Before looking at the equal pay review process, this section consid- ers how equal pay reviews are instrumental in moving the equity agenda forwards, and the benefits that organizations can expect from conducting them.
Despite UK equal pay legislation of over 30 years’ standing, an EOC equal pay taskforce, reporting in 2001, found that there was still an 18 per cent difference between hourly pay rates of full-time male and female employees. The difference was even more pro- nounced for part-time employees. There are a number of reasons for this, including different career paths for men and women.
However, the taskforce estimated that up to half the difference was due to pay discrimination.
Whether or not this figure is accurate, the taskforce also found that there was a distinct lack of evidence to support employers’
commonly held view that there was no gender gap in their own organization. This lack of evidence was actually due to the fact that very few organizations had taken steps to investigate the issue, with many of them being unaware of the Code of Practice on Equal Payand its encouragement to conduct reviews, first published in 1997 (sub- sequently updated in 2003).
The taskforce therefore recommended that organizations should be legally obliged to carry out regular equal pay reviews. As a result of the Kingsmill review,4 set up subsequently to look at non-statutory ways to encourage equality, the government came down in favour of a voluntary approach, while requiring government departments and agencies to conduct reviews by April 2003. The EOC also let it be known that they would monitor whether voluntary reviews were indeed taking place – making it clear that they would lobby hard for compulsory reviews if organizations were slow to respond on a vol- untary basis. Trade unions have also been instrumental in keeping the issue at the forefront of the pay agenda.
Purpose
The purpose of equal pay reviews is to:
ឣ establish whether any gender-related pay inequities have arisen;
ឣ analyse the nature of any inequities and diagnose the cause(s);
ឣ determine what action is required to deal with any inequities that are revealed.
In doing so they should give organizations confidence about whether they are meeting their legal obligations with respect to equal pay for equal work. There is also the broader benefit from being seen to apply a fair and equitable reward system, and the pos- itive impact this has on employee perceptions and satisfaction.
With effect from 2003, equal pay reviews will also support organ- izations’ ability to respond to employee requests for information about their pay practices in accordance with the 2002 Employment Act. This provides for a statutory equal pay questionnaire to help individuals who believe that they may not have received equal pay to obtain information from their employer on whether this is the case, and why, before deciding whether to submit an equal pay claim.
Despite the resurgence of publicity about equal pay since the late 1990s, the E-Reward research published in early 2003 revealed that many organizations remained unfamiliar with the purpose and benefits of equal pay reviews. There was also a lack of understand- ing about the possible sources of pay inequality.
However, some organizations openly admitted that their reward practices may not be robust owing to internal management processes:
‘The company is privately owned and what the board says goes.’
Other respondents described a range of practices to explain where they considered their defence to equal pay claims rested: for exam- ple, the following two comments describe a market-based approach:
‘The organizational structure at present is pretty simple…
There is therefore limited exposure to “equal value” as the roles are benchmarked against their own industry norms.’
‘[we] will use salary survey methodology as a proxy. My understanding is this has already been used successfully to defend an equal pay claim.’
Even though market differentials are commonly cited as a potential justification for pay differentials, there is no such thing as an auto- matic market defence to an equal pay claim. As with all equal pay claims, any market-based defence will be looked at on its merits.
Table 5.1 gives an indication of the kind of tests that might be applied to such a market-based defence.
Other comments describe how organizations seek to achieve fair- ness through having a robust approach to allocating jobs to a grade structure:
‘Grades are evaluated and “levelled” by a committee of the senior management team.’
However, no matter how sound the process is for allocating jobs to grades, one of the biggest challenges to organizations is to pay fairly
within grades. As described in Chapter 4, many organizations have responded to the equal pay challenge by maintaining or introduc- ing analytical job evaluation schemes, on the assumption that if jobs are evaluated into grades using an analytical process, there is a robust defence to an equal pay claim. In part this is true; however, one of the purposes of equal pay reviews is to push the boundaries of analysis and action further – by requiring organizations to address actual pay gaps, even where the gaps occur within a single grade.