street bank HSBC has become a standard-bearer in the Government’s drive to
close the equal pay gap. But even though it has been auditing pay for nearly 30
years, it still cannot claim to have got it completely right. By Philip Boucher
Last December, Trade and Industry Secretary Patricia Hewitt unveiled the
Government’s response to the Kingsmill review into equal pay. The proposals
included the right for women to know what male colleagues at the same level are
earning and the requirement for firms to include information on employment and
pay diversity in annual reports.
While the recommendations stopped short of introducing the compulsory pay
audits demanded in some quarters, Hewitt suggested that legislation would
follow if business failed to make sufficient progress on the issue. The
Secretary of State also outlined Government plans to encourage firms to take
the initial step of conducting an equal pay audit. Since Hewitt’s announcement,
the Office for National Statistics has shown that women working full-time in
2001 earned 18.5 per cent less per hour than men doing comparable or similar
Women and Men in Britain: Management, an Equal Opportunities Commission
report published in January 2002, also revealed that while women now account
for 30 per cent of managers in Britain, they still earn 24 per cent less than
male managers. And the UK is also lagging behind Europe. The most recent
European-wide study, the Structure of Earnings Survey, claims that women in the
UK are paid only 66 per cent of male earnings. Only one other country, The
Netherlands, pays less than 70 and six pay more than 80 per cent.
These developments are forcing many organisations to think about the issue
for the first time. And while most understand the principles of best practice
on equal pay, the vast majority have no experience of its practical
implementation. They want to know how best practice can be made to work in this
area and, more importantly, how to act on any discrepancies that may come to
Len Aspell, head of employee relations at HSBC, says: "I think that
best practice is knowing what your policy is actually supposed to be doing, and
establishing if you are meeting that. Quite simply, if you’re going to make a
statement on best practice you have to be able to back it up.
"You can only start doing this by considering if there are any
differences," Aspell continues. "And the only way you can do that is
by gathering the information on staff that you need."
This means analysing your pay across gender and grade levels to see if any
anomalies occur. And if the evidence given to the Equal Pay Task force is to be
believed, employers are frequently shocked by the evidence this reveals.
Aspell says: "Many employers who said they did not have a problem
actually did but were not aware of it."
HSBC itself is currently close to having complete equality in pay. But it
has had a head start: unlike many firms it has been analysing its pay systems
since the 1970s. Over the years its approach to pay has moved from age-related
scales through job evaluation to broad banding which was introduced in 1987.
In 1995, the high street banker undertook a massive overhaul of its pay
system, placing greater emphasis on market worth within each pay band. This
enabled the firm to introduce transparent pay rates for clerical staff in 1998.
Currently all staff, provided they are fully 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.
But more importantly, HSBC has taken great care to ensure its stated equal
pay policy is communicated throughout the company and reviewed annually. Pay
grades are evaluated each year in a process overseen by a central committee of
demographically representative delegates [see box].
The result is a pay system that is not only transparent, but continually
striving to become completely fair. According to Aspell, the most recent audit,
which has just been completed, shows the bank is succeeding in its aim of
reducing pay irregularities that remain.
Aspell says: "At the management level, women receive between 95 and 100
per cent of the pay their male counterparts receive. And in the clerical
grades, it varies between 99 per cent and 104 per cent. I am quite satisfied
that we are moving in the right direction for both clerical and management
The reason HSBC has been able to claim this is partly the length of time it
has been focusing on the issue of equal pay. But it is also a product of the
whole company being aware of the issues and pulling in the same direction to
put things right, Aspell says.
"We are beginning to get line managers and HR management to focus on
equal pay together. It is important to get as many people on board as possible
– particularly the facilitators, the policy advisers and the employee
However, despite its best attempts, the bank still has a range of issues to
deal with – not least that female managers are still likely to be paid less
than men. Aspell himself admits that the process is very difficult to perfect
and needs to be continually appraised and updated.
One constant complicating factor is that pay is affected indirectly by
multiple factors, such as length of tenure and location, and that extracting
these inequalities means mining deep into the culture and policies of the
"Hewitt’s concept is fine, " Aspell says, "but I would just
add a word of caution that you need to look behind why there is a difference
before you make any changes.
"As a company we are quite happy to do it. But very often a person’s
pay is affected by where they are working and what the market factors might be.
For instance, an IT manager in Lincoln is going to be paid far less than an IT
manager in London. You have to remember that pay is a market issue."
Aspell suggests that in HSBC there is currently about a 1 per cent gap
between the sexes in the step up to the next management level. However, further
up the chain the differences become as wide as 3-4 per cent.
Aspell says: "We need to understand why this is happening as it has
obvious implications for the diversity within HSBC. But it’s a society issue
too. We need to look at how we can encourage more females to take the
responsibility of management."
Following Hewitt’s announcement standard-bearers like HSBC may find
themselves under increased scrutiny to show that a fair and equitable pay
system can be achieved. It is because of this that those firms who have led the
way on equal pay put so much emphasis on the issue of transparency.
Along with being fair a pay system has to be seen to be fair by all –
employers, employees and the general public.
It is because of this that HSBC welcomes the kitemark system that was recently
announced by Barbara Roche, and is considering whether to apply for a Castle
award from itself. Aspell says, "It will help to promote the concept of
equal pay audits and allow people to share best practice ideas, which can only
be good all round."
It also heeds the announcement of Hewitt in many respects. Aspell says:
"In essence the announcement by Hewitt and the findings of the Kingsmill
review go in line with the findings of the Equal Pay Taskforce and the EOC’s
recommendations on best practice.
"These suggest that what we have got to do is move to a position where
if there are differences they have to be explained. And to do this you need
transparent pay systems so that people can understand them."
How HSBC maintains a sensible balance
HSBC benchmarks itself against the
Equal Opportunities Commission’s best practice guidelines on equal pay.
This involves following an outline for auditing your pay system
along with a concept of how your pay system should be organised.
– Does your organisation have a stated equal pay policy?
– Is this communicated to staff through trade unions and
– Does anyone have attributed responsibility?
– Have you carried out pay system reviews in accordance to the
EOC’s code of practice?
– Are jobs evaluated annually?
In all cases the bank is able to say ‘yes’, which provides its
pay systems with a secure foundation and a high level of accountability.
The company runs a pay audit every year to see if it is meeting
targets and to highlight areas that need attention. It shares the results with
trade unions before posting the results of the pay review where everyone can
As one of the world’s largest banking groups, HSBC currently
has 135,000 staff in 82 countries. All of these are audited. From there, the
information is broken up into smaller geographical or strategic business units,
a process which involves interrogating some 70,000 pay records.