Establishing the causes of any significant gender pay differences and assessing the justifications for them
Your equal pay audit might reveal significant differences between the pay (which includes contractual benefits), of men and women doing equal work. If this is the case, you need to identify which aspects of your pay system are causing the differences – and why.
As a general rule differences of 5% or more, or any recurring differences of 3% or more merit further investigation. This is not definitive and does not mean that other differences are not significant or that you are protected from equal pay cases being taken against you. However, such patterns are a good starting place for you to consider.
A significant difference within an equal work band – depending on the specific nature of what you find – may again merit further investigation within that grouping.
You will then need to find out if there are any genuine reasons for the difference in pay that have nothing to do with the sex of the employees in question.
You should check the pay policies and practices that determine basic pay. These might include starting pay, service, pay progression, pay protection and market factors.
These need to be checked from two standpoints:
- how these are being applied in practice, and
- the statistical impact on men and women.
Remember, it’s how pay policies and practices actually affect pay that matters, not the intention behind them.
There are some common reasons behind most gender pay differences, usually due to deficiencies in the pay system. Find out more about pay systems.
‘Hotspots’ include pay protection, starting salaries and job or grade progression.
Remember, the main focus of your equal pay review is on inequalities in pay between men and women doing equal work, rather than pay differences between individuals.
When you are looking for explanations for any pay differences, concentrate on those aspects of your pay policies and practices that affect, or have affected, groups of employees. For example, pay protection.
However, you’ll probably find you need to examine the pay of some individuals when drilling down for explanations for some pay differences.
Once you’ve checked basic pay, check all the other elements of pay, such as performance-related pay, working time pay or benefits. If you find any significant differences in the average amounts received you should also review the policies and practices that influence these, such as the eligibility for allowances, or levels of allowances paid.
Again, it’s how pay and benefits policies and practices actually affect pay in practice that matters, not the intention behind them.
Once you’ve done this, you should be able to decide whether a particular pay policy, practice or pay element is unlawfully discriminatory and whether the resulting pay differences need to be closed. The process will also help you build an equal pay action plan.
It’s not enough simply to find the cause of a gender pay difference. You must then assess whether the cause is related to sex and whether it could justify the difference in pay in law.
To justify the pay difference you will have to prove that the difference in pay or other contractual terms is due to a factor that:
- has nothing to do with a difference in sex
- is the real reason for the difference in pay and not a sham or pretence
- is causative of the difference in pay between the woman and her comparator
- is material: that is, significant and relevant, and
- if it puts women at a particular disadvantage compared to men, is objectively justified.
The question of what amounts to a legally sound justification of a pay difference is a complex area. It depends on the detailed and individual circumstances of each organisation, as well as on equal pay case law. If there is any doubt, you should seek legal advice.
While every effort has been made to ensure that this advice is accurate and up to date, it does not guarantee that you could successfully defend an equal pay claim. Only the courts or tribunals can give authoritative interpretations of the law.
Last updated: 19 Feb 2019