Equal pay in practice checklist 5
What do we mean by 'starting pay'?
The term starting pay covers the amount someone is paid when:
- They join the organisation
- Their job changes significantly and its grading is reviewed
- They are promoted to a new job or grade
How do you find out if there is a problem?
You may start people at different rates of pay for apparently good reasons. However, it is all too easy for pay discrimination to creep in. As well as looking at differences between men and women, remember to think about other aspects of equality such as race, disability, and contractual status (full-time or part-time).
You can find out if there is a problem in your organisation by comparing the amount you paid on recruitment, on change of job, and on promotion, to, for example, men and women, people from different ethnic groups and those with a disability compared to those without, over the past year. If your records show that there is a tendency for people from one group to be favoured over another, then you need to find out why this happening.
A difference in starting salaries can have a long-term impact:
Bob and Rose both apply for a teaching job. There are two vacancies and both are appointed. The jobs are both classroom teachers at the same level so they would be seen as ‘like work’ under the terms of the Equality Act 2010.
Bob has been teaching for three years since he qualified. He asks for - and gets - a pay point above the minimum based on his salary in his previous job. Rose has taught for five years since she qualified. She is appointed to the bottom pay point because she had three years out of the job market to look after her children and did not ask for any more, because she really wanted this particular job.
Time moves on with Bob keeping his pay lead. Promotion opportunities come up. Bob and Rose both apply and both are promoted, but because of his current pay lead Bob is appointed to a higher pay point. When they come to retire, Bob gets a bigger pension because it is based on final salary and length of service.
What lies behind the differences?
The answers to following questions can help you find out what lies behind any differences in starting salaries.
- What skills does a person need to get the job? Were you clear about these before the selection process took place?
- Who decides pay on appointment? The human resources department? The reward manager? The line manager?
- What kind of information do they have to help them come to this decision? Are they alert to the possibility of pay discrimination?
- How is pay on appointment decided? Does it depend on what the person asks you for? Is it the going rate for the job?
- What kind of evidence do you use to tell you what the 'going rate' or market rate is for jobs?
- What are the criteria for agreeing to pay someone more than the lowest point of the salary scale?
- What kind of pay system have you got?
- Have you carried out a job evaluation exercise to ensure jobs are fairly valued across the organisation?
What else do you need to be aware of?
Importing pay inequity from outside
When people move from one employer to another their previous salary often determines their starting salary in the new job.
Have you checked what their previous salary really was? Leaving it until the P45 (P60) turns up is too late. Men, white employees generally, and older workers may tend to ‘talk up’ what they earn; women, those from ethnic minority groups and young workers may be more reticent. And if a woman is returning from a career break she may have no up-to-date salary information. Do you know whether the previous employer had a fair pay system? Are you running the risk of perpetuating someone else's inequality?
Compounding pay inequity on promotion
As our example shows, applying a percentage increase on promotion can compound a pre-existing pay inequity. When deciding how much to pay someone who has been promoted, you should apply the same criteria as for salary on appointment. Narrow pay bands with no overlap between them would mean everyone who was promoted would start on the same point. This would ensure fairness and help control the pay bill.
Flexible starting salaries
Some organisations have found appointment on the minimum point of the scale is too rigid. They want the freedom to appoint on a higher salary in exceptional circumstances. This might be, for example, where the candidate brings specific skills and directly relevant experience that would minimise training costs. A solution may be to put an upper limit on the discretion allowed, such as no more than 5% above the bottom pay point. This may be acceptable in genuine cases, as long as women and men are considered on an equal basis. You need to be aware of the risks of starting external appointments on higher salaries than people promoted internally. These could include poor morale, resignations or a potential equal pay case.
Action - what you can do to put things right
Have a clear policy on starting salaries – and follow it
A starting salaries policy should state that new appointees to a post or grade (whether new recruits to the organisation or internal promotees) will commence at the minimum point of the relevant pay scale or range unless the individual meets the criteria for a higher point on the scale, in which case they will be placed at that point.
Do not rely too much on previous salary. Skills and experience (consistent with criteria for pay progression) should be the only criteria for appointing at above the lowest point on your pay scale.
If the market rate for the type of work can be demonstrated to be higher than the salary in accordance with the starting salaries policy, then the most transparent solution is to pay the additional amount as a separate market supplement.
Be clear about the skills needed to get the job
Most jobs require people to have some knowledge and skill before they are appointed. What skills must a new starter have as the foundation for their subsequent development and competency in the post? These could be skills gained through training, education or experience. Then look at the value of those skills. Review the value placed on formal qualifications. Are they still relevant and necessary? It is important to strike the right balance between relevant experience, vocational training and educational qualifications.
In looking at written applications, it is good practice to make them anonymous, so the people drawing up a short list do not know the gender or race of the applicants. You can then compare candidates against the required skills without the risk of bias.
Decide what evidence you will use to tell you what the going rate is for a particular set of skills
Evidence about market rates is best treated with caution. Don't rely on hearsay. And because market rates change over time, a market premium that could have been justified two or three years ago may not be appropriate now. Remember that a skills scarcity may be a short-term phenomenon, and may be confined to a particular geographic area.
Consider whether your pay system is contributing to the problem
Organisations often have different payment systems and starting salary arrangements for different kinds of workers, manual/non-manual for example, or collective agreements covering different groups. How many systems do you have? Is that justifiable?
Under your pay system, how long will it take the new appointee to get the rate for the job? The more complex and less transparent the system is, the more vulnerable it will be to pay inequities. Systems based on broad bands and job families can cause problems. The narrower the band, the clearer is the justification for progression, which means less risk of problems. Even then, the way people progress will have to be carefully defined and the criteria used must be relevant. (See checklist 6 Pay Progression.)
Consider whether the people making the decisions on starting salaries need any training in avoiding pay inequity
Managers don't always realise the risks involved in setting starting pay when they agree starting pay for a new recruit or promotee. It is important that people involved in making pay decisions are trained in the whole range of pay equality issues, including race, disability, age and contractual status (whether full- or part-time). Send them on a course or get professional advice - perhaps from ACAS.
Make sure that decisions on starting pay are properly documented
It makes good business sense for employees to understand why they are paid as they are. It is also good risk management, because if you should ever be challenged in an employment tribunal, documentation will be essential. Properly documented decisions will enable you to explain your reasons.
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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