As the considerations in respect of possible inequality regarding starting pay on, pay protection and pay progression are similar, one checklist is provided to cover your pay policies and practices in these areas.
You should apply the checks in turn to starting pay, pay protection and pay progression policies and practices. It is possible that you will need to ask other questions particular to your organisation. Some of the considerations are as follows:
Typically, employees will join a pay grade or job as a new recruit, a transferee, on promotion, on re-entry after a career break, or following a restructuring of a pay and grading system.
Starting pay on joining a job/grade may be determined using a set formula/rule or simply be an amount agreed by the parties. Where a formula is used, the impact should be tested to ensure that its operation is not producing different outcomes by gender, ethnicity or disability. Where there is managerial discretion over starting pay, the impact of decisions should also be regularly checked by gender, ethnicity and disability.
You can find out if there is a problem in your organisation by looking at the amount you paid on recruitment, on change of job, and on promotion, to 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.
Pay protection arrangements
‘Red circling’ is a widely-used pay protection technique for protecting the pay of an individual or group whose job is downgraded following, for example, an internal reorganisation, grading review or implementation of a new job evaluation scheme, or following a relocation.
The use of red circling, which maintains a difference in pay between protected groups over more than a reasonable phase-in period of time will be difficult to justify. You should check that your pay protection arrangements are in line with prevailing case law.
Differences in pay between protected groups resulting from pay progression within a grade or job, whether by traditional increments or an alternative progression mechanism, may be objectively justified by the benefits to the organisation of increased experience ensuring greater expertise. But this justification erodes after an appropriate period of time.
Problems, however, may arise from the legacy of past incremental progression systems, which appear to lie at the root of, for example, some gender-based pay differences.
It is essential that any new pay progression arrangements are rigorously scrutinised both for their impact on protected groups, and for the strength of the ‘increased expertise and value’ justification. The argument is likely to be stronger if progression is linked to the achievement of pre-determined criteria.
The checklists below will assist in identifying potential equal pay issues. If you answer ‘no’ (or you do not know the answer) to any of the questions in the checklists you will need to further investigate the pay data and pay practice to ensure that it is free from discrimination.
Download Checklist 1: Starting pay, pay protection and pay progression
Starting pay: Action - what you can do to put things right
Have a clear policy – 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. For more on market forces see Equal pay in practice note 9.
Pay progression: Action - what you can do to put things right
Is your pay progression system is contributing to inequality in pay?
Different methods can be used to achieve and then to maintain equality. These include:
- Shortening the scales – long pay scales can lead to unequal pay. Women and those from ethnic minority groups joining at a lower point than a white 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.
- Guaranteeing that employees will reach the maximum within a reasonable timeframe through, for example, accelerated incremental progression.
- 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. If operated fairly, these will then provide a justification for position on pay scale.
- 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 may 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.
- 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.
Pay protection: Action - what you can do to put things right
Pay protection is often the most sensible and practical way of realigning rates of pay for employees after others have been found to be doing equal work but, as with any other aspect of the pay system, it needs to be well thought out and kept under review. Protection is a sensitive area and you may need to check prevailing case law.
Answering the questions in the checklist will help you to decide whether you need to take remedial action or not. The answers will also suggest some possible solutions.
Consult your employees and their workplace representatives. They will have views as to the acceptability of any proposals and they may also be able to suggest alternatives.
Look for alternative solutions. If the protection is likely to carry on for longer than three years, consider whether a one off non-consolidated lump sum to buy out the pay may be the better option.
Make sure that decisions on protection are properly documented. It makes good business sense for employees to understand why they receive benefits, but if you should ever be challenged, documentation will be essential. Properly documented decisions will enable you to explain your reasoning.
Transparency is a key feature of tackling equal pay problems. A transparent pay system, including clarity on pay protection, avoids uncertainty and perceptions of unfairness and reduces the possibility of individual claims.