Equal Pay Audits

Insight

Equal Pay Audit - First Step

An Equal Pay Audit identifies differences in pay between men and women doing equal work, investigates the cause and sets out recommendations to eliminate unequal pay which cannot be objectively justified.

Before You Start

Decide who your audience is and whether you are going to do an audit in consultation with stakeholders or an internal audit where the results will only be made available to senior management. There is no legal obligation to conduct equal pay audits or to involve stakeholders in the audit, although it is good practice to take a transparent approach by sharing the results and working with stakeholders to take action to address the gaps. If you decide on an open, consultative process then it is extremely important to gain buy in from your senior management team as the output of the audit may involve changes to pay and reward.  

If you don’t run pay analyses as a norm, or haven’t done in recent years, you may encounter unwelcome surprises. Public sector organisations usually have a decent level of knowledge and management information about pay and occupational segregation, especially in Scotland where listed authorities are obliged to publish details on occupational segregation. Public sector organisations are also more likely to use job evaluation which will assist them in justifying pay differentials.

Private sector organisations who do not use job evaluation to underpin reward can have less of a formal, structured approach to how they decide how much to pay staff. This can pose challenges with an equal pay audit as it is difficult to compare different types of roles, and subsequently justify pay gaps. It is therefore important to consider who the audit will be made available to from the outset.

Equal Pay Audit Step 1: Scope

Decide which jobs will be covered in the audit. If possible, a plenary approach is best, but you could start with specific groups or roles where there are large numbers of incumbents.

Consider who will be involved in the audit. If this has been planned as an internal management audit, you will probably only need HR and payroll staff, and may benefit from an independent specialist. If you plan an open, consultative audit you should involve recognised trade unions and /or employee representatives.

Establish what data you require. You will need to collect data about each employee including various elements of pay, grade or pay band and hours of work. You then need to think about which protected groups you are going to include in the audit. Clearly a comparison of men and women’s pay should be included, but it is possible to use other protected characteristics as a comparison.

However, caution must be used in making overall conclusions when analysing pay of other protected characteristics. Firstly, the data may not be as comprehensive as there is a lower disclosure of protected characteristics that are perceived as being sensitive. Secondly, the size of the cohorts will make meaningful analysis difficult. For example, the data may show that 5% of staff have declared a disability (and 95% haven’t). Such unequal sample sizes will have a dramatic effect on the confidence of interpretation.

Employers usually have reliable and comprehensive data about the age groups of staff, and it can be useful to include this as an intersectional analysis, particularly as there is evidence that the gender pay gap becomes more marked for women aged 28 and over.

You should now be ready to move to the next stage. Before doing so, note that pay differentials are to be expected. It would be very rare to do an equal pay audit and not find any variances. A perfectly equal pay system is really only possible if you were to suddenly start a new organisation with brand new staff, and even then parity would drift depending on elements which change pay, such as length of service, restructuring and market forces.