Although the Government scrapped plans for compulsory gender pay audits last year, employers that ignore unequal pay between men and women are putting themselves at risk of tribunal claims.
According to figures from the Office for National Statistics, the median gender pay gap in hourly earnings for employees is 27.5% in the private sector and 19.2% in the public sector.
For part-time workers the gap is even bigger, expanding to 49.7% in the private sector and 31.1% in the public sector.
Despite the gender pay gap shrinking since the now repealed Equal Pay Act was introduced in 1975, there are still pay discrepancies in many organisations for male and female staff members doing equal work. To reduce the risk of tribunal claims and to ensure men and women are receiving equal pay, employers should follow these five steps:
Step one: Gather information
The first step is an equal pay audit. Gather information about what employees are paid. Guidance from the Equality and Human Rights Commission recommends that employers should gather information about their pay and grading arrangements, job evaluation scheme, payroll system, HR information systems and occupational segregation.
Step two: Determine which jobs are equal
Next, determine which groups of employees are doing "equal work". The Equality Act 2010 defines equal work as: "like work"; "work rated as equivalent"; and "work of equal value".
"Like work" is defined as work that is the same or broadly similar; "equivalent work" is where the demands of a job are determined to be equal to those of another job under a job evaluation scheme; and "work of equal value" is work that is different to another job but of equal value in terms of the demands of the role.
If the employer has not already done so, it should carry out a job evaluation scheme to help determine whether or not employees are performing equal work.
Step three: Identify pay gaps
Once groups that perform equal work have been identified, clarify whether or not there are gaps in their pay. For each group that performs equal work, calculate the average basic pay and the total average pay for men and women, including benefits, and determine whether or not there are any gaps between them.
Also compare the pay of part-time and full-time employees, as more women tend to work part-time than men.
Step four: Determine the causes of pay gaps
If gaps in pay are identified for employees doing equal work, look at the reasons for these to determine if they are because of sex. There are a number of non-discriminatory reasons behind pay gaps, such as: pay progression, pay protection, performance pay, competency pay, premiums and allowances.
However, determine if these are genuinely the reasons behind the pay difference and whether or not sex has still played a role in deciding the pay of the employee.
Step five: Develop an equal pay action plan
If employees are found to have not been equally paid because of sex, put together a plan to address the gaps in pay. For example, you could reduce the excess pay of employees who are overpaid or move underpaid employees to the relevant point in the pay scale.
However, be aware that, while increasing the pay of underpaid employees may be costly, reducing the pay of overpaid employees is likely to cause dissatisfaction among those affected and could result in breach of contract and/or constructive dismissal claims if the employer does not approach the matter carefully.
Before deciding on what action to take, weigh up the risks of each option. Pay should be equalised as soon as possible as employers will be vulnerable to equal pay claims until this has happened.
Although following these steps will not entirely remove the risk of equal pay claims, putting right significant gaps will help to ensure that the majority of employees receive equal pay for equal work. With the number of equal pay claims received by employment tribunals falling from 37,400 in 2009/10 to 34,600 in 2010/11, it seems employers that have made moves to address equal pay may already be experiencing positive results.
This information is taken from XpertHR's good practice guide on equal pay. The full guide, including further information on job evaluation schemes, is available at XpertHR.