The government published its long-awaited and heavily trailed Equality Bill yesterday. Employment lawyer Darren Newman confesses that he’s far more excited about this than an adult should be. He really does need to get out more.
Darren has a running commentary on his blog and I expect he will be taking the bill apart in detail. He really loves this stuff which means he has the patience to go through it and understand it. If you want some insights on what the new law means and what impact it is likely to have, check Darren’s site over the next few days.
For now, though, I am going to focus on the proposal to make equal pay audits compulsory. This, too, is something which I thought had been kicked into the long grass when the Equalities and Human Rights Commission advised the government against it last month on the grounds that the extra burden on employers could damage the country’s economic recovery.
Seems I was wrong again.
From 2013, firms with more than 250 employees will be forced to conduct equal pay reviews and publish the data on their gender pay gaps. Furthermore, there will be no period of amnesty to allow firms to deal with any discrepancies in pay. Once the audit has uncovered pay differentials, firms will have to pay up immediately to equalise pay, and give six years worth of back pay to those employees who can show that the discrimination went back that far.
This effectively gives employers four years to carry out their own equal pay audits and change their pay structures before the law forces them to do so. Even this has potential pitfalls. If a firm carries out an equal pay review and finds it has pay discrepancies, if aggrieved employees or trade unions get hold of that information, it could be used as the basis of a legal claim which, again, could result in the employer having to make immediate payments.
Many employers still don’t understand the reach of equal pay legislation. It doesn’t just penalise firms for paying a man and a woman different rates for the same job. A company can fall foul of the law by paying lower rates to a predominantly female group of workers than it pays to a predominantly male group of workers, if the work of both groups is deemed to be of equal value. For example, you could argue that staff on an IT help-desk and staff on an HR help-desk are doing work of equal value. You are likely to have both men and women employed on both desks. But if you have more men on the IT desk and more women on the HR desk and you pay the IT people more, then you are in trouble.
How do you determine whether jobs are of equal value? This is where the fun starts. The recommended process for conducting an equal pay audit can be found on the Equality and Human Rights Commission’s website. It is quite clear that the only reliable means of deciding whether or not jobs are of equal value is by using an analytical job evaluation scheme. They break jobs down into a number of components and score them, thereby giving each job a numerical value. These systems are relatively common in the public sector but less so in the private sector.
However, if this bill is passed, companies will need to introduce such schemes. It is almost impossible to carry out an equal pay audit that would stand up in court without having used a job evaluation system. In effect, the Equality Bill will make job evaluation schemes compulsory.
Implementing these schemes is not something you can do overnight. You either need to bring in consultants or get your own people trained and qualified to set up and maintain the system. You also need to make sure your HR data is in a good enough state to feed accurate information into the job evaluation scheme. If you are in any doubt about the amount of work involved in an equal pay audit, run through the process on the EHRC site and work out how long it would take you and how many people you would have to recruit to do it.
Conducting equal pay audits will be time consuming and expensive for companies, even before they have started paying out to correct any pay discrepancies. Equal pay claims have come close to bankrupting many public sector organisations and the impact on the private sector of increased bureaucracy and pay costs could, in a recession, be potentially catastrophic.
For all that, there is no certainty that this legislation will have much impact on closing the pay gap. As the CIPDs Charles Cotton said:
Gender pay reporting is not the answer to the gender pay gap. The pay gap is a deep-seated and complex problem, as the government-commissioned Prosser review showed, which made 40 recommendations to address the issue. Choices made at school, choices of what qualifications to pursue, careers advice and cultural norms have a far greater impact in pushing men and women down different career paths than discrimination in the workplace. And there are basic realities about career and life paths that mean the actual, like-for-like pay gap is not as great as some of the sensationalist headline figures suggest.
He predicted that the new law will do little more than create bureaucracy and fuel employment law claims.
But should we be worried? After all 2013 is well after the next election and the Tories will be in power and will have repealed the law by then, won’t they?
Don’t bet on it. When this idea was first discussed two years ago, Theresa May spoke out in favour of compulsory equal pay audits and criticised the government for not going far enough. Her views haven’t changed. She was on the BBC news yesterday, again accusing the government of letting employers off the hook by not imposing tougher sanctions for pay inequalities.
If the Equality Bill goes through with these equal pay provisions unamended, some employers in the private sector will have to make some expensive and time consuming changes over the next four years. The country might be plunging into a recession but employment lawyers and job evaluation consultants will be looking forward to some bumper years.