Equal Pay Audits (EPAs) – What They Are & Why You Need One (13 March 2020)

Despite legislation being put in place in 1970, there is still hard evidence that unequal pay remains a problem in the UK in 2020.

So much so, that a major campaign, #MeTooPay, spearheaded by Dame Moya Greene, OC, DBE with the support of over 100 senior business professionals, is currently working to redress the balance. You can read more about the #MeTooPay campaign and my personal involvement in my article here.

I am passionate about this cause, and working towards stamping out unequal pay fully aligns with my ambition to support UN Sustainable Development Goals #5 Gender Equality and #10 Reduced inequalities.

A quick recap about Equal Pay

Equal pay is a legal obligation under the Equal Pay Act 1970 and is defined as the difference in the pay of a man and woman doing ‘equal work’.

It’s also important to note that equality legislation does not just relate to gender. It covers all protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.

How can you avoid unequal pay situations?

This is a question I get a lot, and you’ll be pleased to hear that there are a number of steps that can be taken to assess, address and redress situations of unequal pay.

One of the tools to detect unequal pay situations are Equal Pay Audits. To ensure that you’re operating within the law, and, of course, treating your employees fairly, I recommend that you conduct regular EPAs. If you haven’t done one in a while, now is the time to act!

What is an Equal Pay Audit, and why should you bother?

An EPA is an exercise that compares the pay of employees deemed to carry out ‘equal work’, which is defined as:

  • like work: work that involves similar tasks with similar skills;
  • work rated as equivalent: work that has been rated under fair job evaluation with the same number of points;
  • work of equal value: work has been rated of equal value in terms of effort, skill and decision-making.

The audit highlights any pay discrepancies and whether they are discretionary or systemic. It then provides a plan for redress.

As with any project, it’s essential to ensure that your EPA is properly planned out and resourced appropriately. This includes sponsorship from a senior leader and a good communication plan with the workforce.

There will be follow up actions, so you will also need to ensure time and budget are available to redress findings, review, and amend processes and systems to avoid new potential cases.

While an EPA may be perceived as unnecessary, expensive and time-consuming, the potential return on investment far outweighs these considerations. By not conducting regular EPAs, you risk potential lawsuits which will be much more costly in terms of back pay, settlements and reputation, as well as your time commitment. I suggest looking at an EPA as a health check of your organisation.

It’s worth noting here the lengthy legal cases of Stacey Macken, Samira Ahmed and the other women who took the BBC to court. The lawsuits took years, and a number are still on-going. Pay-outs can exceed 6 figures for back pay over a number of years.

With this as the alternative, an EPA is well worth the upfront time and effort!

What Is defined as ‘Pay’?

When looking at ‘pay’, you need to include all of the following aspects of an employee’s remuneration package:

– basic pay

– variable pay (eg. bonuses)

– overtime rates and allowances

– severance and redundancy pay

– access to pension schemes

– benefits under pension schemes

– hours of work

– sick pay

– benefits

Ok, I get it… So, how do I conduct an EPA?

An Equal Pay Audit is a six-step process:

  1. Decide which employee population you will include in your audit that is deemed to be doing ‘equal work’;
  2. Collect the necessary pay information (see above list);
  3. Audit and clean the data itself. From my experience, there are always data points that need double-checking and correcting;
  4. Analyse pay gaps and provide an evidence-based rationale for differences;
  5. Where that is not possible, investigate further if direct or indirect bias has crept in;
  6. Determine actions, including amending systems and processes, for redress and put into place swiftly.

Things to consider in your EPA

When it comes to equal pay in your organisation, there are a number of potential pitfalls that you’ll want to avoid. These include:

  •  A lack of transparency or secrecy over pay decisions. Contractual secrecy clauses are unenforceable in relation to discussions about equal pay under the Equality Act 2010.
  • Discretionary pay systems. These are a very common practice and can lead to unequal pay if they remain unchecked and unchallenged.
  • Non-payment of discretionary or incentive payments on maternity leave. I remember very earlier on in my career, some female colleagues would try and time their pregnancy in order to not lose out on their bonus!
  • Different variable pay terms for different groups of employees.
  • Different pay structures across the organisation.
  • Overlapping and wide scales. Again, this used to be a common practice which was very difficult to defend in a court of law. If it’s still the case in your firm, be aware!
  • Managerial discretion over starting salaries. There is a growing trend of employers no longer asking for previous salaries during the recruitment stage. This is helpful to stop perpetuating unequal pay situations from one employer to the next.
  • Market-rate pay: market rate is often used as the basis for determining pay. Third-party salary surveys are also wrongly used as a proxy job evaluation and grading tool.
  • Job evaluation systems that are not fit for purpose. I remember the case of the Prison Service in 2006 where the PCS union claimed for equal pay for 3,300 women working in support administrative and managerial roles with male prison officers and governors on the basis of job evaluations. This resulted in a cost of £50million in back pay.

What can YOU do about promoting Equal Pay?

Everyone in the workplace has a role to play to stamp out unequal pay.

Employees: be aware of your internal and external worth and claim it.

Line managers: be vigilant when recruiting, managing and promoting your team members;

I would also like to call out three other groups of stakeholders who have a major role to play:

  • My HR and Reward colleagues, whose role it is to design and implement pay structures;
  • Executive Committees and Board members: in my article about the #MeTooPay Campaign here, Dame Moya explained that CEOs can be unaware of such potential financial and reputational risks linked to unequal pay cases; and
  • Investors, whose responsibility it is to invest in firms who treat their employees fairly. As part of your stewardship engagement, ask your portfolio companies for their latest Equal Pay Audit.

Support and help is available

You can find resources and get more information about Equal Pay from the following bodies:

The Equality and Human Rights Commission (EHRC)

Law Society of England and Wales

Law Society Scotland

ACAS

Equal Pay is a legal requirement and a genuine risk to your organisation and the stakes are high if you don’t comply. For support implementing an EPA in your business, please book a call with me to find out how I can help you mitigate your risks and become an employer of choice.

Book your call here >>> https://calendly.com/responsiblereward

Corinne Carr is the founder of PeopleNet Ltd, an independent remuneration consultancy specialising in Responsible Reward. Read her report, Responsible Reward: How to fulfil your environmental, social and governance promises through performance and pay, and watch her explainer 2-minute video. www.peoplenet.ltd.uk