Legal

How to conduct an equal pay audit

2 Feb 2021 By Alana Penkethman

Alana Penkethman explores the benefits of regularly reviewing pay structures and employee salaries

Reviewing pay is a useful exercise for assessing the efficiency and productivity of your business. Beyond allowing employers to check their employees’ salaries, it allows businesses to assess the duties and requirements of roles, learning how employees work and apply themselves, and considering how age, length of service and gender vary across the organisation. This can provide useful insight as to where improvements can be made. 

How do I assess work?

There are three categories of equal work: like work, work rated as equivalent and work of equal value. Each of these has a different definition in law, but initially you could consider the following factors:

  • tasks and duties;
  • skills and knowledge;
  • responsibility and initiative;
  • physical demands and risk; and
  • emotional stresses and mentality.

You should try to ignore job titles, and instead look at the specific duties of the work. You could also use a job evaluation scheme to provide objective assessment, and perhaps generate a scale or structure for pay. To avoid potential unfairness, it is sensible to have a few people assess each role, and for the panel to be diverse and impartial. 

How do I assess pay?

Once you have identified groups of equal work, you should gather the pay data for each individual within that group. You can then find the average hourly rate for the women in the group, and the average hourly rate for the men in the group. There are benefits as to whether you calculate the mean average or the median average, and this will depend upon whether you wish to identify extremely high earners or whether you want to assess the differences across the group.  

How do the figures compare? Is there much of a gap between the averages? A pay gap isn’t necessarily discriminatory, nor is it automatically unlawful. However, it may be that a procedure or policy is impacting pay disproportionally. If this is the case, the business is exposed to an equal pay claim, and is ultimately holding back the potential of its staff. 

What do I do with the results?

There is no point in carrying out an audit unless you intend to use the results to take action. If the difference between the results is minimal, great, well done. If the difference is significant, you could start by looking at the factors that determine pay within your business. 

How does your business determine starting pay for each pay group – is it based upon experience or age? How are pay increases decided – does it depend upon performance or results? How about bonus payments – are they based upon targets or working time? 

Ultimately, you need to be confident that any discrepancies between the results, and the barriers to those higher rates, have nothing to do with the gender of the employees. If gender is relevant, you need to address this.

What quick wins can I make?

Make sure your pay structure is transparent. Employees should be able to understand how their pay is calculated and how they can move up the pay structure. Ideally, one simple pay structure should be used across the business. 

Update and review your job evaluation schemes regularly and ensure it reflects the objectives of both the role and the business. Is everyone working towards the same goal and contributing at an appropriate rate? 

Finally, review your policies to make sure they don’t indirectly discriminate. You could also introduce an equal pay policy. Not only will this set out the position clearly for employees, it will be a helpful document should you need to defend an equal pay claim.

Alana Penkethman is a chartered legal executive at Parker Bullen

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