Three essential areas to address around pay gaps and equality
Instances of unequal pay can manifest all too easily, but they can also be guarded against by putting checks and balances in place and maintaining those with regular auditing. My three main areas to focus on when considering pay gaps and inequality are pay structures, annual pay review and pay policy.
Pay Structures: are they robust enough?
Benchmarking – make sure that you benchmark annually to keep your pay structures and market rates current. Market rate is used as a material factor defence in Equal Pay Tribunals, so it is critical that you retain evidence that supports every ‘market rate’ salary decision you make, and store that evidence for six years. The ‘market rate’ defence evaporates after a certain time, which is another reason for regularly reviewing your knowledge of the current market rate and gathering fresh evidence to support your view. How often should you do this? Probably every year.
Job Evaluation System - Increase your levels of transparency and eliminate discretionary pay systems by adopting a job levelling or job evaluation system. This gives you a structured blueprint across the organization, allowing you to slot people into certain levels in a robust, consistent way. Whilst job levelling goes some way to achieving greater structure, a job evaluation system like Evaluate is underpinned by factors and points that ensure roles are correctly levelled and roles of Equal Value are identified.
Assess pay scales and ranges - you will have some overlapping of pay scales and ranges, where the maximum of the lower pay scale is higher than the minimum of the next higher scale, but it should never be significant.
Audit roles - remember to continually audit roles and ranges to keep them up to date. If a role changes in evaluation terms, what impact does that have on its position in the market, and in the pay structure?
Reduce pay activity outside of the Annual Pay Review – Wherever possible try to mitigate against ‘The Grey Economy’ where managerial discretion over things like starting salaries, ad hoc pay awards or pay decisions happen outside of your annual pay review processes. If discretion is devolved to the line, make sure those decisions are based on sound evidence such as market data, or robust internal analysis. There will always be flight risks you need to deal with - and you will never totally eliminate those - but you want as much of your pay reviews as possible to happen while you are ‘in the zone’ around your pay structure and benchmarking policy.
Read the T&Cs… Where possible harmonise different terms and conditions for different groups of employees.
Having these checks and balances in place, especially using a Job Evaluation System, will allow you to build the kind of pay and grading structure to achieve and maintain Equal Pay.
Annual Pay Review: 5 key questions to ask yourself
- Are our annual pay awards made in a consistent manner, in line with pay policy and linked to personal performance or productivity?
- Are we auditing our performance ratings and annual pay review regularly enough to ensure consistency across functions, roles and line managers, and to guard against gender bias? (Are more men getting the lion’s share of the larger pay awards? Are more part-timers getting lower pay awards? Are these mostly women?)
- Have any extra or ad hoc awards outside of the APR undermined internal equity? If so, is there a justifiable defence at the tribunal?
- Are our market-based pay systems or supplements underpinned by robust market data sources that reflect the market? How old and relevant is that data?
- If we have pay protection policies, should we consider buying them out? If not, are we letting the market catch up? Are we on top of any amounts being frozen, or is it possible we are consistently overpaying? From a gender perspective, do we have more men than women under pay protection, or are there any other discriminatory practices within the scheme?
Pay Policy: 5 key questions
Are we applying a consistent pay policy when setting starting salaries or are we allowing ourselves to fall into the trap of ‘who shouts loudest’ (bearing in mind men can be more aggressive in negotiating pay and reward than women).
Are we monitoring and auditing the starting pay across genders?
Are we 100% sure there is no discriminatory practice within our pay protection scheme?
Where we have red- or green-circled employees, are the criteria we are applying free of gender bias?
- Are all our annual promotional reviews being carried out in a fair and equitable manner, or are there areas we can improve? For example, are we allowing too much manager discretion?
Being open and transparent and challenging yourself to ask these questions should help you build an engaged, happy and productive workforce and create value for your organisation. Furthermore, communicating a clear stance on your Equal Pay Position will help make that workforce diverse and inclusive, and positively impact employee wellbeing.