Equality and Human Rights Commission

In this step you will:

• Check the causes of any differences you have found in pay
• Consider whether those differences in pay are justifiable and why

A. Checking the causes of pay differences

If you have found pay differences between male and female employees doing the same jobs, or between white and ethnic minority employees or disabled and non disabled staff, or you have found that some jobs fall within a few points of each other using the equal value estimator, you need to find out what is causing those pay differences. You may find, for example, that their starting salaries are not always the same, or that part-time workers are paid less per hour than full-time workers, or that some employees are paid more in bonuses than others.

There is a checklist to help you determine the causes of pay differences.

• Download Checklist - causes of pay differences (Word)

In small businesses, common causes of differences in hourly basic pay and hourly total pay between men and women doing equal work are:

• Differences in starting pay - due to the ‘going rate’ for jobs in the local area
• Differences in pay increases since joining
• Longer service in the job can lead to higher or lower pay
• Differences in rates of overtime and shift pay, with some jobs attracting higher rates
• Some jobs are paid commission but others are not
• Some jobs receive bonuses but others do not.
• Some receive benefits, such as free meals on duty or taxis home for late workers, company cars or mobile phones

Some of these differences, for example overtime and commission, may be justified by the requirements of the job, but if you cannot justify the pay differences in your audit they may leave you open to equal pay claims.

B. Considering whether pay differences are justified

If you have found differences between, for example, the pay of men and women doing equal work, you need to be able to demonstrate that those differences are not related to the sex of the job holders and that the higher payment is justified. Otherwise you may get equal pay claims. You cannot rely on your perception or hunch that the higher pay is justified. You need evidence. There are some examples below that demonstrate some of the common reasons for pay differences in small businesses.

You should keep a record of the causes of your pay differences, whether you think they are justified and your reasons. This kit contains a checklist to help you do this.

Download Checklist: are pay differences justifiable (Word)

Examples

'Going rates'

• Pay difference: In the equal work group, male delivery drivers have higher hourly rate than female machinists
• Possible reason: Higher local ‘going’ rate for delivery drivers
• Type of evidence: Current adverts in local press showing prevailing rates and you have recent evidence of difficulty recruiting to the higher paid job

Service

• Pay difference: In the equal work group, longer-serving female employees earn more than men with shorter service
• Possible reason: Those with longer service are more experienced and perform better
• Type of evidence: Records that higher pay for longer service reflects real differences in job performance gained by experience of the work

Bonus or commission

• Pay difference: In the equal work group, some male employees have higher hourly total earnings due to bonus or commission payments
• Possible reason: A need for the business to provide these payments e.g. to incentivise sales people and to recruit and retain them Type of evidence: Appropriate records. Then you need to justify the amounts paid e.g. by records of sales figures

Performance

• Pay difference: In the equal work group, some employees are paid more for performance
• Possible reason: Because they are considered ‘better’ at their jobs
• Type of evidence: If this means that the higher paid employees perform better, you should be able to demonstrate this objectively e.g. by reference to work targets and outputs

There are more examples provided in the checklist: are pay differences justifiable? (Word)

You need evidence to justify differences in pay between men and women (and between white and ethnic minority; disabled and non-disabled) employees doing equal work to show that the pay differences are not due to the sex, ethnicity or disabled status of jobholders. If you cannot justify the differences you need to take action to deal with the pay differences.

Summary

At the end of step four you should have:

• Checked the causes of any differences in pay for employees doing equal work
• Considered whether those differences are justified, whether you have the evidence for this and kept a record of it

For any differences you cannot justify you will need to take action to deal with the pay differences.

Now you are ready to move to step five - moving forward.