Peter Brown
Paydata.co.uk Blog, January 14th 2011

The interim report on Fair Pay by Will Hutton was published last month.  Initial interest was mostly focussed on the potential use of a pay multiple or maximum pay ratio.  It was easy to overlook some interesting views on what “fairness” really means in the context of pay.

Hutton’s starting point is clear.  He notes that pay in the UK is unevenly distributed.  He lays out evidence that “unfairness” in senior executive pay in increasing.  The gap between the top one per cent and the rest of the population has been widening steadily over the last decade.  He states, “Substantial and growing pay inequality poses a serious challenge to society and Government.” 

However, what does “fairness” mean?  The standard dictionary definition is something along the lines of “the condition of being just or impartial”.  Clearly, it can have several dimensions.

Hutton argues that, in terms of pay, fairness should not be just about equality of outcomes.  He feels that people should get their “due desert” according to their differing contributions.  He also argues that fairness inherently requires fair processes to operate.   Fair pay must therefore be proportional to individuals’ contributions and be determined fairly.

Hutton goes on to say that, the value of individuals’ contributions should be reflective of both the size of job and the individual’s contribution at work.

Hutton is very definite when it comes to the benefits of achieving fairness in reward. “As well as being morally desirable,” he argues, “Fair pay brings instrumental benefits to organisations, by supporting greater employee engagement and morale, and to society as a whole by helping to avoid inequality traps and assisting social mobility and incentives to productive work.”

The fair pay debate has well and truly been kicked off.  Watch this space…