Equal Pay Auditing - Guidance

Transcription

1 Equal Pay Auditing - Guidance Equal pay auditing is a subject that requires some background knowledge before you can consider whether it is an option for you. This guide is aimed at developing HR practitioners, containing the basics and highlighting good information available elsewhere.

2 Contents No. Content Page 1. Introduction 3 2. What is an equal pay audit 5 3. Where do I start 6 4. What data do I need 7 5. Genuine material factor defences 8 6. Using the data 9 7. Other sources of information 10 Co-operatives UK Limited

3 Introduction This guidance is aimed at HR professionals considering whether or not undertaking an equal pay audit is right for their organisation. Achieving equal pay for equal work is a good ambition for any organisation, and is part of a package of measures that can be deployed to ensure that you get the most out of your human resources through seeking equality of opportunity and reward. It will help improve your organisation s profile and value to employees as a good place to work. It could improve your attraction and retention of good employees and therefore reduce your recruitment expenditure. Additionally, an equal pay audit might contribute to identifying problem areas within organisations with a gender pay gap; it will certainly be a valuable measure to deploy to address any gender pay gap and will be worthy of mention in your gender pay gap report. The business case for equal pay auditing is therefore very strong. There is presently no general legal requirement in the UK for employers to undertake an equal pay audit. Whether or not you undertake one is entirely up to you, unless you face a specific order from an employment tribunal. Since 1 October 2014 the employment tribunals have had the power to order an employer to undertake an equal pay audit and to make the results public if they lose an equal pay claim in an employment tribunal. You could be fined 5,000 at each hearing if you are found to have unreasonably failed to comply with such an order. While there is no general legal requirement to undertake an audit, there is an obligation not to breach the equality clause implied into all contracts of employment and to pay equally for some roles. This guide helps you determine which. This reference guide explains how you should go about conducting an equal pay audit and signposts other available information. The guide isn t intended to be and should not be acted upon as legal advice. Co-operatives UK recommend that specific legal advice is taken covering the individual circumstances of any case. Co-operatives UK members can take advice from us; see our support services and contact details on the following page. Co-operatives UK Limited

4 The Co-operatives UK HR Package - delivering HR expertise for your co-operative Because people are at the heart of a successful co-operative business, Cooperatives UK offers a specialist HR service designed specifically for co-operatives. We offer: Co-operative HR expertise - in HR law, policy, reward and benefits A high quality service - we're not for profit which means all our income goes into developing market leading services for subscribers Value for money - we deliver HR services to subscribers with a cumulative total of over 100,000 employees, a scale which produces both high-quality and high-value for our subscribers To find out more about the Co-operatives UK HR Package, please visit or contact: Gillian Buxton, HR Reward and Policy Manager, gillian.buxton@uk.coop, Tim Knowles, Head of HR Services tim.knowles@uk.coop Kate Fielding, HR Reward and Policy Manager kate.fielding@uk.coop Co-operatives UK Limited

5 What is an equal pay audit? Equal pay audit is a commonly used term for an examination of whether or not your organisation is rewarding people equally for doing: the same or broadly similar work work which is different but has been rated as equivalently demanding work which is different but is nevertheless equal in terms of the demands by reference to factors such as effort, skill and decision-making The Equality and Human Rights Commission publish further guidance on what equal pay is. The only statutory definition of an equal pay audit is an audit designed to identify action to be taken to avoid equal pay breaches occurring or continuing (Section 139A of the Equality Act 2010). An equal pay audit will seek to identify relevant differences in reward which you can then review to determine whether or not there is a potential equal pay breach. Not all differences in pay will amount to an equal pay breach. There may be a genuine material factor which explains the difference in such a way as to provide a defence to an equal pay claim. More on this later in the guide. Undertaking an equal pay audit will help you to identify, articulate and record those genuine material factors and could play an important part in defending an equal pay claim. An inherent part of an equal pay audit is enabling you to develop an action plan for improvement where you identify a problem through your audit. Co-operatives UK Limited

6 Where do I start? Before deciding whether or not undertaking an equal pay audit is right for your organisation, consider what you will need to do to make it worthwhile. A valuable equal pay audit is an audit which is robust and objective, and produces results which are reliable. As you will have gathered from the above, to undertake an equal pay audit you will need to determine where people are doing: the same or broadly similar work work which is different but has been rated as equivalently demanding work which is different but is nevertheless equal in terms of the demands by reference to factors such as effort, skill and decision-making This is a relatively easy task where you have people doing exactly the same work. However, if like most organisations you have different people doing different jobs, you will need to determine those which are equal in terms of the demands by reference to factors such as effort, skill and decision-making. To do that you might use your grading system, comparing jobs which are different but are in the same grade. If your grading system uses broad bands, or you doubt that the grading system is objective and robust, it is likely to prove unhelpful to your audit. In those cases, you will need to make an assessment of the value of work. You could try that yourself, but to be independent and objective it is best to seek the support of another independent organisation which is a specialist in valuing jobs. Co-operatives UK s members can access support through Co-operatives UK s HR Package. We can help you to develop a grading system and place jobs that are similar in terms of effort, skill and decision-making into that grading system. Putting it bluntly, there s no point in considering an equal pay audit unless all the people you employ do the same work, or you have a robust grading system. Co-operatives UK Limited

7 What data do I need? Where there is equal work, the Equality Act implies an equality clause automatically into the contract of employment. Equal pay cases have determined that a claim can be made on a term by term basis. This means that tribunals do not consider total reward, but will break down individual components of the pay package and consider whether or not the equality clause has been breached. This means you should consider not only basic pay but also additional payments, whatever they may be. People earning similar basic pay might receive different additional payments for all sorts of reasons and just because your audit results in a difference being identified does not mean that the equality clause has been breached. There may be genuine material factors for the difference. The only way to be sure is to undertake an analysis of basic pay and additional payments in order that you can consider whether or not a payment might be paid because of a genuine material factor which means that the equality clause is not broken. Try to ensure you are comparing like for like, for example by comparing full-time equivalent payments for part-time employees, and, in terms of variable payments, use a monthly, quarterly or annual total, again on a full time equivalent basis. The Equality and Human Rights Commission publishes guidance on the information needed and the tools available. Keep a good record of how you generated the data so you can ensure that in future you are generating data on a like for like basis. Co-operatives UK Limited

8 Genuine Material Factor Defence If your data analysis reveals a difference in pay or other contractual terms for work that is considered to be equal work, the equality clause will take effect unless the employer can prove that the difference is due to a material factor which does not itself discriminate against the employee either directly or indirectly because of the employee s sex. The employer must identify the factor(s) and prove: it is the real reason for the difference in pay and not a sham or pretence; it is causative of the difference in pay; it is material: that is, significant and relevant; and it does not involve direct or indirect sex discrimination. Personal differences between the workers concerned, such as skills, experience and qualifications, may be material factors. Other examples are geographical differences, for example London weighting, unsocial hours, rotating shifts and night working. Whether the defence is made out will depend on the specific circumstances in each case and Co-operatives UK recommend that legal advice is obtained to determine whether there is a valid material factor defence Co-operatives UK Limited

9 Using the data You might find a great number of gaps in your data. If this is the case, consider how you will approach dealing with the issue. It often helps to consider the largest areas of concern first, whether that is largest from a perspective of the number of people potentially within scope of the problem, or where you have the largest gaps in pay even though there are few people within the scope of the problem. Broadly you should aim to use your results to: Generate a report to engage with relevant managers Undertake an analysis and identify particular risk areas Develop an action plan. Consider whether or not there are problems being generated by reason of not having clear guidance and policy statements about your approach to pay. You will inevitably begin to develop differences in pay and reward where pay and reward decisions are delegated to different people. Having a clear policy and setting the parameters of delegated pay authority will help you to ensure that pay decisions are fair and equal, and that any proposed differences are considered from an equal pay perspective to ensure that they are due to genuine material factors. Keep the data you produce, use it as a reference point in future to compare how successful any measures you have deployed to reduce the problem have been. Then ensure that you re-run the data on a like for like basis at regular periodic intervals, such as at the same time each year or every three years. If you are not sure how to address the gaps that you have identified, or whether or not you have a sufficient explanation for any gaps, take advice. Co-operatives UK s members can access such support through Co-operatives UK s HR Package. We can help through our team of lawyers and reward professionals. The Equality and Human Rights Commission produce guidance on producing an action plan. Co-operatives UK Limited

10 Other sources of assistance Equality and Human Rights Commission: ACAS XpertHR (subscription service Co-operatives UK HR Package subscribers receive free access to XpertHR) Co-operatives UK Limited