Driving home equality

Bowing to pressure from its trade unions, BMW Group’s once strike-ridden Oxford plant agreed to take a partnership approach to tackling equal pay by undergoing the TUC’s ‘Close the Gap’ training course as a prelude to carrying out an equal pay review. HR manager Paul Lewis explains its motivations for this and reveals that the process has not been as straightforward as HR expected.

nother year over, another target missed. The end of 2003 was the deadline by which the Equal Opportunities Commission (EOC) wanted 50 per cent of large employers with 500-plus workers to have carried out equal pay reviews.

The target is part of a long-term campaign to reduce the gender pay gap (full-time women earn about 18 per cent less than full-time men). And EOC research says it is unlikely to be achieved any time soon. A survey last March found that more than half of large employers and two-thirds of medium-sized ones had no plans to conduct an equal pay review.

While pay reviews are not required by law, the EOC advocates them as the only way to ensure employers are not breaching the Equal Pay Act 1970 and its European counterpart, Article 141 of the Treaty of Amsterdam. The EOC’s targets and its close monitoring of progress in this area have a clear purpose. While the Government rejected calls for mandatory pay reviews in its recent overhaul of equal pay legislation, it promised to revisit its decision if voluntarism proved ineffective. The EOC does not intend to let the Government off the hook: the targets, and progress (or lack of it) towards them, will form part of the push for legislation next time round.

In an effort to remove the ‘fear factor’ from the equal pay review issue, the EOC published a new version of its code of practice on equal pay in December, giving practical advice on managing equal pay, including a five-step pay review model for employers to follow. The commission and the trade unions continue to push the notion that no organisation can call itself an employer of choice until it has tackled this issue.

One employer that responded to this argument is BMW (UK) Manufacturing. The German carmaker’s Oxford plant has come a long way since its 1970s heyday as the ‘bad boy’ of British industrial relations. Its transformation, which has seen a near doubling of the workforce, complete restructuring and huge productivity gains, was symbolically completed last year when it won the Chartered Institute of Personnel and Development/People Management award.

Oxford HR manager Paul Lewis says: “It is an objective of BMW Group that our vision is to be the most attractive employer worldwide. It is about having the best people behind the BMW Group badges. We have to ensure that the Oxford plant is the most attractive employer in the UK. How could we achieve that, or stand up and say it, if we had not done something as fundamental as an equal pay review?”

So in 2001 one of the company’s unions, the MSF, raised the issue with the then personnel director, and the answer was “let’s talk further”.

“Without sounding smug,” says Lewis, “we thought we didn’t have a lot to lose. We were confident we would meet a lot of the criteria, without realising how detailed it could be, or where the analysis might take you.”

Meetings with the T&G, MSF and Acas revealed that new skills and knowledge were needed before they could start the ball rolling. Meanwhile, the TUC had received government funding to train 400 representatives in equal pay issues, including carrying out pay reviews. The course, called ‘Close the Gap’, was being offered to union reps and employers who were willing to work in partnership.

“We said, ‘let’s have a look at it’,” says Lewis. “The three-day training course was comprehensive. We decided to put together a tailored programme over two days – we felt we were mature enough in our relationships that we would not have to spend time breaking down the barriers.”

An equal pay steering group, made up of union representatives, three HR managers and line managers, went through the training, which was facilitated by Dunstable Open College. It covered an equal pay representative’s duties and the law, how to set up equal pay reviews and how to take managing equal pay forward.

One of the most important outcomes of the training, Lewis says, was the increased sense of trust between management and unions and greater transparency over pay issues – now recognised as a key factor in achieving equality.

“It felt more like a workshop,” says Lewis. “We started to identify the issues, the barriers, and from the start we were presenting a lot of confidential information to give the unions an understanding of how the pay and grading structures worked.”

After the training, the company embarked on an equal pay review. Only 7.3 per cent (220) of the Oxford workforce is female. They tend to be employed in support functions including purchasing, finance, HR and quality engineering.

Four of the Oxford Plants grades are on a single pay rate. “That is the simple bit,” says Lewis. “But for the three other grades we have a range of salaries, and that is the analysis we have been going through. We identified two of those three grades, involving 16 women employees, where there appeared to be some pay gaps. We had to investigate these further.”

The general rule says that any gap of more than 3 per cent is significant. “Our conclusion was that we needed to drill down and start to understand a bit more,” says Lewis. “It was not a massive task.”

After further analysis, he says, it was found that material – that is, non-discriminatory – factors accounted for 14 of the 16 pay gaps, including the fact that some of the women were new and others had been promoted to a new grade. But in two cases, it could find no objective reasons for the difference, and as a result these women’s salaries are being reviewed and adjusted.

Since taking over the Rover Group in 1994, BMW has transformed the organisation from a traditional, hierarchical manufacturing company to a modern, democratic set-up comprising self-steered teams of up to 15 people, a new grading structure and other elements such as performance reviews.

“It means every individual has the opportunity to influence their own earnings,” says Lewis.

Annual reviews are carried out by line managers, structured around one-off bonus payments. Is there a possibility that gender bias is entering the process at the level of individual management discretion?

“We have not looked at the performance elements at this stage,” Lewis admits, “and we will need to. Yes, reviews are completed by line managers, but there is a checking and confirmation process that takes place. The review has to be validated by two other groups – a peer group check and a next level check – and there may be some adjustments. Finally, we have some analysis of what is awarded, though more by area than by gender. That is something we can build on.”

Equal pay best practice also demands that wider human capital issues, such as recruitment, career progression and promotion be brought into the equation. Pay inequality, according to equal pay experts such as Denise Kingsmill, is often a symptom of a much deeper-rooted problem – that women’s salary progression is being thwarted, either consciously or more often inadvertently, by a lack of flexibility, support or awareness on the employer’s part.

Lewis acknowledges these wider issues, but insists that BMW’s HR processes are fit to tackle them. “We have a number of processes in place. Management staff go through a career portfolio review that is robust and looks critically at their potential. We also go into detailed succession planning for each area. And we do a lot of training with managers in equal opportunities.”

Thanks to the HR team’s open and transparent approach, many eyes are now upon them. “Others within BMW will be looking to learn from our experience. Our plants at Hams Hall, Goodwood and Swindon are interested in what we are doing,” says Lewis.

“We will show the results openly, we have taken the unions into our confidence. We have a good relationship and have worked together on many issues: for example we use a significant number of temporary employees and that took a lot of work to convince the unions that it was the right way forward. We have broken through on so many fronts – flexible working patterns, looking for quicker response times and flexibility, and involving the unions more in forecasting. These are the things that have challenged us.”

And there are more challenges to come, with plans to increase production of the Mini from a record 144,000 last year to about 170,000 a year to meet demand. BMW chief Helmut Panke insists the Mini will be built only at Oxford and that capacity constraints will be overcome. Removing bottlenecks, upping productivity and gaining maximum output with minimum investment is of the utmost importance.

While equal pay might seem a low priority in all this, it is likely to pay dividends in ensuring BMW retains and gets the most out of its loyal and highly-motivated workforce at this crucial juncture. Indeed, it could play a small but vital part in the next chapter of this British manufacturing success story.

Relevant legislation

Equal Pay Act 1970

UK legislation that entitles a worker doing equal work or work of equal value to that of a person of the opposite sex in the same or associated employment to equality in pay and conditions of employment.

Article 141 of the Treaty of Amsterdam

Formerly Article 119 of the Treaty of Rome, this requires member states to ensure men and women receive equal pay for equal work, pay being defined as  “the ordinary basic or minimum wage or salary and any other consideration, whether in cash or kind, which the worker receives directly or indirectly, in respect of his employer or employment”.

EOC Code of Practice on Equal Pay

Describing the employer’s duties under the equal pay and related legislation and advising employers on compliance via a five-stage equal pay review model, the code is approved by Parliament and can be admitted as evidence and taken into account by the panel in any tribunal proceedings under the Sex Discrimination Act 1975 or the Equal Pay Act 1970.

Useful information

Sex Discrimination Act 1975

Outlaws indirect sex discrimination in pay systems, defined as a provision, criterion or practice that acts to the detriment of a considerably larger proportion of one sex than the other, requiring objective justification from the employer.

Data Protection Act 1998

Protects pay and other data from inappropriate use and allows data to be disclosed only in accordance with data protection principles.

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