#InternationalEqualPayDay is observed worldwide on 18thSeptember every year. It was set up by the United Nations in 2019 to draw attention to the ongoing problem of gender pay gaps and to advocate for equal pay for work of equal value.
In the UK, the Equal Pay Law was established to address such pay gaps, but many challenges still remain.
You may remember the case in 2020 of Samir Ahmed winning her claim against the BBC for equal pay in which she claimed she was underpaid by £700,000 compared to her male counterpart.
The case of “Equal Pay” was highlighted most recently again in the outcome of the Thandi and Others vs Next Retail Ltd case(that has been ongoing for 6 years!) in which the Employment Tribunal (ET) ruled in favour of female claimants who argued that their roles in Next's retail stores were of equal value to men working in warehouses but they were not paid equally.
Next argued that the work performed by the men in warehouses required different skills and conditions compared to the retail roles held by women in their stores, justifying the pay disparity. They emphasised that warehouse work was more physically demanding and involved different responsibilities. They also argued that their “legitimate aim” was justified by their need to maintain and maximise company profits.
However, the ET found these arguments insufficient because the roles were deemed comparable in terms of overall value, effort, and decision-making, as outlined under the Equality Act 2010 resulting in a ruling that the women were entitled to the same pay.
The result of this case for Next is that they have been ordered to rectify this pay disparity by aligning wages and paying back pay which can legally go back as far as 6 years. Some legal experts estimate this could be a cost in excess of £30 Million!
With such severe consequences, this case clearly highlights the importance of Equal Pay compliance for UK businesses, including SMEs, and the need to regularly assess pay structures and ensure compliance with the Equal Pay Law.
So, what can small business owners do to ensure they do not fall foul of the Equal Pay Law?
The starting point is to be objective and conduct a pay audit. To ensure fair pay for everyone, businesses need to identify and address any pay gaps. These gaps might be related to gender, race, experience, job role, full-time or part-time status, location, or salary negotiation. Focusing on and fixing these issues can lead to a more motivated team and help your business maintain and demonstrate fair practices.
In our guide, we talk you through the key steps in how to conduct a pay audit in your business to identify if there are any concerns to be addressed.
Step 1: Define Your Objectives
Before you begin, clearly outline what you are looking to achieve with the pay audit. Some common objectives might include:
- Spotting differences in pay between genders, ethnicities, or other groups.
- Ensuring compliance with the Equal Pay legislation where men and women should get the same pay for the same work of “equal value”.
- Making employees happier and keeping them longer by fixing pay gaps.
Step 2: Gather the Data
To conduct an effective audit you will need the following information:
- Personal Information: Employees’ demographics (e.g., gender, ethnicity)
- Employment Details: Job titles, departments, length of service, and full-time or part-time status.
- Base Salary: Current base salary information for all employees.
- Additional Salary elements: Include bonuses, commissions, and other forms of salary.
You should ensure that the data you are using is up to date and is treated in the strictest confidence.
Step 3: Analyse the Data
Once you have collected all the data, use tools like Excel or specialised HR Software to help you look at:
- Overall Gaps: Identify if there are pay differences between different groups, like men and women.
- Role-Specific Gaps: Analyse pay gaps within specific job roles or departments to identify any discrepancies.
- When looking at the data you will need to remember to take into account factors such as experience, education, and job performance when analysing the pay differences. Although it is challenging, you need to try and be as objective as possible when taking these factors into account.
Step 4: Identify Causes and Develop Solutions
If you do identify any gaps, you should look at the root causes. For example, are your recruitment processes resulting in unfair pay? Are there differences in experience that can support the differentials in pay? Are there other reasons for the disparities that could be legally justified?
If the gaps cannot be legally justified, you will need to develop an action plan to address them. This might include actions such as:
- Adjusting Salaries: Address any unjustified pay gaps by adjusting salaries as needed. This could be done immediately or in the next pay review.
- Implement Fair Pay Practices: Review your policies and practices to ensure that they promote fair pay moving forward avoiding future potential issues
Step 5: Communicate Findings and Actions
When addressing any gaps or unfair practices identified, you must consider how and when you communicate this with your employees to maintain good employee relations You should also be prepared for questions such as “how long have I been underpaid?” and “will you be paying my backpay I am owed?”. Although these can be uncomfortable questions to answer, being upfront about your position and rationale will help you to build and maintain trust with your employees.
Step 6: Monitor and Review
It is a good practice to ensure that you regularly review your pay structures and update your pay policies to ensure that as your business grows and market conditions change, you are not unfairly paying your employees. Putting in place this kind of rigour, not only helps to promote a workplace culture that values diversity and inclusion, it will help you to avoid a Next situation and having to backpay your employees for up to six years!
Conclusion
Doing a pay audit might not be high on your list of priorities. It does requires a lot of time and effort, but it is an important activity in making your workplace fair and inclusive. By following these steps, you can find, and fix pay gaps early, avoiding any potential costly ET claims. And of course, if you haven’t got the time or the skills to do this, why not ask our team for some help.
Have you conducted a pay audit in your business? Share your experiences or questions with us. Give us a call at +44 (0)1233 627 275 or email us at hello@dakotablueconsulting.com.