How do I calculate gender pay gap?

One of the social disclosures under the Corporate Sustainability Reporting Directive (CSRD) and the Voluntary Sustainability Reporting Standard for SMEs (VSME) is the gender pay gap. For many small and medium-sized enterprises (SMEs), this sounds daunting — but don’t worry. The calculation is straightforward and can be done with basic payroll data.

What the standard requires

Under the VSME Basic Module – Workforce: Remuneration, collective bargaining and training (B10), SMEs must disclose:

• Whether employees are paid at or above the national minimum wage.
• The percentage pay gap between male and female employees.

For SMEs with fewer than 150 employees, this disclosure is optional until 2031 (when the threshold drops to 100 employees). Still, your bank or a large client may request it sooner.

What the gender pay gap means

The gender pay gap shows the difference between the average pay of men and women in your business.

It does not mean you are paying people differently for the same role (that would be discrimination). Instead, it reflects patterns such as:

• more men in management roles,
• more women in part-time positions, or
• differences in seniority.

The simple formula

You only need one formula:

Gender pay gap (%) = (Average male pay – Average female pay) ÷ Average male pay × 100

Where:

• Average male pay = total pay for all male employees ÷ number of male employees.
• Average female pay = total pay for all female employees ÷ number of female employees.

You can calculate this using annual salary or hourly pay. Hourly pay is usually clearer for SMEs with part-time staff.

Step-by-step

1. Collect payroll data — total gross pay for all men and women. If you need guidance on workforce data, see how to report headcount vs FTE.
2. Adjust for hours if part-time staff are common (calculate hourly pay).
3. Work out averages — male average pay and female average pay.
4. Apply the formula — calculate the percentage difference.
5. Interpret the result — a positive percentage means men earn more on average; a negative one means women do.

Most payroll or HR systems can export this data, which makes the calculation quick.

Example

A retail shop employs:

• 5 men earning a total of €125,000 per year.
• 7 women earning a total of €140,000 per year.

Average male pay = €125,000 ÷ 5 = €25,000 Average female pay = €140,000 ÷ 7 ≈ €20,000

Gender pay gap = (€25,000 – €20,000) ÷ €25,000 × 100 = 20%

This means, on average, women earn 20% less than men in this business.

Practical tips for SMEs

• Keep it simple: you do not need complex statistics — a straightforward average is enough.
• Use hourly pay if your workforce includes many part-time staff.
• Provide context if your pay gap looks large (e.g. more men in senior roles).
• Stay consistent: use the same calculation method each year so you can track progress.

Key Terms

• Corporate Sustainability Reporting Directive (CSRD) — An EU law that requires large companies — and eventually some medium-sized ones — to report on their environmental and social impacts. Smaller suppliers are not directly in scope but may be asked for CSRD-style data by banks or bigger clients.
• Voluntary Sustainability Reporting Standard for SMEs (VSME) — A simplified framework designed to help SMEs share sustainability information. It is voluntary but can help SMEs respond to client or bank requests.
• Basic Module — The minimum set of sustainability disclosures under the VSME. It covers essential topics such as energy use, greenhouse gas emissions, waste, workforce data, and basic governance issues.
• Gender pay gap — The percentage difference between average male and average female pay. A positive number means men are paid more on average; a negative number means women are paid more.