The nightmare of equal pay claims that the public sector is facing has been well reported. UK councils alone are going to have to shell out a staggering £5bn to deal with the issue, the Local Government Employers (LGE) body estimates. And now the phenomenon is starting to grip the private sector too. Stephen Moir, president of the Public Sector People Managers’ Association, and director of people and policy at Cambridgeshire County Council, describes it as a “sleeping giant” for private sector employers as equal pay claims start to snowball in the next few years.
But is the private sector prepared for the onslaught? Apparently not, if recent research by the CIPD is anything to go by. Earlier this year, a study found that just 48% of private sector services firms had carried out an equal pay audit or planned to do so in the next 12 months, compared with 82% in the public services sector. Emma Bartlett, employment partner at Speechly Bircham law firm, points out that equal pay claims have grown at a rate of 2,300% since 2004.
“Claims rose from 6,607 in 2004-05 to 44,013 in 2006-07, making equal pay the second most popular claim after unfair dismissal. An even greater increase of 150,000 claims is predicted for 2007-08, and unfair dismissal will be dwarfed now employees know how to bring equal pay claims,” she says.
Employees now have the right to ask their employer to complete an equal pay questionnaire outlining the salaries of all staff as part of the Freedom of Information Act. And it’s causing major problems for HR, according to Bartlett.
“It’s been heightened by the tightening of budgets in private sector firms, particularly in the City where there still isn’t much transparency for pay. People aren’t getting such large bonuses and women are starting to ask why,” she says.
Bronwyn McKenna, legal director at Unison, says the public sector has been proactive in dealing with equal pay and that it’s more likely to be a problem for the private sector now.
Peter Burgess, director of Retail HR recruitment firm, insists that most major retailers have strict guidelines on pay equalities but admits that there’s an issue with confidentiality. “There’s a lot of secrecy around what people earn and that needs to change. If an employee suspects that a colleague doing a similar job is earning more than they are it leads to suspicion and resentment – which can trigger a claim,” he says.
Burgess operates an open and transparent pay structure at Retail HR and a clear, performance-related bonus system so all staff know how much they are entitled to.
“It certainly stops any moaning and whingeing about salaries,” he comments.
Long hours culture
The gender pay gap is most prevalent for women in their 30s who may be returning to work after maternity leave or looking to work flexibly after having a baby. The so-called “motherhood penalty” was highlighted recently by a TUC study which found the difference between men and women’s full-time earnings increased from 3% in their 20s to 11% in their 30s.
Bartlett says the long hours culture in many private sector firms was largely to blame. “There just aren’t that many women left who are willing to give 150% after having a baby, which you can do in your 20s.
“The flexible working legislation is fully in place but it doesn’t necessarily mean that employers are embracing it,” she says.
There is still a tendency to recruit “in your own image” in many private sector firms, Bartlett adds, and as many of the interviewers are white, middle class males, it only makes the situation worse.
But Graham White, director of HR at Westminster City Council, says there should be no excuses for the gender pay gap in either the public or private sector.
“UK employers have fixed the obvious issues around applying legislation and employment law but if we are really going to do more than just crack the glass ceiling we need to embrace diversity and smash the ceiling away completely,” he says.
HR professionals need to look at adopting more imaginative recruitment methods and convince their employers to take a different perspective to flexible working, White advises.
“There are some progressive companies who are targeting women to work specifically during school hours as that’s the only available time for them and marketing the jobs in different places, like local retailers,” he explains.
“If you’ve got two people in a job share for a senior level role an employer has the benefit of two brains rather than one. But they have to recognise that rather than thinking they’ve got to have one full time employee.”
John Lucy, head of HR at Herbert Smith law firm, says training and educating line managers about the implications of getting equal pay legislation wrong is crucial.
Single status agreement
“There is absolutely no justifiable reason for private sector firms to base pay on gender if employees have the same responsibility. Payment should be based on performance and competency and what an employer can afford given the industry they are in,” he says.
Lucy recommends getting an independent auditor in to assess the HR processes.
Moir accepts that the public sector was far from proactive in talking equal pay but points out that although a single status agreement was first implemented in 1997, it didn’t actually set a deadline.
“The agreement was an important step but there was no set timescale for councils to implement equal pay audits. It wasn’t till 2004 that a three-year agreement was put in place to resolve it,” he explains.
Moir claims that the private sector can learn from the public sector’s mistakes by implementing regular equal pay reviews and assessing any non-consolidated bonuses. “It comes back to the whole notion of productivity and how pay scales relate to reward structures,” he says.
But Moir insists it’s not all doom and gloom for the public sector.
“Many local authorities have now agreed equal pay deals and the NHS is in a much better state. We’re getting our act together but there’s still more work to be done in some areas,” he says.
In the meantime, the nightmare has only just begun for the private sector, and law firms are set to reap the benefits as the equal pay claims start to mount.
How to deal with an equal pay claim
- Check that you have all the relevant information and legal advice to manage it.
- Ensure all the relevant records, such as pay and benefits, are up to date.
- If you haven’t done already, implement an equal pay audit.
- Consider the PR element, how are you going to communicate it to your employees and the outside world?
- Consult with an employer organisation, such as the CIPD or CBI.
- If the employee is still working for you make sure they are not victimised for making a claim and that their manager understands the confidentiality issues.
- Think about damage limitation – a negative ruling could open the floodgates for hundreds more.