosy a picture of the labour market.
The analysis shows that the proportion of jobs paid at or below the National Living Wage (NLW) is under-estimated by around one-fifth. Crucially, it finds that the “bite” of the NLW, meaning its value relative to the median wage, was reached two years earlier than official statistics indicated.
Therefore, pay benchmarking against ONS averages may give a misleading impression of competitiveness, particularly for lower-paid roles, creating risks around recruitment, retention and compliance with pay policies.
The research also shows that the gender pay gap has been consistently under-estimated by about one percentage point over the past 20 years. While the difference appears small, for employers publishing annual gender pay gap reports it highlights the danger of assuming national figures are a reliable comparator. In practice, disparities could be larger than official benchmarks suggest, which has potential consequences for an organisation’s reputation and employee trust.
Another weakness flagged is ASHE’s limited coverage of the labour market is that jobs in smaller, younger and private-sector organisations are consistently under-represented. By contrast, public-sector and larger employers are over-represented. For HR in SMEs, this means that using ASHE as the sole basis for benchmarking may be particularly misleading.
A “new official review” of ASHE is urgently needed to ensure its reliability, according to the paper’s lead researcher John Forth, professor of Human Resource Management at Bayes Business School (formerly Cass Business School), City St George’s, University of London.
Until such a review has taken place, HR are advised to take a more critical approach, supplementing official data with sector-specific and regional surveys, and conducting proactive internal audits.
The findings underline the need for HR to be vigilant: if official pay data is misrepresenting the prevalence of low pay and the scale of the gender pay gap, organisations that rely on it risk falling behind in setting fair, competitive and inclusive pay policies.
The paper, titled ‘The representativeness of the Annual Survey of Hours and Earnings and its implications for UK wage policy’, is available on the Wiley Online Library.
