Pay inequality doesn’t add up for anyone

Heather Falconer provides some tips on how to get boardroom buy-in on pay
audits

The past few years have seen equal pay emerge as a priority issue for the
Equal Opportunities Commission (EOC), the Government and trade unions. As part
of a sustained campaign to close the gender pay gap, the EOC has said half of
large employers with 500-plus workers should have carried out a pay audit by
the end of 2003, and a quarter of smaller organisations should do so by
December 2005. If you need to persuade your board to approve an audit in your
organisation, challenge them to answer the following questions.

Can you afford to receive, fight, or lose an equal pay claim?

The costs of getting it wrong are getting higher. The Government legislated
in summer 2003 to increase from two years to six the amount of back pay a
successful equal pay claimant can receive in compensation. It also said
claimants who can show that the employer deliberately concealed relevant facts
could possibly claim back further – to the date of the contravention. And
lawyers say there is scope for this new rule to be used to challenge the
statutory time limits in the European courts.

In addition, the tribunals are now entitled to award interest on the back
pay owed to the successful claimant.

To this must be added the ongoing costs associated with defending a legal
pay case – in the case of an equal value claim it could drag out for several
years, necessitating the retention not only of lawyers but also of equal pay
experts to advise on job evaluation.

Even without the costs of litigation and compensation, a perception that pay
systems are unfair, unjust or discriminatory is likely to undermine workforce
morale and productivity, as well as the reputation of a business among
customers and potential recruits looking for their employer of choice.

Equal pay has also been identified as an economic productivity issue. The
Government-appointed Kingsmill Review reported in 2001 that the gender pay gap
was partly a symptom of greater human capital management problems within
organisations – the failure of employers to recruit, train, develop and promote
women to their true potential.

Can you afford to have confidence in your own pay systems?

A mounting body of research points to the fact that UK employers remain
vulnerable and inefficient because of their misplaced confidence in and their
lack of knowledge of how their own pay systems impact on male and female
employees. This was starkly identified by the Equal Pay Taskforce, which
pointed in its report Just Pay to "a surprisingly and worryingly
widespread lack of awareness of the existence and persistence of the gap
between women and men’s pay".

Research produced in 2001 found that despite the fact that 93 per cent of
respondents were very or fairly confident about the fairness of their pay
systems, potentially illegal pay practices were still very much in evidence
(Gender Equality in Pay Practices, EOC). Nine per cent of respondents said jobs
predominantly occupied by men were graded higher in their organisations than
those predominantly occupied by women. And 13 per cent said only jobs mainly
carried out by men had access to bonus or performance-related earnings, while
those performed by women did not.

Can you afford not to carry out an equal pay review?

The latest research for the EOC, released in March 2003, found that most
large, and two-thirds of medium-sized employers, had no plans to conduct an
equal pay review – although organisations that had started a review did so in
2002, suggesting the forces for change may be having an effect (Monitoring
Progress Towards Pay Equality, F Neathey, S Dench and L Thomson, Institute for
Employment Studies).

It found little change in organisational pay structures and practices since
the 2001 survey above.

– Occupational segregation – a major reason for the gender pay gap –
remained marked even in large organisations. This sort of segregation has been
linked in studies to reduced productivity in that it limits the range of
employment opportunities taken by women, resulting in unfulfilled potential.
Despite this, employers were usually at a loss to provide precise information
on the proportions of men and women in different occupational groups

– Two-thirds of employers were not monitoring the relative pay of men and
women and 43 per cent had no plans to do so

– The culture of secrecy and obscurity that the EOC highlights as so central
to the continuing pay gap was much in evidence. Less than half of larger
organisations told all employees about the range of pay for other jobs, grades
or bands, and almost a quarter (22 per cent) actually forbade employees to
share information about their pay with colleagues.

Most organisations which had conducted or were conducting an equal pay
review said they had not found it difficult. Those that did have problems, said
this was to do with the quality of their HR and payroll databases and data.

The complete guide to Equal Pay Reviews

This article is adapted from Equal Pay Review, the latest one
stop guide from Personnel Today Management Resources. The guide offers
practical, independent advice on how to carry out a review, including a
step-by-step guide to implementation and a review of the various tools
available to carry out audits. ONLY £75

Enquiries: Caron Berry, 01371 810433 or e-mail: personneltoday@esco.co.uk

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