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www.menzieslaw.co.uk

Gender Pay Gap and Equal PayManaging your risks in the new era

www.menzieslaw.co.uk0117 325 0526@menzieslaw

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ContentsEqual pay bites in the private sector 4

Our approach 5

Gender Pay Gap v. Equal Pay 6

Causes of the gender pay gap 7

The Gender Pay Gap challenge 10

What exactly do we mean by ‘equal pay’? 15

Equal with who? 16

How far can you defend unequal pay? 18

Beware the evaporating defence! 20

Do you have gender ghettos? 22

The dangers of pay protection 24

Time limits and back pay 26

The Gender Pay Gap Reporting Duty 28

Why you should act now 30

The key steps 32

Have an audit even if you think you don’t need one 34

Conclusion 36

Pay & Reward Services from Menzies Law 38

Gender Pay Gap and Equal PayManaging your risks in the new era With the advent of the requirement for larger employers to publish their gender pay gaps annually, a new era in pay equality has begun. The publication requirement and subsequent media interest has led to an explosion in an awareness of equal pay rights amongst employees and a steep upturn in equal pay claims. At the same time, the related theme of gender and pay has become mainstream and is likely to now feature far more prominently for both public and private sector employers.

HR professionals need to become experts on the Gender Pay Gap and equal pay, and fast. You need to understand the factors causing the gap to persist, even after four decades of equal pay legislation. You need to understand the likely equal pay risks in your organisation, how to spot them and how to mitigate them. And if your organisation has 250 or more employees you need to calculate your own gender pay gap figures, prepare to publish them and decide how best to reduce your organisation’s gap before the avalanche of claims begin.

In this guide, our Pay & Reward team provide the key information you need to understand the gender pay gap, equal pay risks and how to start tackling them. We explain why there is no time to be wasted in carrying out an equal pay audit, and why you should do so even if you don’t think you need one.

October 2017

© Menzies Law 2017

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Equal pay bites in the private sectorThe Equal Pay Act was 47 years old in 2017. Surely we aren’t still deliberately paying women less than men for the same work? So why is it the year’s big employment law news story?Well, there are a few reasons. The last two decades have seen mass claims against public sector employers, in which legal principles have been developed to take the right to equal pay much further than was envisaged in the past. Now, many of the public sector actions are running their course (with other public sector bodies having got their houses in order) and claimant lawyers are looking to target private sector employers who have traditionally considered themselves relatively safe from this type of action.

Other developments have meant that the sorts of claims that might previously not have got off the ground are now either easier or more financially viable. This includes legal changes about limitation periods for bringing claims, as well as a movement (albeit a slow one) towards greater pay transparency.

With Employment Tribunal fees making individual employment claims more expensive to bring, there is a greater incentive than ever for lawyers to promote group claims, where the costs can be spread between a large number of individuals. Good news for the individuals; not so good for the employer.

But the key reason why equal pay is high on the agenda is that its sibling, the Gender Pay Gap, is now a priority of the Government Equalities Office. David Cameron personally launched the introduction of mandatory gender pay gap reporting and it was clear that he personally felt strongly about it; and Theresa May’s government has continued to treat it as a key priority for Government employment policy.

We call equal pay and the gender pay gap ‘siblings’ because they are linked and need to be understood together while at the same time (as many siblings insist!) they are separate, have different causes and solutions, and should not be confused.

Our approachIn this guide we will:

• Explain the differences between the gender pay gap and equal pay

• Explore the causes of the gender pay gap

• Define the gender pay gap challenge

• Explain the key aspects of equal pay that every HR professional and senior executive needs to know

• Explain the gender pay gap reporting duty

• Describe how to identify your gender pay gap

• Explain why having a good pay structure or a job evaluation process is not sufficient on its own.

...Theresa May’s government has continued to treat gender pay gap reporting as a key priority for Government employment policy.

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When seeking to understand gender equality in pay, it is important to appreciate the difference between what we refer to as the “gender pay gap” and what we mean by “equal pay”. Although related, they are different. Equal pay (for lawyers, HR professionals and academics) is the statutory right of men and women to be paid the same amount of pay for doing work of equal value to each other. A lack of equal pay will provide the basis for a successful Employment Tribunal claim unless the employer can show it has a valid defence. We will explore all this in detail in a few pages’ time. Essentially, equal pay is a type of sex discrimination. Sometimes it is caused consciously; often it is more a case of unconscious bias by management.

The gender pay gap is a different creature. As you might expect, it is what we call the difference between female and male average earnings, either within a particular employer or nationally. It is much more broad than the issue of equal pay, and describes the fact that average women’s pay has stubbornly remained significantly lower than average men’s pay for decades.

As we will outline in a moment, the gender pay gap is caused by a variety of factors. A key point to emphasise is that only a small part of the UK’s gender pay gap is caused by the sort of conscious and unconscious sex discrimination in pay decisions that is covered by equal pay law.

Since the gender pay gap - both nationally and within any organisation - is simply the difference between the average male wage and the average female wage, the mere fact of having a gender pay gap does not mean that your organisation can be sued for equal pay. You may be paying everyone, male and female, perfectly fair wages for their particular roles, but simply have more men in the higher paid roles and more women in the lower paid roles. When this is averaged out, you can sometimes end up with a significant gender pay gap but without any notable legal risks under equal pay law.

Equally, an employer with a gender pay gap of zero might potentially have some sizeable equal pay claims against it, due to some of its female employees being paid less for work of equal value compared with male colleagues; but the maths involved in producing a simple male:female wage average across the business might hide that fact.

So every large employer will need to appreciate the differences between equal pay and the gender pay gap as they become more sophisticated in dealing with the gender issues surrounding pay and pay decision in their organisation.

Gender Pay Gap v. Equal PayThere are a variety of theories and explanations for why we have gender pay gaps, and they sometimes differ according to which occupation, sector or location you’re looking at. They also change over time, as jobs and society (particularly the attitude to women in the workplace and responsibilities in a family for childcare) change. We will explore the main causes that are generally agreed to be at play nowadays.

EducationStudies show that girls tend to do better at GCSE and A-level but less well at degree level. Girls are less likely than boys to take A-levels or higher qualifications in STEM (science, technology, engineering and maths) subjects. Even when women have obtained STEM qualifications, they are much less likely than men to work in a relevant industry which allows them to fully capitalise on such qualifications. Since better qualifications tend to higher paid jobs, educational achievement is a factor.

Work experienceAlthough women’s overall levels of educational qualifications have increased significantly in recent decades, to match men in many cases, one key remaining difference between the genders that partly explains the continuing gender pay gap is the amount of time and experience gained in the workplace. Nowadays

women spend a great deal more time in paid work than they did in previous times, but still not as much as men on average, particularly at key points in their careers. Maternity leave is obviously a major reason, and its impact is particularly high given that maternity leave tends to be most often taken at a point when potential career development is often reaching its peak for many workers – in their late 20’s, 30’s and nowadays early 40’s – when the first opportunities to move into management and leadership positions often become available.

Causes of the gender pay gap

...average women’s pay has stubbornly remained significantly lower than average men’s pay for decades.

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£26.97

£33.05

Senior professionals of educational establishments

18.4%

£16.24

£17.61

Journalists, newspaper

and periodical editors

7.8%

The gender pay gap is typically higher for occupations where women are underrepresented, for example chief executives and senior officials.

£35.59

£49.33

Chief executives and senior officials

27.8%

£23.29

£25.99

Legal professionals

10.4%

£21.56

£24.46

Managers and professionals

in health services and public health

11.9%

£11.28

£13.94

Science, engineering & production technicians

19.1%

£10.87

£13.80

Managers and directors in retail and wholesale

21.2%

£11.42

£14.83

Construction and building

trade supervisors

And when women on maternity leave return to work, the vast majority do so on a part-time basis, which is not only often less well paid (see below) but also continues to widen the gap between male and female colleagues’ overall number of hours of experience at work. This factor of the amount of overall time spent at work during a career is a significant player in the gender pay gap.

OccupationThere are more men than women in the higher paying occupations. While women are now slightly the majority in some areas such as medicine and law, men still dominate the higher paid jobs overall. For example, they account for 69% of the IT & Telecoms sector, 74% of the jobs in energy supply, 77% of architects and 91% of engineers. Women are disproportionately employed in poorly paid roles such as cleaning, catering, and caring roles. 93% of secretaries are female; as are 94% of those who work in childcare and related personal services.

Occupational segregationThis is something that we will look at in more detail when we consider equal pay risks (see page 22). In summary, in some workplaces and industries women and men tend to collect in different roles (probably driven, to a significant extent, by cultural views on what is “men’s work” and what is “women’s work”. Hence, in a typical local authority, their refuse collectors will often be entirely male while their school cooks will often be entirely female. The common ‘dinner ladies/dustmen’ role segregation is a major cause of the gender pay gap when (as is often the case) the workers in the male-dominated roles negotiate higher pay and better bonuses year on year than for the female-dominated roles.

Part-time workMostly as a result of family and domestic duties, and societal attitudes about who should be responsible for

Source: Office of National Statistics, Annual Survey of Hours and Earnings, 2016 * Excludes overtime

£12.82 £22.17 £8.03 £16.61 £9.37

£14.16 £31.46 £7.90 £16.58 £10.54

Profession (Full-time

employees)

UK average Financial instiution

managers and directors

Hairdressers, beauticians and related

services

Nurses Secretarial and related occupations

them, women account for around three quarters of all part-time workers. And a key fact about part-time work is that it is usually lower paid than full-time roles, even when the job is the same. (See the hourly pay rate penalty discussed below.)

Discrimination – conscious and unconsciousWhile, as we’ve seen, there are a range of economic and social reasons for the gender pay gap, sex discrimination continues to play a notable part on every level. Corporate attitudes as to what a man can be asked to do, and what he will expect to be paid, compared with a woman, continue to differ markedly overall. The majority of the time, such discrimination is probably unconscious and unintentional, and sometimes there are no decision-makers to identify as being personally blameworthy – the culture simply exists and is allowed to persist. It is often not specific or blatant enough to qualify as an equal pay claim

– it is a more subtle form of unequal treatment and unequal opportunity.

There are so many examples of this at work. Women keen to move into management or senior roles are sometimes held back by attitudes around mothers not wanting, or being able to cope with, high-pressure or long-hours roles. Fathers (often stereotypically seen as their family’s ‘breadwinner’) are invariably higher paid than mothers. Indeed, an excellent way to boost your earnings is to be a working father – they tend to get paid the most, on average. Research suggests that women are more reluctant than men to ask for pay rises and to negotiate a better pay deal when starting a new job. And when they do ask for a pay rise or a higher starting salary, women are more likely to be refused or offered less than a man would receive. Some of it is conscious discrimination, some of it unconscious. Your own experiences in the workplace will no doubt provide you with many examples of both types.

Male median hourly wage

Female median hourly wage

Median gender pay gap -12.5%-0.2%-1.6%9.5% 23.0%29.5%

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In 2016 the UK’s national gender pay gap (based on median average hourly earnings) for all employees was 18.1% 1. That’s a broad, national picture. An interesting thing happens when you look at the difference between full-time and part-time work. When part-time workers are excluded from the comparison, the gap for full-time employees was down to 9.4%. The reason for the large difference between the full-time and part-time gender pay gaps is that the vast majority of part-time workers are women, and most part-timers get paid less per hour that full-timers. So if you are both a woman and you work part-time, you get penalised twice on pay. Since pay equality is just as important for society whether you work full or part-time, we tend to concentrate on the combined figure of 18.1% to describe our national gender pay gap.

New push for equalityIf we accept (as we surely must) that any significant gender pay gap is a Bad Thing, then as a society we should be moving towards reducing and eliminating it. And we are – although at such an incremental rate that present predictions suggest it could take up to 50 or 100 years (depending in which expert you ask). All three main UK political parties have expressed an intention to accelerate this process, and the result is that the current Government has now legislated to compel larger employers to report on the gender pay balance (or imbalance) within their organisations.

These changes are intended to lead to greater pay transparency and the underlying assumption is that employers with large pay gaps will be pressured (whether through negative internal or external publicity or through litigation) into taking steps to reduce their gap.

Closing the gapWhat will it take for male and female average wages to converge? There are many commentators with many views on this subject. A summary of the main suggestions usually offered is as follows.

Government actionThe Government needs to push gender equality up the agenda and keep it there, mostly via legislation because voluntary methods don’t appear to work. And yes, this is precisely the reason why the new gender pay gap reporting duty has been created.

Employer actionWays need to be found to reduce the cost (or the perceived cost) of substituting the working hours of one employee for another, so that job-sharing, part-time and flexi-time options are more available and don’t come with an ‘hourly pay rate penalty’, nor cause the closure of various progression routes within the business. Managers need educating as to the fact that mid-week handover of clients and customers, case loads and responsibilities for meeting deadlines can in fact be achieved efficiently with good IT, good structures and a willingness to really make it work. Studies suggest that in some sectors with good IT and structures (e.g. pharmacy, IT and healthcare) the hand-over cost from one employee to another (mid-week or during a day) is very low, and consequently the hourly pay rate penalty for working part-time in such sectors is almost zero. Conversely, in jobs that have poor IT support, such as law, the hourly pay rate penalty can be enormous.

Some employers will need to work harder than others to change attitudes within their culture that tend (consciously or unconsciously) to value the contributions

The Gender Pay Gap challenge

of men, or the types of work in which men tend to predominate, over those of women.

Gender pay gap calculations, equal pay audits and gender equality reviews of staff contracts, policies and procedures can all provide crucial insight into aspects of inequality. Some of these will be unequal treatment, while others will be the slightly lesser evil of unequal opportunity (e.g. a bonus for a particularly well conducted or challenging task or project may be far easier for a man to achieve because he is able to arrange to work long hours each evening to achieve it, whereas his female colleague needs to leave on time each day due to childcare commitments).

Societal changeSociety will need to further reduce its tolerance for allowing the gender pay gap to persist. Many suggest that women need to ask for more pay rises, and ask more firmly. They need to insist on pay parity, know their rights, lobby their trade union, negotiate more strongly when accepting a new job. If they go part-

time, they need to insist on their rate of pay and opportunities for career advancement remaining pegged to their full-time and male counterparts.

As many of today’s parents will have noted, school-age girls nowadays are usually appalled to hear that a gender pay gap exists and are adamant that there’s no way they are going to let such nonsense continue when they are grown-ups.

An interesting thing happens when you look at the difference between full-time and part-time work...

1. Office of National Statistics, Annual Survey of Hours and Earnings, 2016

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of its professors are women.2 A trickle of stories like that will become a deluge from April 2017 onwards, as ‘household name’ employers begin to publish their own gender pay gaps.

In summary, the main risks arising from having a high gender pay gap are:

• legal risk of equal pay claims (see below)

• potentially a demotivated and resentful portion of your workforce

• a block on talented female employees rising and flourishing within your organisation

• harm to relationships with shareholders, customers and other stakeholders

• negative impact on your attractiveness in the recruitment market

• external reputational harm if you are named in a league table (perhaps sectorial or geographical)

• ‘naming and shaming’ by the Government of those employers who fail to publish their gap, or who have particularly poor gender pay gaps.

And the main legal risks arising from the existence of an equal pay claim within your organisation are:

• payment of compensation to remedy the pay gap in the current year

• back-pay of up to 6 years to remedy any past pay gap

• legal fees cost

• considerable demands upon management, HR and Finance teams’ time and effort

• ‘piggy back’ claims by other men and women able to compare themselves with either the claimant or the comparator

• external reputational harm

• internal harm to employee relations and industrial relations.

Currently the Government does not have its own method of bringing any enforcement action against an employer suspected or known to be operating

RisksAs we’ve established, having a gender pay gap is, itself, not unlawful or indicative of an organisation having equal pay risks. There might well be many good reasons why the average pay within your organisation (or within particular parts of the organisation, or staffing grades) vary between men and women. However, until you’ve investigated thoroughly, you are unlikely to be able to tell.

Since the gender pay gap and equal pay are related, the more that people talk about gender pay equality at work, in the media and socially, the more they are also likely to think and talk about equal pay and whether they might have a claim. The more awareness there is of such things, the greater the risk to your organisation of an equal pay claim.

If you do have differing pay between the sexes for work that might possibly be said to be of equal value, you may well feel that the gap is entirely justified for non-gender reasons. It might be caused by the market rate for the job, or the man negotiated harder, or he has additional responsibilities. Unfortunately, equal pay law is fiendishly complicated, and what you may see as a ‘good reason’ might not pass muster at court. Just consider the fact that Birmingham City Council has reportedly had to sell the NEC in order to fund what’s said to be a £1 billion back-pay bill for its female workers, even though it has operated complex pay structures and Job Evaluation programmes for decades, which are of course intended to avoid the creation of equal pay risks.

Another factor is that there are plenty of claimant lawyers out there who make a living from putting together ‘class action’ equal pay claims. Historically, they’ve targeted the public sector, but, with many of those claims having run their course, and the gender pay gap reporting obligations set to provide a bonanza of targets for which private sector employers might not have their house in order, that looks set to change.

Furthermore, the more high profile your organisation, the more damning a poor gender balance can look, regardless of any illegality. Recently Oxford University had to face tough questions over the fact that only 8% of its top-earning academics are women, when 21%

The hourly pay rate penaltyEmployers can bring about considerable, swift improvements in gender pay equality by calculating, monitoring and seeking to enforce gender equality in notional hourly rates of pay between men and women in the same and similar roles. A move from full-time to part-time work often results not just in the obvious pro rata reduction in annual salary but, over time, an actual reduction in the hourly rate of pay too. The more hours you work, the higher your overall hourly rate of pay (taking into account bonuses and other extras), and conversely the fewer hours you work, the lower your overall hourly rate. This really shouldn’t need to happen, and ought to be an easy aspect for employers to monitor and correct.

2. BBC News; 12th October 2015

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Slightly oddly, the original Equal Pay Act 1970 and its current provisions in the Equality Act 2010, apply only to male/female pay differentials. It is gender equality, not the wider idea of ‘equality’ as we now understand it. It is of course also against the law (obviously!) to pay a black worker less because she’s black, or a disabled worker less because of his disability, but that would have to be challenged as a standard discrimination claim rather than an equal pay claim. The very specific, technical regime of equal pay law looks at whether there is equality of pay and other terms of employment between men and women doing the same work or work of equal value. Thus it allows a broad comparison between different roles of equal value, being designed to enable women to challenge the very deep-seated causes of gender-based pay equality. For example, a female cleaner could allege that she should be paid at the same rate as a male handyman. A female therapist could allege that should be paid at the same rate as a male chiropractor, and so on.

When we say it’s a ‘very specific, technical regime’, we mean it. The rules are complex.

The comparison exercise applies to all contractual terms. Employers might think, well he negotiated a higher salary, but she’s got a better car and a gym membership and we let her work from home on Fridays, so over all they both get more or less the same deal. However, there’s no defence of ‘it all comes out in the wash’, so in this example both the salary differential and the benefit discrepancies could form the basis for claims. Wages, bonuses, pensions, rewards, company cars and other benefits all fall within the ambit of equal pay law, and all can be compared individually.

Contractual versus discretionary There’s a further complexity when it comes to the difference between contractual and non-contractual (discretionary) pay and benefits. Equal pay law technically only concerns itself with contractual terms of employment, so discretionary pay and reward items, such as a discretionary bonus scheme or M&S vouchers for ‘Employee of the Month’, are not covered by equal pay law. However, these things are still covered by mainstream sex discrimination law, which is of course also founded on the principal of complete equality between the sexes. So, although in an Employment Tribunal case a claim for (contractual) pay inequality and a claim for inequality under a discretionary bonus scheme would be treated in slightly different ways, the usual risks – and outcome – are almost always still the same for the employer.

What exactly do we mean by ‘equal pay’?

... so discretionary pay and reward items, such as discretionary bonus schemes or M&S vouchers for ‘Employee of the Month’, are not covered by equal pay law.

any gender pay gaps. However, the mandatory gender pay gap reporting duty, which we shall look at later, includes the duty to submit the business’s gender pay gap statistics to the Government and a strong hint has been given by the Equalities Minister that enforcement powers are being considered as a next step. (A current example of Government enforcement would be HMRC’s power to enforce the National Minimum Wage.)

Before then, the Government has indicated that it intends to publish league tables of employers and their gender pay gaps, and carry out some ‘naming and shaming’.

Now is the time to actIn 2015 we predicted a deluge of gender pay gap reporting, media interest, reputational harm, Employment Tribunal claims and far higher employee awareness once the duty to collect and report gender pay gaps became law. And we believe we have been proved right. We have seen a surge of equal pay queries, grievances and claims recently, and it seems unlikely to reduce any time soon.

Every HR professional needs to become something of a gender pay gap and equal pay expert. If your organisation employs over 250 people, the reporting duty is upon you and the risks are clear. If you work for a smaller organisation, you are still going to experience a raised awareness amongst your workforce of equal pay issues. This isn’t going to go away.

We strongly suggest that now is the time for all organisations to conduct an equal pay audit, identify their gender pay gap and take steps to start reducing it.

It will take time and hard work, and a lot of senior executives may not understand, or want to understand, its importance or the risks that are present. It is the responsibility of HR and employment law professionals to provide leadership and education in this key area of risk.

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It is an important ‘gateway’ to bringing an equal pay claim, allowing workers to compare themselves to workers of the opposite sex in completely different roles elsewhere in an organisation, regardless of whether or not there is a JES.

Crucially, it opens the door to large claims where workers in a predominantly female-occupied role (typically cleaning or caring type roles) can compare themselves to (almost inevitably higher-earning) colleagues in typically male-dominated roles, such as those involving outdoor work, anti-social hours or a very technical skill-set. (Heaven forbid that we should suggest any comparison between HR and Finance…)

How can you tell if a dementia carer’s work is of equal value to a caretaker’s? Or if a PR executive is contributing as much to a business as a software engineer? It’s difficult. All the more so when you take into account that the value of any ‘instinctive’ answer is likely to be severely compromised by longstanding social norms with an inherent gender-basis.

To answer this crucial question in a ‘work of equal value’ claim, the Employment Tribunal has a whole special procedure for conducting ‘equal value hearings’, which includes gathering lots of evidence about the different roles and, usually, appointing an independent expert to determine the issue. It’s like an additional trial outside of the main hearing. Lengthy, costly and something you really want to avoid if at all possible.

Which comparators are allowed?In a public sector context (where most of the case law so far has originated), should a cleaner at a school be able to compare herself to a worker at the refuse centre where both are employed by the local authority? What about where one or both roles are outsourced? What if they are outsourced to companies set up by the council specifically to try to avoid equal pay liability?

In the private sector, can an employee in one group company compare herself against a male employee in another group company?

In this context, there are five main gateways to comparison. An employee can compare herself to:

1. Her predecessor or successor in her own role;

2. A male worker at the same establishment (on any terms and conditions);

3. A male worker at another establishment which uses the same terms and conditions (whether employed by the same employer or an associated employer);

4. A male worker employed by a different employer where there is a ‘single source’ of terms and conditions (e.g. a national collective agreement); and

5. A male worker previously employed by the same employer, where the female worker has subsequently been TUPE’d out to a subcontractor.

Businesses which operate through associated companies or over multiple sites need to be aware of discrepancies that might arise, particularly when the gender pay gap reporting obligations kick in, leading to more information being available across a disparate workforce.

An equal pay claimant has to show that she (or he) has a comparator of the opposite sex and they are doing ‘equal work’ but she is getting paid at a lower rate for it.‘Equal work’ comes in three flavours…

‘Like’ work‘Like’ work essentially means that the claimant does the same job as her comparator. Of course, with many roles there are nuances – if you have a teacher who also has a few management responsibilities, is that still ‘like work’ in comparison with the other teachers? It usually comes down to questions such as what are you managing? How much of your time does it take up? Do you need extra qualifications or experience? Do you use them?

These are the sort of questions that Employment Tribunals dealing with equal pay claims might have to hear evidence on. In reality, however, even the most antediluvian employers now generally realise that paying “pin money” to “the girls” is not acceptable and so nowadays we tend not to see many claims for unequal pay between people in exactly the same role. Most claims, therefore (and certainly most group claims) do not involve ‘like work’ at all.

Work rated as equivalentYou can bring an equal pay claim if you believe that you are being paid less than a person of the opposite sex who is doing work that has been rated as equivalent to your work under a Job Evaluation Scheme (“JES”).

Maybe your organisation has carried out a JES that’s been agreed with your workforce. Many brownie points if you have. But unfortunately that doesn’t mean you have nothing to worry about.

The history of equal pay litigation in this country tells us that just because a JES has been done, it doesn’t mean that the results of the JES have been implemented. Many women succeed in claims because they are being paid less than men at the same level as them on the JES, or even less than men who are meant to be below them under the scheme!

Furthermore, there is a nasty tendency for the people who were earning more before the evaluation to somehow, co-incidentally, to end up being the very folks that do quite nicely after the JES, thank you very much. This result often comes by way of pay protection or ‘bonus’ schemes put in place to ease the transition – both can be challenged.

And there’s another risk too. The fact that a JES has taken place isn’t the end game for an equal pay claim. If a female worker can show that the evaluation methodology itself is discriminatory or unreliable then the whole scheme can be thrown out of the window.

Work of equal valueFinally, you can bring an equal pay claim if you believe that you are being paid less than a person of the opposite sex who is doing work of equal value to you.

This is the key equal pay risk nowadays, and it is often a hidden risk.

Equal with who?

Equal work comes in three flavours...

Like work, work rated as equivalent and work of equal value.

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Equal pay legislation does allow some common sense and relevant commercial factors to be taken into account, when deciding whether there is an equal pay claim, through the ‘material factor’ defence. However, be warned. This is the one and only defence to an equal pay claim and it only goes so far, often expiring in its protection far sooner than employers expect or hope for.

Material factor defenceThe fact that a woman can point to a male comparator who is doing equal work but being paid more than her does not automatically mean that she has a good equal pay claim. In such a situation, an employer may be able to rely on a ‘material factor’ defence. To do so, it has to show that a significant factor other than the gender difference can explain the pay gap.

A ‘material factor’ must be:

• genuine and not a sham or pretence;

• a significant, material factor which definitely caused the whole of the pay differential; and

• not itself tainted with any sex discrimination.

Unequal pay scenarioThe ‘material factor’ defence operates in two ways, aligning with the principles of direct and indirect discrimination.

First, if the ‘material factor’ relied on has nothing to do with gender, then the defence succeeds. Let’s take the case of a small chain of restaurants where a female branch manager seeks to compare herself to a better paid male branch manager. There could be any number of reasons for the pay gap between them. Perhaps his restaurant is bigger or busier, or he has more experience, or he got a better appraisal rating,

or the HR Advisor made a mistake and offered him £2,000 too much in the offer letter, or he was TUPE’d in when the store was bought and his pay is therefore protected. Any of these factors could provide a material factor defence for the company. If the female branch manager is the only person affected in the pay comparison, or it impacts on other males and females in the company equally, then that is likely to be the end of the story and the end of any viable claim.

However, if our female branch manager can show that she and other female colleagues are put at a ‘particular disadvantage’ by any of the factors that the company relies upon to explain the pay gap, then the employer will have to objectively justify its actions, in exactly the same way as indirect sex discrimination must be objectively justified. So, let’s say that the bigger, better-paid manager roles are only available to managers prepared to do night shifts. The female branch manager may well be able to show that this inhibits female managers from taking those roles. Is it justified? The company would have to show evidence about the necessity of branch managers working at night and why they need to be paid more to do so.

How far can you defend unequal pay?

Common examples of legitimate ‘material factor’ defences are:• ‘market rate for the job’ (so long as the

employer has solid evidence and refreshes that evidence annually to justify any continuing difference year on year)

• a bonus genuinely linked to personal performance/productivity (so long as the opportunity to earn the bonus, to the same level, is equally available to both sexes)

• a pay supplement based on greater experience or qualifications (so long as the employer has solid evidence that this experience or these qualifications are relevant to the job and are used to help do the job better)

• ‘red circling’ and other types of pay protection (so long as the reason for the pay protection still applies and the original pay was not itself a case of unequal pay)

• comparator’s role involves supervision of others, unsocial hours, heavy lifting, complex machinery, extremes of temperature or other similar factors making it different to the claimant’s role.

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Although the ‘material factor’ defence is very attractive for an employer to deploy and rely on when seeking to defend an equal pay claim, or simply to justify why an employee of one sex is being paid more than a colleague in an ‘equal work’ role who is of the other sex, it is often actually far more flimsy and short-lived as a defence than most people believe.

Market ratePerhaps the most regularly used ‘material factor’ defence is the good old ‘market rate’: “we only pay him more than her because that’s the market rate for his work”. This defence may be true and seem very attractive to an employer, but when it comes to actually deploying it in an equal pay claim, employers can find that it’s not always as easy as they had assumed.

First of all, the employer has to gather (and then potentially produce for the Employment Tribunal hearing, up to 6 years later) the evidence that supports

its case about the ‘market rate’. Do you keep documentary evidence of every ‘market rate’

salary decision you make? Do you store that evidence for 6 years? Many employers do not, and yet it is critical to do so.

Secondly, the ‘market rate’ defence evaporates after a time. Employers need to regularly review their knowledge of what the current market rate for that job is, and gather fresh evidence to support its view. There is no firm rule about how often you need to do this, but probably every time you consider a pay award, so potentially once a year.

Protected payAnother situation to consider is where someone’s pay is protected, perhaps as a result of a TUPE transfer, red circling, a redeployment following redundancy or a demotion.

We look at pay protection as a potential defence in more detail later on, but here let’s look at the issue of when it might evaporate as a defence.

Beware the evaporating defence!

It may feel obvious and reasonable at the point when the pay protection starts that it is justified and cannot expose your organisation to an equal pay claim. But consider: how long can the pay protection argument last? 2 years? 5 years? After a certain amount of time, the quite fair and understandable reason why you put the pay protection in place is likely to evaporate, purely due to the march of time. As each year passes, the strength of a ‘pay protection’ defence gets weaker and weaker. This is because the obligation to ensure equality of pay and other terms is so important that it will always eventually endure over other considerations. In that context, any reasons for overriding the duty to ensure equality will only be tolerated by the law for a limited period.

A good example of the evaporating ‘material factor’ defence of pay protection is the aftermath of a TUPE transfer. You inherit someone under TUPE who is paid more than your existing staff in the same or similar roles. Initially, of course, you must honour the new-comer’s higher pay entitlement, in accordance with TUPE. That’s not unequal pay – that’s your compliance with TUPE law. However, after a year or two that excuse for the higher pay may well be starting to wear rather thin if it is causing pay inequality with one or more colleagues of the opposite sex. TUPE pay protection doesn’t mean pay protection for life: it’s there to prevent the new employer from refusing to honour the previous employer’s terms and to preserve that status quo for a reasonable period of time. But at some point it evaporates as a ‘material factor’ defence. Sooner or later, if there’s a gender pay gap as a result of a TUPE transfer, the equal pay legislation will trump a historical TUPE transfer and the risk of a claim may emerge.

As you may know, TUPE prevents changes to terms for transferred employees where the change is because of the transfer. However, a post-transfer change in terms in order to avoid or to reduce an equal pay risk is legitimate, since it’s unlikely to be seen by a Tribunal as because of the transfer; rather, it’s a change in order to promote gender pay equality.

Keep alertSo the moral of the story when looking at ‘material factor’ defences to equal pay claims is to stay alert and be prepared for your defences to evaporate over time.

Review and refresh your justifications and your evidence regularly, and store this information carefully so that you can go back 6 years if necessary.

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As we’ve already touched on briefly, the most difficult – and most expensive – type of equal pay claim comes about when a whole sector of your workforce is made up almost or entirely of one gender (generally women) and it seeks to compare itself with another sector made up entirely of the opposite gender. This is the situation that caused Birmingham City Council to have to sell the NEC in order to settle its £1 billon equal pay liabilities, bought about in the most part by its dinner ladies (and similar) comparing their pay with its dustmen (and similar).

Up and down the country, other public bodies have faced the same problems, and private sector employers are not immune either.

What about your business? You are likely to have some roles or areas of your workforce that are (almost) entirely one gender or the other. In factories, it’s the (usually) male-dominated shop floor. In law and accountancy firms, it’s the (usually) entirely female secretarial and admin staff. In schools and colleges it’s the (usually) male-dominated site maintenance team. The long name for it is occupational gender segregation, but equal pay academics tend to use the shorthand ‘gender ghetto’.

Apples and orangesThe equal pay risk inherent here is, as you may have guessed, the ‘equal value’ type of claim. You may pay your school cooks the same rate regardless of their gender, and likewise all dustmen get paid the same regardless of sex, but do both groups get paid the same? Highly unlikely. But might a Tribunal decide that they are doing work of equal value? Very possibly.

The question of whether the work done by a cleaner, carer or cook is ‘worth’ the same (or more) than the work done by a driver, caretaker or dustman is almost impossible to answer objectively. It’s like comparing bananas and

socks, and everyone will have their own subjective view on the merits of bananas (and indeed socks).

Critically, in the case of female-dominated occupations such as cleaner, carer or cook, we would suggest that society’s instinctive view of their ‘low value’ is almost certainly influenced by the fact that they are female-dominated occupations, and that women have done them for low pay (or, indeed, without financial reward, in a home setting) for generations. This means that a comparison process – whether done through a JES or an equal value claim – can throw up surprising results.

Can you defend it?If the two sets of jobs in different parts of an organisation are found to be of equal value– what then? Can it be a ‘material factor’ defence for an employer to say, simply, that the going rate for cleaners is less than the going rate for drivers, and that’s it?

Often, no. Sometimes, yes, if you are lucky and you can produce robust evidence to prove that the labour market does indeed work in that way (and isn’t just assumed to) and you can show that you would not be able to fill the ‘male’ roles without paying a premium.

But even that’s not the end of the story. Where ‘the market’ that’s being looked at is an exploitative market, taking advantage of women and the lack of opportunities that may be available to them, causing wage values to be suppressed, then their equal pay claim could still succeed. A typical example of an exploitative market would be in low-paid, probably minimum wage, work in an area without much economic opportunity. But what about the female City workers who can point to massive average pay gaps? Are assumptions being made during their careers about their aggressiveness, their commitment and their longevity that lead to a market where a woman is seen as worth less than a man?

There are plenty of claims out there, waiting to be brought. If you have roles which are heavily weighted towards one gender or the other – at whatever level of the business – then you need to look closely at your risk.

Do you have gender ghettos?

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The dangers of pay protectionPay protection, or ‘red circling’, may seem like a good idea in certain situations, and is often demanded by trade unions but, as well as costing you more, it also comes with a considerable equal pay risk.

The equal pay riskOne of the most common explanations given for pay differentials in any organisation is one form or another of pay protection. We can all think of common situations where pay protection comes about as the result of an agreement, such as following a redeployment or a restructure. It can also come about when a job evaluation scheme is implemented and transitional arrangements may be put in place to assist those whose roles are downgraded (sometimes on the basis that this is cheaper than performing a ‘levelling up’ exercise). It is a useful tool to have in your pay & reward toolbox.

Aside from agreed pay protection, we also come across it in a compulsory sense following a TUPE transfer, if incoming staff transferring to you come across with higher salaries.

However, in every case of pay protection there is the risk of an equal pay claim from a lower-paid colleague of the opposite sex who is doing the same or similar role, or one of equal value.

The defenceOf course, the good news is that the presence of a pay protection agreement (or one imposed by TUPE) will normally provide you with the ‘material factor’ defence which can usually defeat an equal pay claim – for a time. However, such a defence is far from 100% certain, and its protection reduces over time, as we have already looked at, so every time you agree any pay protection, you need to think about the following factors and plan ahead.

To recap, to qualify as a ‘material factor’ defence, you need to prove that the reason for the higher pay is a decent, genuine reason and one that explains the whole of the gap.

It must also not be based on a reason that, although itself is not sexist, nonetheless leads to sex discrimination in its eventual outcome. This point is especially important to be aware of where more men than women are getting pay protection, or where it is only being offered to certain role(s) that are mostly, or entirely, done by one sex or the other.

Getting caught outFor example, you run a manufacturing business and you offer pay protection for an entirely genuine reason unrelated to sex (e.g. restructuring and redeployment) to your (mostly male) production operatives, because the shop floor union demands it. 80% of those who then benefit from the pay protection happen to be men. But for your office staff, who don’t have a recognised union, you don’t offer pay-protected redeployment because there’s no union demanding it and you think you can get away without doing so. However, 80% of your office staff are female. Some of them accept redeployment into lower-paid roles without the benefit of pay protection. Your primary reasons for treating your workforce differently in terms of offering, or not offering, pay protection appear on the face of it not to have anything to do with sex: reason 1 is that they are different parts of the business who traditionally have always been treated differently; and reason 2 is that one part of the business has a union who bargains well, while the other part of the business doesn’t. However, the end result is that your female staff who are redeployed into lower-paid roles without pay protection are then worse off than your male production operatives who receive pay protection. If one of your female employees manages to prove an ‘equal value’ connection between her role and one of these male roles, there’s the equal pay claim.

It’s easy to fall into this trap while you are busy with a restructure, probably some redundancies too and perhaps dealing with some tough union negotiations at the same time.

In some public sector claims we’ve heard about, there is no official pay protection for the male workers but the impact of the pay changes on them have been cancelled out by the introduction of (more-or-less spurious) ‘bonuses’, again negotiated by their union and not available to roles in other departments that are mostly carried out by females.

TUPE situationsIn the case of a TUPE transfer, the existence of TUPE would almost certainly provide a good material factor defence, at least in the initial months after transfer. But what if the pay differential is so great that the lower paid employees have no realistic opportunity to catch up? What if further pay awards are made on a percentage basis, so the gap actually gets bigger rather than smaller? There are tantalising comments from judges in some of the judgments in equal pay cases about the extent to which an employer will be expected to take action to ensure that differences are eventually levelled out. It seems clear that this sort of defence will not hold good forever, but there is little clear guidance as to how long it might last.

Don’t forget the evaporating defenceEven if you have put in place a pay protection approach that explains the whole of any gender pay gap, and which is founded on good, fair, non-sexist reasons, remember – as we’ve said before – that any pay protection defence is very likely to evaporate over time. It may hold up for 1, 2 or even 5 years, but after a certain amount of time, the quite fair and understandable reason why you put the pay protection in place is likely to evaporate, purely due to the march of time. As each year passes, the strength of a ‘pay protection’ defence gets weaker and weaker.

Best approachSo every time you are thinking of putting pay protection in place, ask yourself:

• Will it favour traditionally ‘male’ roles over ‘female’ roles in our business?

• What will the actual male:female ratio of take-up and benefit be?

• How long will/should it last for?

• Can we justify its length in a situation where it creates a potential equal pay claim? If yes, for how long can we get away with that justification?

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How long does an equal pay claim risk last? How far back in time can the claim reach? Both these things may be longer than you thought and are important to factor in when thinking about potential risk and cost.

Claim time limitsEqual pay claims can be brought at any time whilst the claimant remains in employment. A change of role or contract will not usually extinguish the right to claim. While the inequality in pay continues, the right to claim continues.

Where a claimant leaves employment, the time limit to bring a claim in the Employment Tribunal is six months from the last day of the employment relationship. There is no discretion to extend this time limit, but there are a complicated set of rules dealing with situations where the claimant may have been unable to claim.

However, although the strictness of the Tribunal time limits sound like a good thing for employers, there’s a catch. It’s recently been decided by the courts that claims can also be bought in the civil courts – the High Court and County Court – where the limitation period for such a claim is six years. This is because the claim is a type of ‘breach of contract’ claim, which always has a 6-year limitation period.

Potentially, therefore, if you have a population of underpaid female employees in your business, you could face claims from all your current employees, plus any former employees for the previous six years.

Reaching backAn equal pay claimant can claim for back pay of up to six years (five in Scotland), as well as increased pay going forward if she remains in employment.

So with the right to bring a claim up to six years after leaving employment, and the ability to claim back pay for up to six years, that’s a lot of potential risk. And cost.

Piggy-backOne more thing to mention. Once a woman has succeeded in her equal pay claim (or received increased pay following a settlement), any other man who does the same work as her but is now paid less than her is able to use her as a comparator to demand an increase in his own pay, or otherwise he can bring his own equal pay claim. This sort of “piggy-back” claim means that pay adjustments to address equal pay issues can trigger widespread ‘levelling up’ exercises across the business.

Time limits and back pay

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In 2015, following the failure of a voluntary scheme, the Government decided to legislate to require larger employers to publish their gender pay gaps. The regulations require all private and voluntary sector employers with 250 or more employees – and all public sector employers in England of that size – to collect and analyse their pay data, as it stands in the month covered by their ‘snapshot’ date, and to publish and report their GPG within 12 months of that date. For private and voluntary sector employers the annual snapshot date is 5 April; for public bodies in England the snapshot date is 31 March.

Reporting requirementsQualifying employers must publish the following gender pay gap statistics about their employees based in Great Britain:• the mean and median average gender pay gap

figures for the organisation;

• the mean and median bonus pay gender pay gap for bonus payments over the preceding 12 months; and

• the number of men and women working across the 4 salary quartiles.

To help explain any pay gaps they may have, employers are able to include additional narrative that provides context and sets out any actions the organisation intends taking. If the pay gap is particularly high then employers may choose to provide more detail (i.e. broken down by hours and/or job grade) where this would help to present a more favourable picture.

The report must be published on the employer’s website every year and left there for at least three years. It must also be uploaded onto a particular section of the Government’s main website.

The Government’s website is easily searchable and makes an employer’s report easy to find and compare against all the other employers’ data. It suggests that a ‘name and shame’ policy may well be pursued by the Government, sooner rather than later.

The GPG data must include not just employees on an employer’s payroll but also the wider range of those

The Gender Pay Gap Reporting Duty

Gender Pay Gap Report

who are termed by employment law as “workers” (e.g. casual workers, temps, consultants and other non-employees who are contracted to provide personal work or services to an organisation). This requirement may well include any self-employed consultants and contractors who you may engage.

Other Government actionThe Government has indicated that it intends to:• run periodic checks to assess for non-compliance;• produce tables by sector of employers’ pay gaps;• highlight employers who publish particularly full

and explanatory information; and• ‘name and shame’ employers who fail to comply.

Non-compliance The Government has confirmed that civil penalties will not currently be introduced, but this will be kept under review in the light of rates of compliance by employers in the first few years of implementation. We believe it is quite likely that, over time, the Government will decide to give enforcement powers to a body, perhaps HMRC.

Further, the Equality and Human Rights Commission will be able to investigate employers who fail to comply.

What is “pay”?The Regulations define “pay” as including:

• basic pay

• paid leave

• area allowances

• shift premiums

• bonuses

• car allowances

• standby/on call allowance

• clothing allowance

• first aider and fire warden allowance

However, pay does not include:

• overtime pay

• expenses

• any amounts sacrificed under a salary sacrifice scheme

• benefits in kind

• redundancy pay

• arrears of pay and tax credits.

Pay must be calculated before deductions for PAYE, NICs, pensions, student loan repayments and any voluntary deductions. Those who are in receipt of sick pay or any other form of special pay for statutory leave (maternity, paternity pay, etc.) should be counted as if they were on their normal full pay, to avoid skewing the data.

What is “bonus pay”?The Regulations define “bonus” pay as including:

• profit-sharing, productivity, performance and other bonus or incentive pay, piecework and commission;

• long-term incentive plans or schemes (including those dependent on company and personal performance); and

• the cash equivalent value of shares on the date of payment.

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To re-cap, the risks arising from the existence of an equal pay claim in your organisation are:

• payment of compensation to remedy the gap in the current year

• back-pay of up to 6 years to remedy any past gender pay gap

• reimbursement of the claimant’s Tribunal or court fees

• a penalty of up to £5,000 issued by the Tribunal for your business’s failure to comply with legislation

• your business’s legal fees costs

• the claimant’s own legal fees if the claim is brought in the civil courts

• considerable demands upon management, HR and Finance team time and effort

• ‘piggy back’ claims by other men and women able to compare themselves with either the claimant or the comparator

• external reputational harm to your organisation

• internal harm to employee relations and industrial relations

• harm to relationships with shareholders, customers and other stakeholders

• negative impact on your attractiveness in the recruitment market

• harm to your ability to win Government contracts.

If your organisation qualifies for the GPG reporting duty, you obviously need to ensure you that you report and publish your data by the deadline of within 12 months of your annual snapshot date (i.e. by 4 April if you are private or voluntary sector or by 30 March if you are a public sector body in England).

But more than this, you should also be taking active steps to analyse how any pay gap you may have is caused and attempting to reduce it as swiftly as you can, where practicable.

If you are an employer with fewer than 250 staff, you will still be at a much higher risk of equal pay claims, now that equal pay is the new ‘big thing’ and everyone is talking about it.

So whatever sort of organisation you are, now is the time to act on your gender pay gap.

Why you should act now

...the unions are already making equal pay a high profile aspect of their work and this will only increase.

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The key stepsStart with an equal pay audit

Addressing the risks requires a good understanding of your current position. You should arrange for a professional equal pay audit of your workforce to be carried out.

Elements to assess include basic pay, any variable like bonus or financial incentives, any enhancements such as shift pay, weekend pay or overtime, any allowances such as clothing,

tools and travel time and any financial benefits such as PMI and insurance cover.

By undertaking a gender pay gap audit, you will be able to identify where your largest and highest risk pay gaps are and then:

• investigate the reasons for any gaps; • decide what pay gaps are defensible with a ‘material factor’ defence; • refine your view of the extent of any legal risks present, their magnitude and potential cost to

your organisation; and• formulate a plan to address them and/or defend them, as appropriate.

Data analysisThe results of the audit data need to be presented and studied carefully, by function, business unit and

location. The unintentional inequity of some of some of

your enhancements and fringe benefits, for example, might undermine the fact that your actual basic pay is itself fairly gender-neutral. Anything discretionary might be inequitable - you need to consider and test it. Historical changes can mean inequities become hidden in your policies.

2DIY or external expert?No big surprise here! We recommend that you

engage an equal pay audit expert to either conduct the

whole audit for you or at least to scope out for you what is required and how it should be carried out. You should choose an expert who combines solid HR expertise in pay & reward with an ability to produce and analyse complex statistics.

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Legal You need to consider whether you have any legal defences to any gender pay gaps you may find, such as the ‘genuine material factor’ defence, which often works effectively. Again, you will not fall off your chair to hear that we recommend that you engage a genuinely expert equal pay lawyer to assist you, not simply a run-of-the-mill employment law team. Equal pay

law is very distinct from mainstream employment law and relatively few employment lawyers have much experience of it. Ensure they really know what they’re talking about (test them out

by asking them to explain the ‘evaporating defence’ or what ‘piggy back’ claims are!).

You are likely to need advice on whether different roles in your organisation are ‘work of equal value’, which is where the majority of equal pay risk lies. High risk areas need particularly careful attention.

You then need to prepare a legal strategy for dealing with any equal pay claims that are likely to arise, not only from current employees but from those who left you up to 6 years ago.

Ideally your equal pay lawyer should work in close tandem with your equal pay auditor. Ensure they do.

Relationships and communicationsYou need to prepare to answer difficult questions from

your employees, customers, shareholders and other

stakeholders. You may well need to rebuild trust with any staff who discover that they have been negatively affected by any gender pay gap. You may need to review your employee engagement, morale and productivity levels.

When you are required to publish your gender pay gap you will of course also need to consider the PR angle and possibly take steps to prepare for responding to any negative media reaction. The local press may be awaiting the publication of your stats with interest.

FinancialIt may be a statement of the obvious, but you will need to plan how you are going to

fund two important aspects. First, how you

will fund any gender pay gaps that you decide you need to close by increasing the pay of some of your workforce.

Second, you need to consider how you will fund any equal pay Tribunal compensation awards that you might be required to pay – particularly the potentially large back-pay claims that can grow up over the years.

Risk registerIf you operate a risk register, your equal pay risks may need to be placed high up on it,

particularly the financial cost associated with a

‘worst case scenario’ mass equal pay claim.

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As we work with more and more businesses through our own Gender Pay Gap Audit & Advice service, it’s become very clear that even those clients who initially thought they didn’t need a gender pay gap audit and didn’t believe they had much of an equal pay risk have been surprised at the pay gaps – and therefore equal pay risks – we’ve found consistently across their organisations. And those who confidently said that they didn’t think they needed an audit “because we have a well designed pay structure” or “because we use a job evaluation process” have been surprised. While very helpful in themselves, neither of these things will mean your business is free from any gender pay gap or from the risk of equal pay claims.

At the risk of seriously repeating ourselves, remember that Birmingham City Council recently had to sell the NEC in order to help fund its £1 billion equal pay liability.

And yes, they had an elaborate pay structure and had been operating job evaluation programmes for years. Yet neither of these things helped them avoid huge inequalities in pay, perpetuated over decades.

Also, while JES processes can be very helpful (if used properly), all of the organisations that we’ve carried out an audit on who use any JES have nonetheless found that they still have significant gender pay gaps.

And sometimes these gaps are alarmingly large.

So having a job evaluation process does not mean you will have a tiny gender pay gap and does not mean that you are safe from significant equal pay claims.

In fact, having what you feel is a well-designed pay structure and/or a job evaluation process can often lull you into a false sense of security when it comes to viewing your equal pay risks.

Ask yourself: how confidently can you say that you’ve nailed all of the following areas of risk?

• Who makes all your decisions on pay? Are they consistent and sense-checked across the business? Are they regularly calibrated? The decision makers themselves may be biased in either direction.

• What pay guidance and policies do you have in place? Do you actually check that they are applied correctly, and do you correct any errors? Uncorrected errors get perpetuated and increase the bias over time.

• Do you make job offers based on achieving satisfactory probation? And do you check that offers made in this way are honoured? Which roles are handled like this – what’s the gender split in those roles?

• If you have any sort of incremental pay scales, how long does it take to get to the top of the grade? Is there any gender bias present? Lengthy progression can be discriminatory.

Have an audit even if you think you don’t need one

The chances are that a thorough review of your organisation, preferably by an independent expert, will reveal a number of equal pay risks that you may not have thought about before, or may not have introduced adequate checks and controls for.

• If you have spot salaries, how is the salary identified and agreed? We all now know that individual negotiation generally favours men over women, as they tend to negotiate differently. What flexibility do decision makers have? Are their approaches entirely consistent and calibrated regularly?

• Do you measure your roles using a job evaluation process, do you sense check the outcomes to ensure they are consistent? Are you sure the scheme is unbiased? Are you sure the evaluators are unbiased? If you have more than one evaluator, how do you ensure that they take precisely the same approach each time they apply the JE process?

• How is pay reviewed annually? If different groups get different increases, why is this? How do you ensure that the impact across both genders is equal in such a situation?

• Do you sense-check any mid-year changes in pay to ensure they are consistent across both genders?

• Are you using recognised methods and market data for salary reviews? Are you using economic indicators?

• If you have any allowances, bonuses, etc., is their application checked and reviewed for consistency and gender equality? These are key risk areas.

• Have you made/how do you handle any interim increases? What’s the decision line? Is it unbiased?

• Do you round hourly or pro-rata salaries consistently? One small amount out of kilter in basic pay gets perpetuated in all pay elements.

• How do you address salary protection (red-circling)? Unhealthily long frozen pay or salary reduction policies can cause gender bias. Do you check its consistency across both genders?

The chances are that a thorough review of your organisation, preferably by an independent expert, will reveal a number of equal pay risks that you may not have thought about before, or may not have introduced adequate checks and controls for. And given all the many responsibilities that HR teams have, plus the times when senior management will ignore or overrule your advice, that’s not surprising.

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Our challenge, then, to all HR professionals is to become equal pay experts. Get fully to grips with equal pay law, its risks and how calculate them in financial and reputational terms. Know your gender pay gap and where the particularly weak spots are.

Work out how these gaps occurred and how you can reduce – or better still – entirely remove them.

Become adept at spotting where a deftly placed ‘material factor’ defence will work for you by providing a lawful justification for certain pay gaps.

Ensure all those who make decisions on pay in your organisation are trained to understand how to spot gender pay gaps, how they can be created and how they can be perpetuated, even if unconsciously or unwillingly.

Lead the way in bringing greater equality to pay in every sector of the economy and public services.

We would love to help. Our Pay & Reward team offers our market-leading Gender Pay Gap services, from a full Equal Pay audit and legal advice through to a quick sense-check on any calculations you’ve put together yourself. Uniquely, our multi-disciplinary team includes an Equal Pay auditor and an Equal Pay lawyer, each with over 20 years of experience. We also offer the full range of Job Evaluation and salary benchmarking services.

Whoever you use and however you go about it, go forward with determination. Let’s create a world where it’s what you can bring to an organisation that determines your pay, not your gender.

Pay & Reward teamMenzies Law

Conclusion

Luke Menzies Barrister & Solicitor

luke@menzieslaw.co.uk

Jane Baalam Specialist Consultant, Pay & Rewardjane@menzieslaw.co.uk

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Pay & Reward Services from Menzies Law

Gender Pay Gap and Equal Pay AuditOur leading service here is our Gender Pay Gap Audit & Advice service, which is a hefty 45-page report combining your Gender Pay Gap, a full Equal Pay Audit, specialist legal advice on your main equal pay risks and finishing off with a list of key recommendations on your pay structure and your overall approach to pay and reward. For a fixed fee we will:

• Crunch the numbers for all of your workforce pay and benefits

• Review all your policies and procedures relating to pay

• Provide a detailed equal pay report, looking at our workforce from a number of different angles (grade, status, job title, department, etc.)

• Identify your GPG and highlight any areas of high risk

• Advise you on the legal risks and how to minimize them

• Support you in formulating an action plan for addressing the various risks.

Gender Pay Gap Review If you don’t wish us to undertake an equal pay audit at this time, our simplified Gender Pay Gap Review calculates just your Gender Pay Gap and provides advice on any key points of risk or comment that may arise from our review of your pay data. We help you prepare for the publication and reporting of your data, and set you up so that you can do it all yourself in future years.

Gender Pay Gap Sense-checkIf you are planning to calculate your own Gender Pay Gap, we can still help. Our Gender Pay Gap Sense-check is a very modestly priced service that simply checks your GPG calculations to ensure you’ve taken the right approach and that your GPG data is ready for publication. We can also assist you with the actual publication and reporting of your data.

Pay & Reward strategy and supportKnowing you have a gender pay gap or some equal pay risks is one thing; solving it is another. Our Pay & Reward team offer a variety of specialist support to help you improve your pay structure. In addition to Job Evaluation and Salary Benchmarking mentioned below, we can also provide you with highly experienced consultancy support to develop your reward strategy generally. Common areas of support are pay scale simplifications, post-merger harmonisation of different pay structures, Equal Pay action plans and the devising of new bonus and incentive schemes.

Job EvaluationThe very best defence against any equal pay claim is to apply a robust, modern Job Evaluation scheme to your organisation.

As well as offering Gender Pay Gap and Equal Pay support from nationally respected experts, we are also able to provide you with a market-leading Job Evaluation scheme, which we believe is the best in the UK by some way. The JE scheme is securely cloud-based and training for your staff is provided at no extra cost.

Salary benchmarkingOur range of Pay & Reward services would not be complete without our comprehensive Salary Benchmarking service, made available through the confidential sharing of data from a large number of UK employers.

Let’s talkFor more information, please contact: Luke Menzies, Director at Menzies Law DDI 0117 325 0921 email luke@menzieslaw.co.uk

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www.menzieslaw.co.uk

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