Employers
still have time to respond to the EOC’s draft code of practice on equal pay,
which will be taken into account by tribunals in assessing claims. Here is its
guidance on conducting an equal pay review
Tackling the gender pay gap reduces the risk of litigation. It can also
increase efficiency by attracting the best employees, reducing turnover,
increasing commitment, and cutting absenteeism. Pay is one of the key factors
affecting motivation and relationships at work. It is therefore important to
develop pay arrangements that are right for the organisation and that reward
employees fairly.
Providing equal pay for equal work is central to the concept of rewarding
people fairly for what they do. While employers are not required by law to
carry out an equal pay review, the Equal Opportunities Commission code
recommends them as the most appropriate method of ensuring a pay system delivers
equal pay free from sex bias.
Essential features of equal pay reviews
Employers are responsible for providing equal pay and for ensuring pay
systems are transparent. Pay arrangements are frequently complicated and the
features that can give rise to sex discrimination are not always obvious. A
structured pay system is more likely to provide equal pay and is easier to
check than a system that relies primarily on managerial discretion. Acas
provides basic advice on the various different types of pay systems and on job
evaluation (www.acas.org.uk). Whatever kind of review process is used, the
essential features are the same, which are to:
– Compare the pay of men and women doing equal work
– Explain any equal pay gaps
– Close those gaps that cannot satisfactorily be explained on grounds other
than sex
These features are the same whatever the size of the organisation.
An equal pay review is not simply a data collection exercise. It entails a
commitment to put right any sex-based pay inequalities and this means the
review must have the involvement and support of managers with the authority to
deliver the necessary changes. The validity of the review and success of
subsequent action taken will be enhanced if the pay system is accepted both by
the managers who operate the system and by the employees. Employers should
therefore aim to secure the involvement of employees and, where appropriate,
their representatives, when carrying out an equal pay review.
Carrying out a voluntary equal pay review
The EOC recommends a five-step model:
– Step 1: Decide the scope of the review and identify the data required
– Step 2: Determine where men and women are doing equal work
– Step 3: Collect pay data to identify equal pay gaps
– Step 4: Establish causes of any significant pay gaps and assess the
reasons for these
– Step 5: Develop an equal pay action plan or review and monitor the
situation
Step 1: In scoping the review employers need to decide:
– Which employees are going to be included. It is advisable to include all
employees deemed to be in the same employment
– What information will be needed. Employers will need to collect and
compare broad types of information about all the various elements of pay and
personal characteristics of each employee – that is whether male or female,
what relevant qualifications they have to the job; what hours they work and
when and where they work these; their length of service; and so on. The
information will vary depending on the type of organisation, its pay policies
and practices and scope of the review
– Who should be involved in carrying out the review? An equal pay review
requires different types of input from people with different perspectives. They
will need a knowledge and understanding of the pay and grading arrangements;
any job evaluation schemes; and payroll and HR systems. It can also be helpful
to have someone with an understanding of equality issues, such as men and women
being segregated into different types of work
– When to involve the workforce. Employers need to consider when to involve
the trade unions or other employee representatives
– Whether expert advice is needed. Employers may also wish to consider
whether to bring in outside expertise. Acas can provide practical, independent
and impartial advice on the employee relations aspects of equal pay reviews
– As a matter of good practice, employers may also want to look at pay by
ethnicity and disability, or age, as well as gender. It may first be helpful to
consider the quality of information available and whether it is adequate for
carrying out a wider review. It may also be appropriate to seek advice from the
Commission for Racial Equality and the Disability Rights Commission.
Public sector organisations obliged by the Race Relations (Amendment) Act
2000 to adopt an Equality Scheme should ensure the pay review deals with any
pay gaps between workers from different ethnic groups as well as gender
differentials.
Step 2: Employers need to do one or more of the following checks:
– Whether men and women are undertaking ‘like’ work
– Work rated as equivalent
– Work of equal value
These checks determine where men and women are doing equal work. They are
the foundation of an equal pay review (Reference manual p20).
Employers who do not have analytical job evaluation schemes designed with
equal value in mind will need to find an alternative means of estimating
whether men and women are doing equal work. The EOC Equal Pay Review Kit
includes suggestions on how this can be achieved. Employers who do use such
schemes need to check their scheme has been designed and implemented in such a
way that it does not discriminate on grounds of sex.
Step 3: Employers need to collect and compare pay information for men and
women doing equal work by:
– Calculating average basic pay and total earnings
– Comparing access to and amounts received of each element of the pay
package
To ensure comparisons are consistent, when calculating average basic pay and
average total earnings for men and women separately, employers should do this
either on an hourly basis or a full-time salary basis (grossing up or down for
those who work fewer, or more, hours – excluding overtime – per week than the
norm).
Employers then need to review the pay comparisons to identify any gender pay
gaps and decide if any are significant enough to warrant further investigation.
Generally it is suggested that differences of 5 per cent or more, or patterns
of difference across pay comparisons of 3 per cent or more should be regarded
as needing exploration and explanation. It is advisable to record all the
significant or patterned pay gaps identified.
Step 4: Employers need to:
– Find out if there is a genuine reason for the difference in pay that has
nothing to do with the sex of the jobholders
– Examine their pay systems to find out which pay policies and practices are
contributing to any gender pay gaps
Pay systems vary considerably. Those that group jobs into pay grades or
bands have traditionally treated jobs in the same grade or band as being of
broadly equal value, either because they have been evaluated with similar
scores under a job evaluation scheme, or because they are simply regarded as
equivalent.
However, recent years have seen a trend towards structures with fewer,
broader grades or bands and greater use of performance pay and market factors.
A single broad band or grade may contain jobs or roles of significantly
different value because they encompass a wide range of job evaluation scores.
This, coupled with a wider use of other determinants of pay and more complex
methods of pay progression, means it is important for employers to check all
aspects of the pay system from a variety of standpoints – design, implementation,
and impact on men and women. The EOC Equal Pay Review Kit provides details on
what to look for.
Step 5: If there are gaps between the sexes’ pay for which there is
no genuine reason, employers will need to make the necessary arrangements to
provide equal pay for current and future employees. Employers who find no gaps
or who find gaps for which there are genuine reasons should nevertheless keep
their pay systems under review by introducing regular monitoring. This will
ensure the pay system remains free of sex bias.
Find out more…
on the EOC code of practice at www.eoc.org.uk
Case study: developing an action plan
Company A carried out an equal pay
review because it was proud of its reputation as an employer of choice.
The equal pay review was held as part of the ongoing management
of the reward structure. The review revealed a gender pay gap of 9.5 per cent
in the bottom grade and 7.1 per cent in the top grade.
Reasons for the gender pay gap:
– Job segregation
– Lower starting salaries on promotion
– Lack of structured progression
With trade union support the company is working towards closing
the gender pay gap with new policies on progression and salaries on promotion.
In 2001 the company publicly set aside a sum of money to narrow the pay gap.
Case study: who should be involved
Company B decided to carry out an
equal pay review because it was proud of its stance on diversity.
The company decided it had enough in-house expertise to enable
it to carry out an equal pay review without the assistance of external pay
consultants.
The company decided the internal audit team would collate and
analyse the data, then produce a report for the human resources team. This team
would implement any changes in policy and practice.
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It decided it would involve the workforce at an early stage and
began by holding an early meeting between senior managers and the trade union.
It also decided to develop a communications strategy to keep
the workforce informed of developments, thereby encouraging ownership of the
process and to help the company manage workforce expectations.
