Mind the gap
Equal pay considerations for SMEs
Equal pay in the news
The publishing of the BBC’s top earners’ salaries made news headlines for several consecutive days and caused public objection to the salary levels and the stark differences between male and female pay.
There is no single explanation for the gender pay gap but deep-set beliefs around the value of women, their contribution and performance still exist in the 21st century. In my role as a HR consultant and provider of professional HR training, I see and hear of practices based on assumptions about the different genders which contribute to the gender pay gap:
“He’s got a family therefore he should receive a bit more”
“She has a family and won’t be able to contribute as much”
If there is a pay difference between a male and female employees where all other circumstances (eg hours, responsibilities) are equal, an employer risks an equal pay claim.
What the law says
The basic premise of discrimination is making an assumption that a person will act in a particular way due to a characteristic they possess (gender, race, age etc) rather than establishing the facts and taking an individual approach.
Equal Pay law first came about in 1970 under the Equal Pay Act (see Made in Dagenham for the potted history) and is now covered by the Equality Act 2010 which states that there should be pay parity between men and women in:
- ‘like work’ (the same job)
- work of equal value (same level of skills) and
- work rated as equivalent (the same point on a salary scale)
Unlike some other employment protection, such as the right not to be unfairly dismissed, there is no length of service needed to make an equal pay claim. Employers falling foul of the law could also be burdened with a financial penalty in addition to paying awards made to the employee.
When discussing equal pay, there will always be an argument around market rate. Indeed, one argument defending the BBC was that if they don’t pay those high rates, they would not attract talent with such rates being offered by their privately funded competitors. When deciding how much to pay for a role, an employer must balance the size of the job (span of control, responsibilities etc) with what it takes to attract and retain the best talent – based on fact, not assumptions about candidates.
It may be that skills availability has declined and therefore market rate has risen. Whilst that may result in the need for a greater salary for a new recruit, there is also the risk of a current role holder leaving for a competitor who also has to pay the market rate. An employer must continually scan the labour market to ensure they can not only recruit, but also retain their workforce.
Men are from Mars….
Anatomy can be one explanation for the gender pay gap. While women are the ones who become pregnant and give birth (…..but who knows what may be achieved by the end of this century!) they will be the ones taking at least a couple of weeks (normally much more) out of work to do so. The world is changing and we are seeing increasing numbers of men taking paternity leave and shared parental leave – because they have the choice to do so, but time out from employment is still taken by more women than men for a number of reasons including financial and cultural drivers. Anyone taking time out of the workplace, male or female can miss out on work experience, but it is mostly women – leading to pay differences based on the assumption that valuable experience has been or will be missed, or that flexibility will be reduced. Employers should challenge themselves on their pay decisons or have mechanisms by which they are challenged (eg advisors, mentors etc).
It is not just the legal and financial implication as we have seen with the BBC (and Birmingham City Council ‘dinner ladies’ v ‘caretakers’, Asda checkout ladies v warehouse men), gender pay disparities are very high profile and impact the employer’s reputation – and their ability to attract and retain their workforce, and ability to win contracts for work. Dealing with an employee raising an equal pay issue is a time-consuming process which creates distractions for the surrounding workforce and lost productivity. Conversely, diversity in the workplace has been shown to increase business performance.
Assessing the gap
Individual or collective equal pay claims are one thing, but a gender pay gap does not necessarily mean there will be claims. Equal pay refers to the difference between men and women’s pay for a similar job, whereas the gender pay gap relates to the differences between average earnings, irrespective of their roles in an organisation. From this year, organisations with more than 250 employees must publicly report their gender pay gap. This reporting has the objective of ensuring organisations assess and justify their pay practices, pay culture and decision making.
Smaller employers that do not need to report, should still be assessing their own practices – and objectively justifying their pay decisions. As the public reporting gathers momentum and creates further headlines, we will learn more about the emerging issues around gender (including transgender) and equal pay.