Equal pay: what it means and how to achieve it

If you are not right now working hard to achieve equal pay, you probably are in big trouble. You may believe that you pay people fairly, you may believe that you can justify any difference in pay between male and female employees — and probably you are wrong. This is serious management stuff says Bob Patchett.

Achieving equal pay is not just a social responsibility — it attracts and motivates competent women who can make significant improvements to your organisation’s performance. Conversely, if there are unjustified differences in the compensation packages of men and women doing work of equal value in your organisation, and you are doing little to resolve them, then you could be landed with huge bills for compensation and court costs. So, the time for action is now, before anyone makes a claim against you.

So where do you start?

The Equality Act 2010 requires that the total compensation package, however made up, should be equal for men and women who do work in the organisation that is the same or similar or judged objectively to be of equal value. Any differences must be objectively justified. To this end you should commit to an equal pay policy setting out that you recognise the importance of paying people fairly regardless of gender or other irrelevant personal factors, how you will ensure that this happens, what you will do if you find unjustified differences, what remedial steps you would take and what anyone should do if they feel they are being compensated unfairly. This should be signed by a senior executive and given wide publicity, perhaps through employee handbooks. Larger organisations particularly should involve managers and employee representatives in the creation of this policy to give it broad ownership.

  • Commit your organisation in a written policy.

  • Explain what it means in practice.

What do your employees do?

In order to compare the value of employees’ work you need to know exactly what they do, which may differ from what you think they do and perhaps even what they are supposed to do. The manager of a small organisation may know this clearly, but otherwise you will need written job descriptions that show the job title; a simple statement of the aim of the job; some detail of how this is to be achieved together with an indication of level of responsibilities, competencies, physical and mental demands; and any other factors that need to be considered when assessing job value. These descriptions should be agreed by the job holder, the manager and an analyst who can maintain a uniform standard. They form the basis of a job evaluation exercise, and may also indicate adjustments that should be made.

  • Analyse each job.

  • Identify the key elements.

Assess their relative work value

Job evaluation examines the work that the job is required to cover regardless of the performance of the job holder. Form a panel of people who between them know the organisation well, understand equal pay issues and ideally include employee representatives and at least one person who is completely disinterested. These may be joined as appropriate by people who understand in detail the jobs in question. The panel’s first job is to determine the factors that are important in jobs in the organisation, such as knowledge, skill, financial competence and decision-making. Ideally they should be measurable. Different sets of factors may have to be considered for different employee groupings, for example senior managers, research staff, administrative workers. The second job is to weight these factors in relation to each other; research workers for example may require vast knowledge but only modest interpersonal skills. Objectivity is helped if a scale is agreed for each factor with a definition at each point. Weighting is the crucial part of the exercise and the most difficult, so there is merit in involving senior executives who may understand more clearly the competencies the business requires for success.

The panel must evaluate jobs with great care, avoiding bias formed by tradition, performance of job holders, and inappropriate beliefs, for example that women cannot sell heavy engineering products or negotiate with militant trade union officials. A score is given for each factor to produce a total for each job. At the end of the exercise the jobs are listed in score order and the result examined to check if the stackup seems wrong. If so, a job should be examined to see if some factor has been wrongly scored or if the importance of the job hitherto has been under or overrated.

  • Form a knowledgeable, representative and unbiased panel.

  • Decide the factors that are important in the organisation’s jobs.

  • Weight each factor in relation to each other.

  • Score each factor in each job.

  • Check the overall result and examine perceived errors.

Now grade the jobs

The obtained scores should not be translated into monetary terms, rather they enable you to group jobs with similar scores into non-overlapping grades, each with a pay band. The grade should have a scale and formula for setting people at the appropriate point or moving them through the band according to their measured performance attainment. This demands a well structured and objective performance appraisal system.

  • Bring close clusters of jobs into grades.

  • Determine a pay band for each grade.

  • Define points in each grade reflecting, say, performance.

What about non-wage benefits?

Where these differ for people within a band, an assessment should be made of the personal value of the benefit, for example private use of a company car, and an appropriate adjustment made to pay. This is also an opportunity to assess whether everyone can access benefits. What about part-timers when a minimum number of hours or units of output have to be worked before a bonus is paid? Look at the problems and make appropriate adjustments to be as fair as is practicable, and certainly not more beneficial to one gender. Be sure to document all pay-related decisions, and make arrangements to hear appeals from employees who are dissatisfied with their scoring or resulting pay.

So, job done?

Not really. First you should ensure that your gender-neutral pay structure remains safe by, for example, carrying out an audit every year as part of your pay review. Even if you do not propose to increase pay rates, you should identify and eliminate any unfairness that has crept in. Consider broad pay implications if you create new jobs or adjust the content of existing ones.

  • Review your pay structure annually and remove any unfairness.

  • Consider the pay implications of changes to jobs or the workforce.

Finally

This is an operation that requires great care and objectivity, so you may prefer to bring in expert help. Consultants may seem expensive, so why not arrange with a local organisation to swop HR staff for a few days to help you get the job done? And remember — if you employ 250 or more employees, you are required to make public your average female wage as a percentage of the male average, explain the gap, and state what you propose to do about it.

When there is no gap, you will have achieved equal pay. And that has to be your aim.