· 3 min read · Features

The year ahead: Why pay equality will be high on HR's agenda in 2010

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An increased focus on equal pay in 2009 has resulted in a number of initiatives that will place this issue high on the agenda of all HR professionals in 2010. In the third article in our series, Lorraine Heard outlines what pay equality issues HR professionals should consider for the year ahead.

The Equality Bill empowers the Government to insist that larger employers (with over 250 employees) publish gender pay gap information from 2013 if there has been insufficient progress on voluntary reporting before then. It seems likely that if the Equality Bill becomes law mandatory reporting of gender pay gap information will follow.

The Equality and Human Rights Commission (EHRC) was asked to develop proposals for such reporting and has been consulting on, for example, whether a single figure should be used for both full-time and part-time staff; how that figure should be calculated; and whether any additional explanation should be allowed.

Large employers, and possibly smaller employers in due course, may ultimately be required at regular intervals to publish details of their gender pay gap by calculating the median or mean figure. The median pay for female employees (the figure at which there is an equal number of employees above and below, both higher and lower paid) is calculated as a percentage of median men's pay with the gender pay gap being the difference between this percentage and 100%.

So if women's median pay is 70% of men's median pay the gender pay gap is 30%. A mean figure is based on a simple average of all earnings with mean women's pay calculated as a percentage of mean men's pay, again taking the gender pay gap as the difference between this figure and 100%. 

Those who have not yet done so should consider doing the calculation to see how their organisation compares with national figures, which are 12% on a median basis for full time employees and 22% for all employees. On a mean basis the national figures are 16% for full-time employees and 20% for all employees. Those with high figures need to analyse the causes of the gender pay gap, and perhaps undertake a risk assessment. 

If there are good reasons that explain the figure, further work may be required to ensure that the employer can explain and, if necessary, defend its position. 

The finance sector

The EHRC inquiry into the financial services sector revealed a gender pay gap of 40% for full-time workers and 53% for part-time workers. While those operating in this sector clearly need to take steps to minimise the risk of equal pay claims, there are valuable lessons for all employers. As Birmingham City Council is believed to be currently dealing with a combined 4,000 equal pay cases - which could cost it up to £200 million - one can only imagine what such cases could cost the financial sector.

Numerous recruitment and employment practice problems were found: 86% of women having lower starting salaries than men; a failure to accommodate childcare responsibilities; a culture that makes it more difficult for women to progress within an organisation; and pay inequalities. Pay inequalities can arise as a result of a lack of a proper structure for rewarding staff, with decisions left to the subjective view of managers, combined with a lack of monitoring and transparency in pay systems which allows inequalities to develop.

It is essential for HR directors to ensure all aspects of recruitment and career progression are governed by processes that are not tainted by sex discrimination and are in all respects objectively justifiable.

Hypothetical comparators

Equal pay differs from other types of discrimination in that a claimant must name an employee of the opposite sex who is better paid or has better employment terms. 

The Equality Bill retains this requirement but also introduces an ability for a claimant to pursue a sex discrimination claim. Therefore a woman will be able to pursue a sex discrimination claim if she believes she would have been paid more had she been a man, even if she cannot actually point to a higher paid male colleague. 

Those most likely to take advantage of this opportunity are those who feel disadvantaged by their employers' remuneration systems.  As such claims can be very costly to defend, and employers should consider how best to structure  benefits to avoid creating an atmosphere in which employees feel, rightly or wrongly, that they are disadvantaged because of their sex.

Male claimants

There are many legal issues currently before the appeal courts, given the large number of claims and increasing focus on equal pay. One interesting case concerns the rights of male ‘piggyback' claimants. These are men who have presented equal pay claims naming as their comparators women who have equal pay claims in which they name other male comparators. The male claimants are therefore in effect seeking to compare themselves to other male employees, which under equal pay legislation they cannot do, by relying on the claims of female colleagues. A recent case decided that this is permissible. The Court of Appeal will be asked to consider the position In April 2010.

Equal pay may prove to be a very expensive problem, especially for those who don't put their house in order. Investigating the position now cannot only allow you to rectify any problems, but may also reduce risk considerably in the long run.

Lorraine Heard is a partner in the employment practice of national law firm Dickinson Dees,