EQUAL PAY AUDIT MAKES REAL BUSINESS SENSE (If conducted from a Sound Commercial Perspective)

EQUAL PAY AUDIT MAKES REAL BUSINESS SENSE
(If conducted from a Sound Commercial Perspective)

http://www.payauditor.co.uk

A headline in “Personnel Today” 15 June 2012 stated:
“Compulsory Pay Audits required for firms that lose Equal Pay Claims”
The last decade saw a huge increase in the pace and size of equal pay claims. The settlement - after eight years - of Wilson and others vs Cumbria Acute NHS Trust was reputed to cost the NHS £300 million. And Local Authorities faced a rash of claims affecting large numbers of staff - costing us - the taxpayer - £100’s millions. Many of these cases are now settled. However there are, proportionally an increasing number of private sector employers who are seeing claims - often from quite senior employees - both female and male, for substantial sums.
The latest Government statement on the subject, in response to the Modern Workplaces consultation, is :
"An Employment Tribunal which finds that an employer has discriminated on grounds of sex in contractual or non-contractual pay will be obliged to order the employer to conduct a pay audit in cases where continuing discrimination is likely…..An audit would not be ordered if an audit has been completed in the last three years, the employer has transparent pay practices or the employer can show a good reason why it would not be useful."
EHRC research indicates that a small proportion of private sector organisations have undertaken such an Audit -many of the remainder citing that "they know they have equal pay." The evidence suggests otherwise - and it is only when they are confronted with an 'Equal Pay Questionnaire' from someone making a claim at an Employment Tribunal that many employers understand the seriousness of the situation and the potentially huge costs they face. Such a questionnaire can be served by any employee who considers that they are doing 'like work', 'work rated as equivalent' or 'work of equal value', to work undertaken by a member of the opposite sex who is paid more.

There are many misunderstandings surrounding equal pay. Firstly, many treat the national 'pay gap' between men and women, which the EHRC quotes at c.16%, as a base against which they can measure their performance in the equal pay stakes. In fact this statistic includes many components and is not based just on job for job comparisons. Any disparity of 5% or more in pay between jobs of similar worth should be rectified or be explained by application of a 'genuine material factor' test.

A second misconception is that jobs that are compared for equal value need to be of similar content or type. This is most definitely not the case as witnessed by Classroom Assistants being compared in terms of overall job worth, with Street Lighting Technicians (Lancashire County Council).

Another fallacy is that - if an employer has a job evaluation scheme in place this provides an automatic defence against a successful equal pay claim. Certainly, if it can be proved that the scheme was designed and is applied in a gender bias-free way (usually implying workforce involvement), and if it (and underpinning job descriptions) are both analytical and up-to-date, then the foundations for a successful defence are there. Unfortunately few job evaluation schemes are satisfactorily maintained and an Employment Tribunal is likely to be made aware of these shortcomings in the event of a claim reaching that stage.

Many who face equal pay claims therefore find themselves unprepared and (often) unable to defend against them. Inevitably such employers scour the list of potential 'material factor defences' for a way out - examples include looking for differences in performance, skill or (necessary) experience- but of course, objective and documentary evidence of such differences has to be presented.

Pay market forces and the resulting needs to pay higher rates to attract the required calibre of employee is another oft-quoted material reason for differences - but again examples of difficulty in recruitment and actual hard evidence of market pay rates have to be available.

While help can be obtained to defend against any claim, it makes greater business sense to have the systems in place that avoid the likelihood of a claim arising in the first place. The spin-off benefits of having pay structures and progression within them in good order are immense and extend far beyond equal pay issues. So - although an 'Equal Pay Review' using the review kit available from the EHRC (http://www.equalityhumanrights.com/) helps employers address equality in pay, it makes a lot of sense to conduct a broader (yet more streamlined) Pay Audit, to examine broader diversity concerns surrounding e.g. disability, race and age, as well as gender . Of equal importance such an audit should pay special attention to :

1. Business competitiveness and sustainability issues related to the employment market and matching pay levels.

2. Recruitment and progression arrangements, including incentives to attract, retain and motivate employees.

3. Performance issues and how best to reward improvement and development.

4. The wider reward package including benefits, terms and conditions.

Such an audit provides the foundations for an action plan to address fairness, equality and competitiveness in pay, and - if correctly conducted, should lead the way to avoidance of equal pay claims and costly tribunals, while having the added benefits of easing recruitment and increasing motivation and retention.
A free “ Equal Pay Healthcheck” is available at :
http://www.payauditor.co.uk/info/Equal-Pay-Review-Healthcheck/436

© Derek Burn 2012 Senior Partner HR Perform - Pay Auditor
(Author of 'Pay Audit - Equal Pay Reviews & Beyond'
and
ACAS designated Independent Expert in Equal Pay)
www.payauditor.co.uk
Tel : 01952 606690 ~~ Mob : 07768 731673
More information is available from :
derek.burn@payauditor.co.uk

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Derek Burn
17.06.2012