Equal pay in practice checklist 14
What is an equal pay audit?
An equal pay audit involves:
- Comparing the average pay of men and women doing equal work
- Undertaking similar comparisons for white employees and those from minority ethnic groups, those with and without disabilities, from different age groups and of different contractual status
- Explaining any equal pay gaps
- Closing any gaps that that cannot be justified on grounds other than sex or other characteristic.
Whatever kind of equal pay audit process is used and whatever the size of the organisation, the essential features are the same. While employers are not obliged to carry out an equal pay audit, only an equal pay audit can ensure that they are providing equal pay.
It is important to recognise that an equal pay audit is not simply a data collection exercise. It entails a commitment to put right any pay inequalities related to a protected ground and which cannot be justified.
What kind of support is available to an employer who decides to carry out an equal pay audit?
In addition to the Commission's forthcoming Equal Pay Audit Kit employers can find practical tips on examining starting pay, grading, bonus payments, and so on. These tips explain the more common causes of unequal pay in the workplace and what can be done to address them.
What is the Commission's Equal Pay Audit Kit?
Our toolkit consists of a 5-step model that sets out the mechanisms for conducting an equal pay review:
The toolkit contains details of how to carry out the various steps and specifies the data that will be needed to do an equal pay audit.
Where does software fit in?
In order to carry out an equal pay audit an employer will need to collate and analyse a range of data about employees and what they are paid.
Information relating to pay will be held in the organisation's payroll system, which, for all but the smallest organisations, is usually computerised. However, the nature and extent of the data held varies widely from one employer to another. It may include a range of pay elements e.g. basic pay, performance pay, overtime, and so on, as well as the employee's job title, sex, grade and department.
Information particular to the employees e.g. their starting date, length of time in current job, performance markings and so on, is also needed for an equal pay review, but that may be held separately on a human resource or personnel system.
An equal pay audit calls for a statistical comparison of average pay for equal work as between men and women, those from different ethnic backgrounds, with and without disability or of different contractual status, and exploration of the causes of pay gaps. This means manipulating data that may be found in human resource systems, or in payroll, or across both. Feedback from employers on the Commission's model shows that there is a demand for software to help them through the data analysis stage.
How do organisations generally hold their data?
Organisations vary in the way in which they hold and manipulate data. Some use integrated human resource and payroll systems in which all the data is held in a single system and can be extracted in a single report i.e. a computerised analysis of specified data.
Some use human resource and payroll systems that operate independently of each other, but which are linked, so that data can be exported from one to the other. This too allows reports that contain data from both systems.
Some use human resource and payroll systems that operate independently of each other, but are not linked. As information cannot be exchanged between the two systems to produce a report containing data from both systems, either data will have to be exported to a separate spreadsheet, or an additional report-writing software tool will have to be used.
Some have different payroll systems for different groups of employees, for example, those receiving weekly or fortnightly wages and those paid monthly salaries. Again data will need to be exported from each payroll system to a single spreadsheet and may need checking to ensure it is in compatible format.
Some use computerised payroll systems, with human resource information being held manually.
Some outsource their human resource and payroll systems to an external payroll service provider. This is becoming increasingly common, especially amongst larger organisations.
Ask the organisations to whom you have outsourced the administration of your payroll to work with you to ensure that your pay processes are equality proofed. If you were ever to be challenged at tribunal, you would be the one who would have to provide the explanation, so you need to know that the processes you are relying on can stand up to scrutiny.
Example - a small government agency
In carrying out their equal pay review the agency put the relevant data onto a standard spreadsheet for analysis. They drew data from both payroll and human resource systems. They also had to input some data manually onto the spreadsheet. Although this required commitment of time and resources it was not difficult. Once the spreadsheet had been created it was available for future use so the initial resource commitment did not have to be repeated. Once the data was on the spreadsheet the analysis was straightforward.
Example - a magistrates courts service
The service has its own human resource system, but the local authority handles its payroll and the service can neither search nor generate reports from the pay system. The service has to ask for specific reports from the local authority payroll department. These are provided in paper-based format, although there would seem to be no reason why they could not also be provided electronically as a spreadsheet.
Data could easily be exported from the human resource system onto a spreadsheet. The task would be to decide what data to export. Most of the data could be used directly, but some might need interpretation before export e.g. to get 'time-in-post' would mean using a standard formula to calculate this from the 'start-date-in post' data. Once a spreadsheet format had been set up it could be used again and again.
In principle the local authority payroll department could be asked to provide a spreadsheet report each year-end with the relevant information and this could be dropped into the pre-formulated human resource equal pay review spreadsheet. Using the human resource systems reporting software would also be reasonably straightforward.
How can employers obtain the software to support an equal pay audit?
The Commission is not able to recommend particular software suppliers. However, the payroll and human resource systems used by most medium to large organisations are capable of supporting an equal pay audit if the data and reporting tools required are specified by the user organisation at the outset. Employers can therefore fully specify the data and reporting required for an equal pay audit when they first set up or alter their payroll and human resource systems.
User organisations can relatively easily customise some of the newer software to meet additional requirements that were not part of the original specification. It may not be possible to customise some older systems.
Because an equal pay audit requires data from both the human resource and payroll systems there is scope for software solutions to the task of bringing the data together, analysing it, and presenting it. Software suppliers can provide equal pay audit options in their standard reports or, alternatively, they could build in the flexibility to carry out an equal pay audit should the user organisation decide to do this.
Smaller organisations may not hold all the data required for an equal pay audit in an electronic database. The EOC produced an equal pay kit for small enterprises that includes guidance on how to set up an equal pay audit spreadsheet.
What about ethnicity, disability and age?
An equal pay audit is concerned with an important, but narrow, aspect of discrimination in employment â€“ the pay of women compared to men (or vice versa), or other protected groups, doing equal work . Before embarking on a wide ranging equal pay audit it will be necessary to consider the quality of the information available and whether it is adequate for the purposes of carrying out a wider review.
An equal pay audit starts with a statistical analysis of data. If the data is incomplete or defective, the audit outcomes may not be robust and inappropriate conclusions may be drawn. The wider the scope of the review the more likely it is that the employer will require software capable of supporting the review.
About the Equal Pay in Practice checklists
Whilst every effort has been made to ensure that the advice given in this note is accurate, only the courts and tribunals can give authoritative interpretations of the law.
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