ADP: Wage inequality worsens for women when bonus pay is in play

A large number of women start their careers at a lower salary when compared to men, according to findings from the Rethinking Gender Pay Inequity in a More Transparent World study released by the ADP Research Institute on Wednesday.

By honing on the career paths of new hires who stayed with the same company from 2010 to 2016, ADP found that women, on average, were paid 17 percent ($15,000) less in their starting salary than men. When factoring in the gender pay gap for incentive, or pay-for-performance, salaries (69 percent), ADP found the total earnings pay gap widened to 19 percent, or $18,500.

“We’re looking at pay equity in a very unique manner,” Ahu Yildirmaz, co-head of the ADP Research Institute, said. “By studying both salary and bonus pay between genders at the time of hire and after six years of tenure within the same firms, we found that the overall pay gap between men and women worsens due to disparity in bonuses.  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.”

In the research, ADP categorized new hires by age and income.

Women in the 20 to 30 age group with a low starting salary had a near-equal base pay of men. However, after six years, the salary gap widened. When bonuses are factored in, young women earned a 21 percent less bonus-to-base ratio than men.

For the 40 to 50 age group, men and women started their careers with almost no base salary gap in all income groups. Women also fared well in their base salary growth over the next six years. The disparity in this group was in incentive pay, especially in lower income groups. In the $40,000 to $60,000 income range, women received an average bonus of 8.5 percent, compared to men who received an average of 11.4 percent. This results in a gap of 74 percent.

ADP also categorized new hires by the industry they worked in, and incentive pay made distinct impacts.

Women in the information industry made 7 percent more in bonus-to-base ratio than men, which in turn lessened the overall gap in total earnings. Women in the finance and real estate sectors earned 21 percent less in their bonus-to-base ratio than men.

According to ADP, the average bonus amount for women was less than two-thirds of the amount paid to men who were equal in base pay, age and tenure. This discrepancy was observed across all age, salary and industry groups from the moment of hire and persisted throughout the six-year study.