Equal pay reviews: pay practices - some questions and answers
Section 6 of the Personnel Today Management Resources one stop guide on equal pay reviews. Other sections.
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Find out more about the ways in which pay practices may cause or perpetuate inequality Decide whether you need to audit your
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Q. We use performance-related pay to reward employees on both an individual and team basis, so we do sometimes pay people differently for doing equal work. How can we prove we are not discriminating?
A. All performance pay systems rely to some degree on subjectivity, so there is a higher risk of possible discrimination because it can creep in at the level of managerial discretion. If an equal pay claim arises, the burden will be on you to prove that the differences in pay between the woman and man, or men, in question had nothing to do with their sex. This would have to be by reference to objective criteria in the appraisal system that determines pay.
It is also important to be aware of how the system is impacting on men and women in practice so that indirect discrimination does not occur. If the performance criteria you rely on to decide pay include some that are easier for men than for women to meet, this could lead to a claim that the system is indirectly discriminatory. In such a case, you would have to prove that the criteria in question were necessary and appropriate for meeting a genuine business need.
Ensure that managers are not relying on potentially discriminatory judgements when deciding on performance payments, such as how often different individuals stay late in the office or how much weekend working they put in. Keep room for managerial discretion to a minimum. Criteria should be clearly defined and equally achievable for both men and women, and managers should be trained in how to assess people while avoiding discrimination.
It is vital to document all performance-pay decisions thoroughly at the time they are made, so that if you do get hit with an equal pay claim, you can prove non-discriminatory reasons for a difference in men and women's pay.
Since transparency is a legal requirement in equal pay, it is best practice to ensure that employees are aware of how their pay package is arrived at, and how it can be broken down into the various elements. This will increase perceptions of fairness and hopefully reduce the risk of claims.
Q. We have recently received an equal pay claim from a woman who is comparing herself with two men in her pay grade. While she has similar performance ratings as the men, the men have worked here longer and so have progressed higher in the grade and earn a couple of thousand pounds more a year. Surely it is justifiable to reward them for their longer service?
A. Pay progression can be a problem if it becomes harder for women than men to move up the pay scale. For example, if workers move up as a result of achieving an agreed target or level of competence or skill, this may be discriminatory if it is in practice harder for women to achieve these. Length of service can pose problems because in general women tend to have more breaks in their career than men.
A tribunal will not accept length of service as a justification for unequal pay if the woman's experience means she is able to carry out the job just as well as the longer-serving men.
Other problems to be aware of in relation to pay progression include: women clustering near the top of a pay scale, which may point to lack of equal treatment in promotion; how women on career breaks and maternity leave are treated - will their breaks mean slower progression than men?; very broad pay bands, and slow progression which will more easily give rise to unequal pay claims.
Q. We stopped providing company cars a year or two ago because we decided they were no longer necessary or appropriate as a way of attracting the people we need. However, now a female employee has challenged us on equal pay because she does not get a company car (she came in after we changed our policy) while male comparators in her grade do. Her package contains other elements that we believe adequately compensate for this. Has she got a leg to stand on?
A. Providing different levels of benefits to different groups of staff can be risky from an equal pay point of view. It is not sufficient in defending an equal pay claim to say that the woman's total package is comparable with the men's - under the Equal Pay Act 1970, she is entitled to have each element of the package considered separately.
As long as your business reasons for withdrawing the company car when you did are well documented, you should have good grounds for defending the claim on the basis that there are objective reasons for the difference other than sex discrimination.
However, in general, you need to know who is receiving what benefits and the rationale for this. You should also make this information clear to employees on the basis of having a transparent pay system (a legal requirement under equal pay law).
You need to consider the impact of your policies on the workforce, too - are the proportions of men and women receiving each benefit equal? If not, why not? Where benefits are conferred on the basis of status, monitor whether there are more men with the requisite status than women; likewise, if length of service is a criterion.
Can the giving of certain benefits still be objectively justified? If not, you may need to consider withdrawing or replacing them, and at the same time carefully monitor the effects of doing so on female and male employees.
Also, ensure that access to benefits does not have an unequal impact on women and men, especially where part-timers are involved, as limited access could lead to indirect discrimination.
Q. We have become aware from analysing our bonus system that our male employees are receiving higher payments on average than our female staff. While we award bonuses on objective criteria, we are concerned following recent high-profile City cases that our female employees might use this as the basis for an equal pay claim. What should we do?
A. You need to find out why this is happening to check the scheme is not discriminatory. First look at who gets a bonus and how the scheme operates. If there are individuals or groups excluded, such as part-time or administrative staff, this could be discriminatory if more women than men work in these groups, unless there are objective business reasons for excluding them.
If there is an element of discretion in awarding bonuses, ensure that managerial practices are not discriminating against women - for example, by putting more weight on traditionally more male attributes compared to those associated with female work.
The reasons for awarding bonuses and deciding the amount awarded should be as objective as possible, and applied fairly.
The criteria should be clearly defined, specific, measurable, achievable and realistic; they should be equally achievable for all teams and individuals, and there should be a consistent approach to applying the criteria across the organisation, backed up by training for managers in how equality issues affect bonus pay.
Managers should document their decisions thoroughly to allow the scheme to be monitored, and so any challenge in a tribunal can be defended.
The system should be as transparent as possible, so that staff know how and on what basis bonuses are awarded.
Q. We run a competency-based pay system, where progression up the pay scale depends on the achievement of certain competencies. These are assessed by line managers. Now one of our female staff is disputing her pay on the basis that one of her male friends has received more favourable ratings from his manager and is paid £1,000 more than her, even though they have the same qualifications and experience. What is the best way of dealing with this?
A. It could be that your competency-based pay system is discriminatory, if the criteria or objectives that you reward favour behaviours and styles of working perceived to be male more than those perceived to be female.
For example, if your criteria concentrate more on assertiveness or decision-making skills, this could allow men to score more highly than those based on traditionally female skills, such as co-operation and nurturing. A non-discriminatory competency pay system will incorporate a good balance of skills and behaviours that favour both men and women; and will show that these can be objectively justified as essential attributes for the job in question.
Q. A few years ago, we appointed two new IT managers to the same grade. The male recruit talked up his previous salary while the woman, who was returning from a career break, undersold herself and ended up on £1,500 less. Now she is threatening an equal pay claim. Were we at fault?
A. Best practice guidance says that you should establish objective criteria for setting salaries on appointment, such as skills, experience and market rates, rather than relying on people's assertions about previous salary, and make sure these are understood and applied across the board.
By relying on previous salaries, you could import pay inequity from another organisation. Also, women may be more reticent in making salary demands, particularly if they have gaps in their CV.
Those making decisions on starting salary should be trained in equal pay issues, and should document their decisions carefully to provide evidence of objectivity.
Other issues to bear in mind when considering starting salaries:
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Section 1: The time is nigh for equal
pay
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