Five mistakes people make when conducting an Equal Pay Audit
| Equal Pay
Undertaking an equal pay audit is often thought of as a daunting task, but it doesn’t have to be that way. Key to making it a simpler process is to be clear about what you are trying to achieve and to be organised. From my experience of working with employers, there are some common problems, which I will explore here in more detail. As an introduction to the subject, an equal pay comparison can be made on three grounds:
- Like work – not necessarily the same job, but jobs that are similar;
- Rated as equivalent – jobs that you have rated as equivalent using a grading system; and/or
- Equal value – jobs that would be graded at the same level if graded using a job evaluation system
1. Understanding what is in scope of an equal pay audit
An equal pay audit (at least one that meets legal standards) should focus on contractual terms and conditions. Strictly speaking, anything that is contractual is in scope, but for most employers the important items are those related to cash payments. This could include base salary, bonus, allowances, and so on.
On the other hand, anything that is non-contractual is out of scope. However, this is where some care is required; what, at first pass, might appear to be non-contractual may have become contractual through custom and practice. So for example, you may have operated the same bonus or performance pay scheme for a number of years. You might say in your handbook or terms and conditions that these things are non-contractual. However, a court or tribunal could decide they are contractual, because over the years they have become the established way of doing things.
2.Biting off more than you can chew
In a reasonable size organisation it is not uncommon to find hundreds of jobs, or at least job titles. The organisation is likely to be made up of a number of business units and may be geographically dispersed. Whilst it is legitimate to compare a secretary based in Plymouth with an electrician based in Glasgow, this approach is likely to throw up so many comparisons that you will most likely get swamped by the data and will make reaching conclusions more difficult – you can’t see the wood for the trees (see also point three below).
There are a number of ways around this problem. The exact solution will depend on your circumstances, but let’s take an example. Let’s say you have implemented job families and have some sort of grading underpin to setting the family levels. What you can now do is conduct your equal pay analysis at a higher level; you could decide that all jobs in a family at a given level are “like work” and that all jobs in all families at a given level are “rated as equivalent”. Even in a large organisation, with many job families, the impact of this approach is to reduce the size of the audit by a factor of five or more. Even where you do not have families and levels yourself, you can adopt this approach. For example, you could use the families and levels that underpin the salary surveys
you use such as those that underpin all Paydata surveys.
3.Focusing on the analysis not the results
Whichever way you cut it, an equal pay audit involves manipulating a lot of data. In my experience, many organisations do not have easy access to reliable data about their people. Even if they do, few have the internal resources to design and build systems to manipulate and analyse the data thoroughly enough to really understand what is going on.
To support the equal pay work we do, we have developed over time a powerful database, which organises and analyses the data, and produces simple reports which highlight the main issues. What this enables our customers to do is to forget about all the data problems and to concentrate on the issues highlighted by the audit. Investigating the issues is where the people who know the business best can add the most value.
4.Confusing equal value with rated as equivalent
I set out some simple definitions of these two terms in my introduction. Many people get these confused, so it is worth looking at them in more detail:
a.Jobs are “rated as equivalent” when they are subjected to the same job evaluation system and the outcome is the same grade; and
b.Jobs are of “equal value” when they would be assessed as equal in terms of demands, such as effort, skill, and decision-making.
In practice, this means:
c.If you have jobs assessed as the same grade under a common job evaluation system then they are rated as equivalent;
d.If you have jobs that are assessed under two different evaluation systems then they may be of equal value; and
e.If either one or both of the jobs has been graded, then they may be of equal value.
This leads me to my last point.
5.Not having a sound basis for determining equal value
Job evaluation has taken a bit of back seat as a HR process over recent years, although I have noticed a bit a renaissance. As they say, wait long enough and everything comes back into fashion! However, for managing equal pay you do need a job evaluation tool and if you don’t have one in house you will need to “borrow” one. As I suggested above, one way might be to use the grading methodology that underpins the surveys you use. The other is to use an analytical job evaluation system like PAYgrade, which has been developed by Paydata as a simple and quick system that produces consistent results.
Whatever approach you adopt, the prospect of starting from scratch with grading your roles may fill you with horror. It would perhaps be better looked at as part of the process of ensuring your directors understand the level of risk that exists in the business for which they are ultimately responsible. As one HR Director said to me, “It is my duty to make sure that the risks in my area of responsibility are identified and highlighted to the Board and my fault if an unidentified risk becomes a liability.” Do you agree?