Employers – let’s talk about pay
The subject of pay is always a hot topic and requires sensitive handling. Employees feel they need more, due to the rising costs of living, or believe they deserve more due to increased responsibilities or experience. Meanwhile, employers are under pressure to cut costs while seeking to attract the best people with an attractive package.
‘These conflicting tensions sometimes make it difficult to strike the right balance, so employers need to take care when looking at setting pay levels to ensure that your business is not vulnerable to a claim relating to equal pay or discrimination,’ says Paula Stuart, a Partner in the Employment team. ‘There are a number of ways in which employers can avoid creating these risks and ensuring staff feel fairly treated when it comes to pay.’
Here, Paula highlights the risks and how to address them.
A recent YouGov poll confirmed that women are still less likely to ask for a pay rise than men; 46% of men have requested a pay rise, compared to 33% of women. A man’s request is also more likely to be successful than a woman’s (31% of men, compared to 21% of women). The differences become starker the older the age group. Commentators suggest that this may be because women, as primary child carers may feel less entitled to ask for a pay rise as they need to work flexibly. This is just one way in which discrepancies between men and women’s pay can come about.
What is the gender pay gap?
Public sector employers and large firms are required to report their gender pay gap each year. This is the difference between men and women’s average hourly earnings in an organisation. Nationally, the gap is slowly closing. For those businesses who are not legally required to report, there are benefits to doing so voluntarily. It may help highlight patterns of exclusion or barriers to progression. Although it is not currently a legal requirement, ethnicity pay gap reporting can highlight these patterns in relation to ethnicity. A published strategy for addressing any pay gaps can be beneficial.
The gender pay gap is not the same as unequal pay; it may simply show that more men do better-paid jobs than women. The risk of equal pay claims arises when men and women are paid differently for doing equal work. Tribunals scrutinise work in several ways to decide if it should be paid the same. This includes comparing factors such as skill, effort and decision-making involved in seemingly very different jobs, such as cooks and carpenters, or refuse collectors and kitchen assistants.
Justifying a pay difference
You may be able to defend an equal pay claim if you can prove that the difference is due to a reason which is untainted by sex discrimination, for example a difference in skills and qualifications. We recommend seeking advice if you have identified potential pay discrepancies. Defending an equal pay claim can be difficult particularly if, for example, the reason for the difference unwittingly continues discriminatory pay practices or rewards being flexible in relation to working hours where this disadvantages women.
Keeping pay secret
While equal pay claims relate to differences in pay between men and women, differences in pay because of another protected characteristic, such as ethnicity, may result in a discrimination claim. Employers can include a pay secrecy clause in contracts of employment but the effect of these is limited. Employees cannot be prevented from asking another employee about their pay when this is to uncover if colleagues are paid more due to gender, ethnicity or another protected characteristic. Any employee making these enquiries is protected from victimisation, for example by being excluded from meetings or refused promotion.
What is proximity bias?
Proximity bias is showing favouritism towards those employees with whom the manager is physically working in the same office, to the disadvantage of those working remotely. One of the risks arising from the increase in working from home is the potential creation of ‘in-group, out-group dynamics’ which can influence pay rises and performance-related rewards. If women or employees of specific ethnicities are more likely to work remotely for a greater proportion of their working time, this may create discrimination risks as well as retention problems.
Line managers may need training to improve their remote management skills. This includes moving away from assessment of employees based on the line manager’s day-to-day observation of them. See our earlier article on hybrid working.
Some employers are offering employees different pay depending on where they live and how frequently they come into the office. A major City law firm recently offered staff a 20% pay cut for working fully remotely. On the one hand, it may seem fair to pay more to reflect the higher costs of living near the office. On the other hand, is it fair to pay employees less for doing seemingly the same job? Does this give the message that work done remotely is less valuable? What does this mean for employees who work from home because of a disability or caring responsibilities? Employers need to carefully consider their rationale for introducing these arrangements so that they have a sound justification for any unintended discriminatory effects.
What can we do?
Even if you assess your gender and ethnicity pay gaps, this may not reveal unequal pay or other discrimination risks. Auditing your employees’ remuneration package against their gender and other protected characteristics is a crucial first step. Part two of the Equality and Human Rights Commission’s Equal Pay: Statutory Code of Practice gives detailed guidance on pay audits.
If your audit reveals potentially discriminatory pay, we can advise you on ironing out these differences. Your action plan following the audit should address issues such as monitoring pay, pay policies and using pay structures, rather than relying on managerial discretion.
How we can help
We are experts in discriminatory pay claims and can advise on dealing with these in the most cost-efficient way. We can advise you on ensuring that your data protection arrangements are suitable for a pay audit and assessing any pay gap. We can support you in minimising discriminatory pay risks and help reap the recruitment and retention benefits of paying fairly.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.