Equal pay in practice checklist 6
What do we mean by pay progression?
In many organisations employees are able to move up a pay band or scale. This is known as pay progression. The worker might progress:
- On a specific date, such as the anniversary of their joining the grade, or at the start of the financial year. This is known as incremental progression.
- As the result of having achieved an agreed performance marking or target.
- As the result of having attained a particular level of competence e.g. having completed a training programme, or having attained a job related qualification.
How do you find out if there is a problem?
You should check that men and women, white and ethnic minority employees, disabled and non-disabled, of differing age groups and contractual status with comparable lengths of service and doing equal work, or in the same grade or band, receive equal average pay. If one of those groups clusters at a particular point compared to other comparable groups you need to investigate why this is.
If you have a 'broadband' pay system you will find that it can take many years for a worker to reach the top of the scale, if at all, irrespective of how well the employee performs. This can lead to perceptions of unfairness, but in some circumstances it could also give rise to an equal pay claim. You should also check that, if there are bars to progression, such as having to attain a certain qualification or level of experience before they can progress, this is a genuine job requirement and that all groups pass through the barriers in equal proportions.
An example to illustrate how progression can give rise to unequal pay
In Crossley and Others v ACAS 1999 (Birmingham ET 1304744/98) Ms Crossley was paid less than two male comparators. All three were on pay grade eight but as the men had progressed further up the pay scale they earned about £3000 a year more. Ms Crossley had had similar performance appraisal markings to the men in a system where pay progression depended on performance. The men had worked for the organisation longer and so had been rewarded for their longer service.
The tribunal held that Ms Crossley had the necessary experience to justify the same basic salary as the comparators and was equally able to carry out the duties of the grade. The tribunal did not accept that there was any 'objective justification' for the difference.
What lies behind the differences?
The answers to following questions can help you find out what lies behind the differences. 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- or part-time).
- Do workers from the various groups start at the same rate? (see Equal pay in practice 5 – starting pay)
- Are there long pay scales for each grade to progress through?
- How do employees progress through the scale or grade? Has the method of progression been checked to ensure that all employees who are equally able to do the job receive equal treatment?
- Do, for example, women and men and people from different ethnic groups progress at similar rates? If there are different rates of progression, what are the reasons for these?
- If performance appraisal is used as a means of progression then the performance related pay scheme does need to be checked for sex, race or other forms of bias.
- What happens to women on maternity leave and career breaks? Some employers pay women on their return from a career break as if the women had progressed in the usual way, in order to prevent the pay gap widening.
What else do you need to be aware of?
Women – or people of a particular ethnicity or disabled workers - clustering near the top of a pay scale may point to a promotion problem. It may be that, for example, women tend to stay longer in that particular grade due to lack of promotion opportunities or bias in the promotion procedure favouring men.
Seniority or length of service may or may not be a satisfactory explanation for differences in pay. Length of service is a factor which, as the example shows, may be used to discriminate unfairly against one sex or the other. You need to consider what you are really rewarding; is it loyalty, experience, performance or competence?
Action - what you can do to put things right
Is your pay progression system is contributing to inequality in pay?
If slow rates of progression are giving rise to unequal pay the system may need speeding up. Different methods can be used to achieve and then to maintain equality. These include:
- Guaranteeing that employees will reach the maximum within a reasonable timeframe.
- Setting time limits within which employees will reach each pay point.
- Setting target pay points for all staff to reach within a specific time. This means that you guarantee all workers currently employed will have reached a certain point e.g. 70% of the maximum, by a set date providing this is equitable across protected groups. Progressing beyond that target point to the max must also be equitable.
- Setting competency and experience criteria for workers to reach each pay point.
- Differentiating awards by the employees' existing position in the pay band; e.g. giving those at the bottom of the pay band a higher percentage pay increase than those at the top.
- Where a scheme has equity shares, reducing the differential between them. This means lessening the difference between awards for employees receiving different performance marks.
- Reducing the number and range of performance and box markings. Performance or box markings introduce an element of managerial discretion and thereby increase the risk of bias against groups of employees. Reducing the range of markings cuts down the number of possible differences in individuals' pay within the grade or job, thereby, leaving less scope for possible discrimination.
- Shortening the scales. As the example shows long pay scales can lead to unequal pay. Women and those from ethnic minority groups joining at a lower point than a man can take years, if ever to catch up. Shorter pay scales, which accurately reflect the time needed to become fully competent at a job, are a positive step.
- Underpinning increases. This means giving minimum cash increase to all workers e.g. 4% or £500, whichever is the greater. This enables lower paid workers to move up the scale.
There is no one best method of progression through the pay bands. Different methods will be appropriate depending upon the size of organisation and the composition of staff. Even in the same organisation, methods may vary depending on the circumstances at the time.
All these methods assume that changes are made to the existing pay systems. Consideration should also be given to introducing a new structure that takes equal pay into account at all stages e.g. introducing short pay bands with clear and fair progression through a number of points.
Consider whether the people making decisions on progression need any training to avoid pay inequity
Managers with responsibility for deciding on the method of progression or with the responsibility for making recommendations and decisions on progression may not always realise the potential impact of their decisions for equal pay. The greater the degree of managerial discretion, the greater the need to ensure that managers are trained in how to avoid bias.
In Latham v Eastern Countries Newspapers Ltd (ET Case No 32453/93) the employer argued that Ms Latham was paid less than her male comparators because the men had been assessed for higher performance-related increments. The Tribunal rejected this on the ground that there was confusion, double-counting and an absence of transparency in the system. There were insufficient guidelines for the assessment and this had allowed inadvertent sex bias to affect managers’ performance rating.
Make sure that decisions on pay are properly documented.
It makes good business sense for employees to understand why they are paid as they are, but if you should ever be challenged in an employment tribunal, documentation will be essential. Properly documented decisions on progression will enable you to explain your reasoning.
Transparency is a key feature of tackling equal pay problems.
A transparent pay system is one where employees understand not only their rate of pay but also the components of their individual pay packets. A transparent pay system avoids uncertainty and perceptions of unfairness and reduces the possibility of individual claims. If pay is dependent upon progression then the progression system too must be transparent. Employers may have difficulty convincing a tribunal of the non-discriminatory character of their pay system if the basis for progression up a pay scale is unclear or overly complicated, as the example above illustrates.
The Commission has published proposals on how to measure the gender pay gap in your work place to improve pay transparency. Read the proposals and guidance to increasing pay transparency.
Whilst every effort has been made to ensure that the advice given in this note is accurate, only the courts or tribunals can give authoritative interpretations of the law.
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