Why do you need to carry out an equal pay audit?

Equal pay has been an important consideration for businesses in the UK since the initial Equal Pay Act was introduced in 1970. This first act concentrated on prohibiting differences in pay between men and women – particularly when doing equal or similar work – and this has been extended to cover different groups of employees, such as gender, ethnicity, and age.

The Equality Act 2010

This act was updated by The Equality Act 2010, which consolidated the advances made in society since 1970. The main premise behind the updated law was to harmonise the definition of discrimination and how it affected certain sectors of society and to strengthen the legal recourse of those affected. It also implemented a responsibility on organisations to act with greater intention to promote equality rather than just be reactive.

The 2010 Equality Act set out clear characteristics for equal pay. These are gender (sex), gender reassignment, pregnancy and maternity, marriage/civil partnerships, sexual orientation, race, disability, religion or belief, and age.

Role of the Equality and Human Rights Commission

In the UK, adherence to the tenets of equal pay is overseen by The Equality and Human Rights Commission (EHRC). The commission’s principal goals are to:

• Eliminate discrimination
• Reduce inequality
• Protect human rights
• Build good relations

Protecting against equal pay claim payouts

Despite the implementation of the first 1970 Act, there are still about 29,000 claims a year for equal pay, arising from more than 368,000 complaints. Even with the best of intentions, companies can get caught by legal constructs exacerbated by the no-win no-fee legal landscape in which ignorance is no defence.

High-profile equal pay cases that are currently ongoing refer to UK supermarkets that have been paying their male shopworkers sometimes up to £3 an hour more than their female counterparts. Legal proceedings are still ongoing, but the results could cost these grocery chains up to an estimated £8 billion in back pay claims.

Equal Pay Audit ‘Under Legal Privilege’

An equal pay audit enables organisations to measure the overall pay differences between groups of employees based on grounds such as gender, ethnicity and age. It should also enable you to identify what is driving up the pay differences.

Carrying out an equal pay audit ‘under legal privilege’ provides some protection whilst you decide how to tackle any inequality issues, allowing employers to resist the disclosure of confidential and sensitive material in the event that an employee brings a claim against you.

If your company needs help in restructuring its bonus and commission rewards strategy in line with the changing trends of your industry, Paydata can work with you to create a long-term approach. Contact Paydata for more details about our Bonus and Commission Design service.

What is the definition of equal pay in the workplace?

During an equal pay audit, we consider the following three areas when comparing job functions and rates of pay:

1. Like work: we consider the level of the work done, the job titles and how (if) they relate to responsibilities and duties. The work may is not the same, but broadly similar.
2. Work rated as equivalent: this is a much more structured approach to pay levels and pay grades, including different levels of responsibilities, departments, and reporting.
3. Work of equal value: in larger organisations, the disparity and diversity of job roles and job functions within the different departments can create a potentially haphazard approach to structuring suitable pay schemes over time. As part of an equal pay audit, you need to first clarify your pay schemes using current data and modelling services.

Will an equal pay audit improve employee relations?

There are a number of reasons why being on top of your responsibilities around equal pay is important to you as an organisation.

• The potential legal and financial outlay could be crippling if someone were to make a claim against you, which was subsequently upheld. A successful claim could also set a precedent and start a tsunami of like-for-like claims from other employees in similar positions.
• It seriously impacts on employee relations and could lead to a surge in resignations from those who no longer feel that their workplace is treating them fairly.
• You will gain a poor reputation as an employee and have difficulty attracting good, new talent.
• It will negatively impact your public image, and you will need to work hard to regain any PR gains and reverse the damage to your brand values.

In a world in which the Corporate Social Responsibility of an organisation is fast becoming a measure of brand appeal and can play a significant role in its success, that responsibility must start ‘at home’ by ensuring that a workplace is a place of equal respect and recognition across all departments.

Paydata has the systems, knowledge and resources in place to carry out a thorough investigation into your pay schemes and their adherence to equal pay. Our equal pay audit will highlight any potential gaps and advise how best to address them in accordance with the law.

If you would like to talk to Paydata about implementing an equal pay audit, contact us now to schedule a call.