Mind the gap

The pay gap between the sexes persists despite 30 years of equal pay
legislation. Equal pay audits could be the answer and asa government commission
looks at how to promote the approach Phil Boucher explains how some
organisations are leading the way

Afair day’s pay for a fair day’s work", may seem a relic of 1970s
industrial turmoil, but for working women throughout the UK the slogan has just
as much relevance today as ever.

While fashions have changed and, in some cases, returned to the catwalk, equal
pay legislation introduced more than three decades ago has failed to change pay
systems that favour men.

According to the New Earnings Survey 2000 an 18 per cent pay gap exists
between men and women who are doing the same or comparable jobs.

The most recent European-wide study, the Structure of Earnings Survey,
claims women in the UK are paid only 66 per cent of male earnings. Only one
other country, The Netherlands, pays less than 70 per cent and six pay more
than 80 per cent.

But while organisations are encouraged to audit their pay systems along
gender lines, there is currently no legal obligation to do so under either the
Equal Pay Act 1970 or the Sex Discrimination Act 1975.

Earlier this year the Equal Opportunities Commission’s Equal Pay Task Force
stated that the situation would only change once pay audits were made a
statutory requirement – a position which Personnel Today supports.

Despite this, the Government has not made any changes to a system that
research shows fails to work. Indeed, the latest CIPD membership survey on
salaries and rewards found that more than half of the organisations surveyed do
no auditing.

Other research by the EOC suggests that only 35 per cent analyse their pay
along gender lines in any way.

Instead, the Government has launched another review in the shape of the
Kingsmill report. While this is likely to develop best practice guidelines on
equalising pay structures and promoting the role of women in business, it is
unlikely to advocate anything but a continuance of the voluntary approach that
is currently in place.

To date its main success has been to encourage nine major companies to run
voluntary schemes as an example to others. Unilever, British Airways,
Citigroup, Littlewoods, Sainsbury’s, HSBC, Compass, Granada and Centrica will
provide the basis of recommendations made to industry secretary Patricia Hewitt
before the end of the year (see case studies).

And according to Denise Kingsmill, deputy chairwoman of the Competition
Commission, HR has a fundamental role in addressing and implementing the
initiatives when they arrive. Before this can happen, however, a demonstrable
business case has to be made that shows time, energy and finances deliver more
than the simple affirmation of a principle.

"Policies are not enough," says Kingsmill. "Companies should
have database systems which look at trends from a gender focus. Gender targets
are also a good thing but they must be tied to corporate objectives, including
growth and performance."

Earlier this year the pay problem was highlighted in the case of City
investment analyst Julie Bower who received an annual bonus £180,000 lower than
her male colleagues doing the same job.

Her employer, Schroder Securities, had employed her for two-and-a-half years
and falsely claimed she was the worst performing member of their team when in
fact she was ranked 37th out of 68. No award has been made yet in this case and
Schroder Securities are awaiting the result of an appeal against the tribunal
decision.

While few cases are as transparently unfair as Bower’s, the Kingsmill review
hopes to tackle this sort of problem by addressing the culture of HR. For pay
to reach a level playing field it suggests that HR has to take the initiative
and push organisations to make changes.

And with industry becoming increasingly global there are also international
implications to be considered. France, Canada, Sweden and several US states all
have legislation that makes pay audits compulsory. And in many countries
companies cannot bid for government work unless they practise equal pay.

Without equal pay legislation the best female talent may simply go
elsewhere. But to do this in the UK, HR has to be forceful in its argument and
appeal to the right people within the organisation, argues Kingsmill. "HR
is fundamental to reducing the pay gap and must be firmly placed at board
level," she says. "Only by realising this can companies attract,
retain and develop women."

The Civil Service

In 1996 responsibility for civil service pay was removed from central
control and placed in the hands of individual departments. To share experience
on equal pay issues the Cabinet Office established a full-time
interdepartmental group.

The result was a series of guidance rules that heightened awareness of equal
pay legislation. It directed all government departments to review their pay
systems in accordance with the EOC code of practice on equal pay every three
years.

This guidance is being updated, and a new working group has been established
with the aim of developing practical help for civil service organisations.

By taking a common approach within the Civil Service, the steering group has
been able to focus on areas of inequality and take steps towards correcting
them. Along with gender differences this has included issues raised by ethnic
minorities and disabled workers. The focus has been broader than basic pay
structures, as promotion and other wage-related areas have also been taken into
consideration.

Pay positions have been standardised across the board. Initial delegation
highlighted a number of equal pay issues within independent departments and
agencies. As well as helping to close pay gaps across the Civil Service the
reforms have sought to tackle these historical inequalities. Sue Jones,
spokesperson for the Cabinet Office, says, "The reform is in the second
year of a five-year programme to change the hearts and minds of the Civil
Service.

"We have one clear objective – to improve the delivery of public
services. And to do that we decided that we needed better, fairer pay and
performance indicators across the board."

Granada Media

When Granada Compass demerged in February 2001, Granada plc became
responsible for a diverse workforce of 6,000. Through its equal opportunities
monitoring Granada already knew a certain amount about its staff, but to ensure
equal pay it needed to delve deeper. Being a media company with many
high-profile television programmes, Granada already paid a lot of attention to
how women are portrayed onscreen, but it wanted this to be reflected behind the
scenes as well.

As it was the first time the company had run a pay audit, the HR department
had little historical data to draw on and priority was given to identifying the
underlying factors behind gender pay anomalies. Karen Harkness, head of
compensation and benefits at Granada, explains, "There can be a lot of
factors influencing pay levels and the difficulty comes in fully understanding
the detail underlying the statistics."

To get around this problem an analytical process was instituted in June 2001
that looked across the organisation at every level. This had the aim of
identifying broadly similar groups to generate some idea of comparative average
pay levels.

Harkness says, "We looked for conscious differences that could be used
to distinguish groups of people. This helped to take into account the very
broad range of people and jobs in the company."

From this the HR team was able to draw average salaries for each level
which, given the diversity in business areas within the organisation, presented
a challenge. Even then, the task was far from straightforward. "Averages
can be misleading – you have to look at the issues behind them," explains
Harkness.

The audit is still in progress and the results are being reviewed. Any
actions that stem from the review are also being developed within the separate
business areas. For the HR team it is the idea of formulating a concept of best
practice that’s considered most important.

"We want to ensure that we are rewarding people equally for equal value
and maximising the potential of our people across the board," says
Harkness.

"We have a diverse workforce and we want to make sure that everyone is
appropriately rewarded, regardless of gender."

HSBC

HSBC is one of the largest banking and finance groups in the world with
135,000 staff in 82 countries. In 1987 the organisation moved away from an
age-related pay scale in favour of a broadband approach. This reduced the
number of pay grades from 11 to three, and, bar minor adjustments, is the
system that’s in place today.

From the start HSBC took the step of auditing these pay bands through a
central committee which looks for evidence of gender or racial wage bias. The
information this produces is presented as statistics that are made available to
senior business managers, HR managers and HSBC’s managers’ council. The
committee also produces strict guidelines that ensure managers are aware of
current legislation and discrimination issues.

Len Aspell, head of employee relations at HSBC, explains, "We run a pay
audit every year to ensure we know where we are going in terms of employment
issues and to highlight areas that need attention.

"We always share the results with the trade unions beforehand and then
post the results of the pay review where everyone can see them. We try to
ensure it is as transparent as possible."

In 1995 a similar approach was taken in a massive overhaul of the HSBC pay
system. Here greater relevance was placed on analysing each pay band in
relation to its market worth. This enabled HSBC to introduce regional pay rates
for clerical staff in 1998, which staff could see from the start. Currently, all
staff, provided they are competent, are paid at a spot rate for their grade and
location. Similar arrangements have been in place in HSBC’s telephone banking
arm First Direct since the early 1990s.

Aspell explains, "We cut data across the whole plc and then drill down
into strategic business units or geographical units. This takes quite a while
as our biggest obstacle is interrogating 70,000 pay records throughout the
country."

Results from the latest HSBC audit are expected later in the year. Those before
it have already helped to close the pay gap and make pay grades more
market-related. "It’s getting better but we’re not there yet. The gap
ranges from 92 to 102 per cent depending on the grade, which is better than
ever before," says Aspell.

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