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Published on: Reward

How to Identify and Solve Pay Inequality

Pay inequality in the workplace remains in the spotlight for UK employers, even though the Equal Pay Act established a legal framework for this over 50 years ago. While there has been some progress over recent years, including the introduction of compulsory Gender Pay Gap Reporting in the UK in 2018,  pay inequality stubbornly persists, not only between genders but between many different demographic groups. 

While UK legislation lags behind in this area, it’s up to progressive organisations to commit to fair and equal pay for all their employees. Organisations that prioritise this are more attractive to top talent, experience a more positive company culture, and are more attractive to consumers.

In this article, we’ll talk about what pay equity means and how HR and leaders can establish and sustain salary equality throughout their organisations.

How to Identify and Solve Pay Inequality

Why We Should Be Concerned About Pay Inequality

Every business should be concerned with pay inequality, not just because of the legal obligations involved but also because of moral implications. 

At a societal level, an ongoing lack of women in senior positions (one of the primary factors driving the gender pay gap) has a knock-on effect to women’s relative wealth and position in society, leading to women being more vulnerable and lacking the choices many men enjoy.

At an organisational level, companies committed to pay equity and transparency are better able to attract and retain top talent. Fairness and equality are the foundations of a thriving company culture and business brand; both consumers and employees are more likely to support organisations that prioritise fair practices.

What is the Meaning of Pay Equity?

When we talk about equality in the workplace, many different terms crop up, such as pay equity, the gender pay gap, and pay equality. While these concepts are all relevant to the topic of equality, they don’t all mean quite the same thing.

For clarity, let’s briefly look at the differences between these terms.

Pay Equity

Pay equity is the commitment to pay every employee equal pay for equal work regardless of gender, race, sexual orientation, religion, disability status, or any other characteristic that is protected from discrimination.

Pay equity (or equal pay) between women and men has been a legal requirement under the Equal Pay Act since 1970, but is still an issue today.

Pay equity isn’t just about equal pay for people in the same (or similar) roles. It also applies to employees doing work that has been rated “equivalent, or in the same grade as that of another employee, or doing work of “equal value,” where jobs might be different but require a similar level of skill.

Pay Equality

While often used to refer to pay equity, pay equality can also refer to the broader systems and culture that prevent different people from having access to equal opportunities. 

The team at Barley describe the subtle difference particularly well:

From 2008 to 2020, Marvel released 22 superhero movies. There were 20 movies featuring a male superhero before we got 1 about a female superhero.

Pay equity is about paying a female superhero the same as a male superhero for the comparable work of saving the world. But pay equality is about changing our systems and culture so that more women can become superheroes in the first place.

At your company, you can think about achieving pay equity as the bedrock foundation upon which to build an ongoing commitment to equality for all.”

The Gender Pay Gap

This refers specifically to the average percentage difference between hourly earnings for men and women in a company or sector – not necessarily for the same type of work. 

In the UK, companies with more than 250 employees are legally required to report their gender pay gap figures but are under no obligation to do anything to correct the balance. Recent analysis by the Global Women’s Institute and The Fawcett Society suggests this ‘lack of teeth’ is one of the main reasons the pay gap is not narrowing in the UK.

The Ethnicity Pay Gap

While gender is the most commonly discussed pay equity factor, other wage gaps also exist between a range of minority groups. Ethnicity pay gap reporting is the most likely area to become legislated next in the UK. At the time of writing, it is under consultation with the UK Government. 

I would strongly advise any companies currently within the Gender Pay Gap threshold to establish systems and process for gathering ethnicity data now. Indeed, some progressive companies are already ahead of the curve and undertaking this analysis, which also means they can start to take action where needed. 

What is a Pay Equity Analysis or Equal Pay Audit?

Organisations that want to ensure balanced pay practices begin by undertaking a pay equity analysis (also known as Equal Pay Audit) to identify any gaps. It’s important to note, this is very different to a gender pay gap analysis. While gender pay gap analysis is an aggregate view of all employees across quartiles of the organisation, an equal pay audit involves detailed role to role comparisons.

An equal pay audit examines any differences in pay between men and women doing equal work. This extends beyond comparing the same or similar job roles (eg accountant), and works across an entire organisation to determine roles of ‘equal value’, including roles in different functions and locations. High profile case law examples include supermarket shop floor workers vs distribution centre workers, and refuse collectors vs school dinner servers.

Jobs are grouped into classes based on requirements, responsibilities, skills, effort and working conditions. 

Data about compensation and demographics is collected for each job class, and an analysis is completed to determine if there are any significant pay gaps between different groups of employees who are doing similar work.

What Role Does HR Play in Creating Pay Equity?

Certain factors are permitted to determine varied salaries for individual roles or employees; these are known as compensable factors. For example, education, experience, seniority, and managerial responsibility are legitimate criteria that would justify someone receiving a higher pay rate than another employee.

HR can help ensure that organisations pay fairly based on these compensable factors, removing bias from the pay structures and ensuring quality for all employees. While pay equity is not the sole responsibility of HR, we do play a significant role in creating the systems and processes to ensure salaries are balanced.

Various steps are required to ensure pay equity with an organisation, and HR can support managers and CEOs throughout the process to:

  • Create and implement pay structures appropriate for the organisation
  • Promote salary transparency
  • Oversee and review hiring and recruitment practices
  • Monitor merit increases
  • Review results of pay equity analyses and make recommendations to management
  • Ensure legal compliance with any approved changes

Identifying Any Pay Gaps In Your Busines

Here’s an example of the steps an organisation would need to take to identify any pay gaps:

  1. Review pay structures and policies around starting pay, merit pay increases, and promotional pay increases.
  2. Conduct a statistical analysis of the data looking for disparities based on gender, race or ethnicity, or any other protected characteristics.
  3. Take corrective action as necessary, which could include revisions in pay policies, adjusted pay structures, reduction of managerial discretion, etc.

Once corrections have been made, companies must identify the operational gaps that led to the discrepancies and allow HR to monitor the hiring, promotion and compensation processes on an ongoing basis.

If you have any questions about pay equity, pay equality, or a gender pay gap at your workplace, then contact me today for expert support and advice.