Ten minute tutorial – pay audits

New
initiatives are furthering the chance of closing the gender salary gap. By Phil
Boucher

What
is it?

Equal
pay audits provide a way of checking whether pay systems are fair to both
sexes, regardless of age, gender or disability. When implemented effectively
they are able to highlight areas of a pay system that are unfair and allow the
appropriate changes to be made.

The
Equal Opportunities Commission (EOC) advises that pay system reviews should be
carried out in consultation with trade unions and staff representatives and be
regularly reviewed to ensure their continuing fairness. This should involve a
thorough analysis of the pay system by producing a full demographic breakdown
of employees, including detail on gender, job title, grade and whether they are
full- or part-time. Each element of the pay system should be looked at closely,
particularly areas like basic pay, performance pay, occupational pension,
company car allowances and any premium payments that are relevant.

The
story so far

The
Equal Pay Act (1970), the Sex Discrimination Act (1975) and Article 141 of the
Treaty of Amsterdam have enshrined the principle of equal pay within both UK
and EU law. Despite this, there is currently no legal obligation to run an
audit and the vast majority of organisations choose not to.

But
while the decision has been put in the hands of individual organisations, the
present government has made equal pay a priority. A national review of pay has
recently been concluded under the direction of Denise Kingsmill. It is due to
report its final conclusions to Industry Secretary Patricia Hewitt next month.
It is thought this will include a number of best practice guidelines on
equalising pay structures and promoting the role of women in business
throughout the UK.

But
it will probably stop short of recommending the legislation sought by the EOC
which claims that business will continue to ignore the issue until its hand is
forced to investigate.

EOC
research suggests that while 93 per cent of employers are confident that their
pay systems are fair, only 35 per cent have actually analysed their pay along
gender lines. They want Hewitt to use the Kingsmill review as a foundation for
changing this.

At
the same time, other organisations are taking a more practical approach. The
TUC recently stated its intention to train 500 union representatives in equal
pay and equal opportunities work. The T&G has also recently unveiled plans
to review the pay scales of 22,500 companies nationwide with plans to prosecute
the worst offenders.

The
promise

Pay
systems are so complex that they can become unlawful or discriminatory without anyone
realising. Regular audits help to stop this.

As
well as being a practical means of showing the contribution of every staff
member is valued, many organisations use the concept of transparency to signal
how seriously they take issues of equality. Furthermore, audits provide a good
way of showing customers and clients that a company is fair and open, has
ethics and can therefore be trusted.

Pros
and cons

If
done well, equal pay audits should lead to higher employee morale, increased
staff retention and a more open and trusting workplace. But if poorly executed,
employees can feel the company is being intrusive and making changes simply to
appear "liberal".

The
amount of time, energy and resources put into running an audit is also just the
tip of the iceberg. Extra training in sex discrimination has to be given to
employees who take decisions about the pay and the grading of others.

Experience
also shows that commitment to the policy by senior management is vital, as is
the recognition from staff that they share joint responsibility for its
implementation.

The
EOC advises that regular reviews are run to ensure continued effectiveness.
This means extra work and frequent policy changes that have to be communicated
throughout the organisation. The trick, according to the EOC, is to make sure
that everything is transparent and agreed with trade unions, management
committees and the board. That way nobody can claim that it’s being run to
favour one section of the company at the detriment of another. It also helps to
persuade those who think it’s an excuse to run a witch hunt for false expenses
and commission claims.

Who’s
on board?

Organisations
leading the way include the Civil Service, Granada Media, the T&G and the
NHS. Understandably, the public sector is being extremely proactive in this
area given its higher public accountability.

But
generally private sector companies have been slow to take up the challenge. The
Kingsmill review has managed to get nine major companies on board. They are
Unilever, British Airways, Citigroup, Littlewoods, Sainsbury’s, HSBC, Compass,
Granada and Centrica. These will provide the basis of recommendations made to
industry secretary Patricia Hewitt.

The
verdict

The
major question at the moment is whether pay audits should be made compulsory.
How this is answered depends heavily on the recommendations of the Kingsmill
review and the subsequent actions of the Government.

While
the report is likely to develop best practice guidelines on equalising pay
structures, it is unlikely to advocate anything but a continuance of the
voluntary approach. But as the Government has made equal pay a priority it may
be that organisations are more forcefully encouraged to run audits off their
own backs.

In
France, Canada, Sweden and sections of the US pay audits are already
compulsory. It may therefore develop into an integral part of retaining
high-quality female staff.

But
what is certain is that the pay gap will continue to close gradually rather
than suddenly. As it has done since the Equal Pay Act was introduced more than
30 years ago.

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