Step one involves some crucial decisions about the entire equal pay audit. It is particularly important, especially if this is your first review. The key areas to consider are:
A full equal pay audit would include all employees in your organisation who are ‘in the same employment’ (See the Code of Practice on Equal Pay) and would consider relative pay of each protected group.
For practical reasons you may find it is not possible for you to carry out such a comprehensive equal pay audit at once. Determine the scope taking account of practical considerations, such as availability of information, and do as much as you can.
You may decide to carry out the audit in stages, but you need to be aware that this increases the risk of an equal pay claim being made.
For practical reasons few organisations are able to carry out a pay audit of the whole workforce on a wide range of protected groups at the first attempt. You may decide to take a staged approach, perhaps beginning with an audit of men’s and women’s pay and developing expertise in the audit process before extending the scope in your subsequent audits.
The equal pay audit toolkit deals with identifying pay gaps on grounds of sex, working pattern, race and disability.
In order to examine pay on any of the grounds listed you must have that information for all, or most, of the employees covered by the review. So,before deciding the diversity scope of your audit consider the extent and quality of the information available about the make up of your workforce by ethnicity and disability and whether this is adequate for the purposes of carrying out an audit. If not, this suggests more work is needed on diversity monitoring in your organisation. The section of the kit dealing with data collection and analysis gives advice about the type of analysis that is possible when you have incomplete information, for example, about ethnicity or disability.
A full audit would include all your employees who are in the 'same employment' for the purposes of the equal pay provisions of the Equality Act 2010. Think about, and decide whether you need to take legal advice on issues such as 'same employment' issues (especially in respect of associated employers) TUPE transfers, or employees on protected pay.
A full equal pay audit provides the highest level of confidence that you have identified and eliminated unequal pay and associated legal vulnerabilities. For practical reasons, organisations may decide to conduct their audit in stages. If you cannot achieve full coverage be aware of the limitations of your audit. This may involve a risk assessment to determine which parts of the organisation to audit first. Include any particular equal pay concerns of which you are already aware, for example, high/low paid groups, jobs heavily populated by one sex or ethnic group.
Your audit is likely to need input from people with different expertise, for example, knowledge and understanding of the pay and grading arrangements; of any job evaluation schemes; of the payroll and HR systems and of how to get information from these. So, a project team is likely to be required. You may need to consider whether to bring in expertise from outside the organisation.
You need to consider when you are going to involve trade unions or other employee representatives.
Who should be involved?
The project team. Bring together the necessary expertise. An equal pay audit requires knowledge and understanding of your organisation’s pay and grading arrangements; any job evaluation system/s you use; payroll and human resource information systems; plus knowledge and sensitivity about key equality issues, such as occupational segregation. It is also helpful to have some insight into how these have evolved over time. Consider carefully what resources you need. Decide the likely resourcing between internal and any external expertise.
The Advisory, Conciliation and Arbitration Service (ACAS), the employment relations experts, offer practical, independent and impartial help to help bring pay systems up to date.
The workforce.You need to consider when and how you are going to involve trade unions or other employee representatives. Involving the workforce is important for several reasons:
In organisations where an independent trade union is recognised, the employer is required to disclose to that union any information necessary for collective bargaining, and this is likely to include information about pay systems.
The audit requires a range of information about every employee and what he or she is paid. Before decisions about the final scope of your audit can sensibly be reached you will need to establish what information you hold and how accurate and accessible it is.
For more details on the data required for your audit see Step 1 - additional information.
Data protection: you will need to consider the data protection issues involved in conducting an equal pay audit. You should ensure that you are aware of your legal obligations when processing personal data, and consider the approach you intend to adopt in relation to the disclosure of the results of the audit.
For further information on the Data Protection Act see Equal pay in practice - conducting an equal pay audit in accordance with Data Protection Act principles.
What information will be needed and what tools are available?
You will need to collect and compare two broad types of information about each employee included in the audit:
The information required will vary depending upon the type of organisation and on the particular pay and grading system.
Besides considering whether you have the information required about each employee in the audit, other important considerations at this stage include:
The accuracy of the data. Names, grades, titles and so on need to be up-to-date and accurate. Even seemingly minor inaccuracies can contaminate results. If you have not undertaken a data cleansing exercise on pay and human resource data recently, then you are likely to need to allow time for this when planning your equal pay audit. (See Data Cleansing guidance.)
Bringing together the information for analysis. If you have a combined human resource and payroll system the information you need should be there. In many organisations the information required needs to be drawn from more than one source, including the payroll system and the human resource system. At this initial stage in the audit you need to plan how you will bring the information together and how you will analyse it. Detailed guidance on the type of analysis required is in step 3 of the kit - Typical sequence of analysis in an equal pay audit.
The key tool for conducting pay audits is the Commission’s equal pay audit kit and its 5-step process. Guidelines on conducting equal pay audits have been published by various bodies including local government, and the Joint Negotiating Committee for Higher Education Staff, the TUC and various trade unions. These may contain useful additional sector specific advice. You may also wish to consider encouraging your own sector to produce such advice.
Most organisations use Excel for various business purposes and it is possible to undertake many aspects of your audit using Excel. Recently, bespoke software packages have been developed for conducting equal pay audits. These allow for speedy and in-depth investigation of pay gaps by any diversity strand and also provide a useful tool for equality impact assessments.
Your audit is not just a data collection exercise. Alert senior management to the possible outcomes of the audit and secure their commitment to an equal pay action plan. Make them aware that the audit needs to be built on a commitment to possible changes in pay.
Key messages include:
Many employers genuinely believe that they are providing equal pay. They embark on a review with an expectation that no inequalities will emerge. It is important to recognise that an equal pay audit is not simply a data collection exercise. It entails a commitment to action if unjustified pay gaps are found.
Early in the process you will need to set realistic expectations about possible outcomes. This may include:
Expect some pay gaps
It is rare for employers to emerge from a properly conducted pay audit without some pay gaps or aspect of pay policy requiring change. That does not mean that pay discrimination has been deliberate. Pay gaps are likely to have been caused by the impact of historical factors, such as service. The gaps may be justified. Take one step at a time in the analysis and explanation of pay gaps and remain objective. More advice on analysing the causes of pay gaps is given at step four.
Alert senior management to the possible outcomes of the audit and secure their commitment to an equal pay action plan. Make them aware that it is not just a one-off data collection exercise but part of an ongoing process that includes anticipating the possibility of action under step five of the kit to close pay gaps.
An equal pay audit may not reveal all your individual equal pay vulnerabilities
The focus of an equal pay audit is on ‘systemic’ inequality in pay – identifying and resolving gaps in average pay between groups of men and women, between people from different ethnic groups and other protected groups. Its prime purpose is to explore whether pay policies or practices, past or current, have systematically disadvantaged any particular group.
In most organisations it would be unrealistic to compare the pay of, for example, every male employee with that of every female colleague performing equal work and to investigate every one of those gaps because of the sheer number of possible comparisons.
That limitation is all the more marked given the large number of permutations of possible comparison between groups of employees from different ethnic groups. Some powerful bespoke equal pay audit software has the facility to analyse relative pay between individuals for organisations particularly interested in this level of risk analysis.
The focus on systemic inequality in an equal pay audit does not preclude some consideration of individual pay, whether as part of a spot-check/sampling process, as part of the process of considering known ‘sore thumb’ vulnerabilities, or as part of the data analysis process - step 3 of your audit.
See also: Step 1 - additional information
Please send any feedback or enquiries to equalpayfeedback@equalityhumanrights.com.