What is the difference between Equal Pay and the Gender Pay Gap?

The BBC has been in the news several times in recent years for failing to follow the requirements regarding equal pay, resulting in claims against them from female presenters and other employees. The recent judgement in their favour, and the 50^th anniversary of the Equal Pay Act of 1970 makes it a fitting subject for this week’s blog.

After paying out several million pounds in compensation and spending years trying to resolve the issue, last week the Corporation was finally cleared of unlawful pay discrimination following an investigation by the Equalities and Human Rights Commission.

This blog will explore the requirements of Equal Pay legislation, and how it differs from the Gender Pay Gap requirements. The two are often spoken about together but in reality are very different.

In terms of risk to your business, having an equal pay problem could result in very large claims against you going back several years whereas having a gender pay gap problem is more around hamstringing future growth in terms of potentially having a misogynistic culture that will not appeal to existing staff or potential recruits in today’s increasingly inclusive world.

This will likely result in recruitment and staff retention difficulties and also missing out on the benefits that a diverse and engaged workforce undoubtedly bring.

Both clearly also have the potential for bad publicity so we’ll look at them in a little more detail and then consider what actions employers can take.

Equal Pay

The requirement of equal pay for male and female employees has been enshrined in UK Law since the Equal Pay Act of 1970, where it became illegal to pay different rates for men and women who are:

• doing the same, or similar, jobs
• doing work that has been rated as “equivalent”, or in the same grade
• doing work of “equal value”, where jobs might be different but require a similar level of skill.

The requirements were reinforced by the Equality Act 2010 that also strengthened rights between male and female employees irrespective of whether they are on full time, part time or temporary contracts. Previously many part time workers were paid a lower ‘Full Time Equivalent’ rate than full time employees for doing the same role.

The difference in pay between employees is often complicated by myriad factors other than sex e.g. experience, competence, and in the case of BBC personalities, status and the ability to affect ratings e.g. Chris Evans was paid ten times the level of some BBC female radio presenters but he also brought in record listening figures. On the face of it the female presenters had a good case for equal pay as they were doing the same job for less pay, but on the other hand most people would not argue that the presenter with stellar listening figures should be paid more and the legislation broadly allows for such differences if they can be justified, as explained later.

A high profile example you may remember from the BBC was Carrie Gracie, the BBC News China editor who claimed that the Corporation’s male US editor and another male editor were paid 50% more than her for doing the same role. The BBC’s initial justification was that the US role was higher profile as America is more often in the news than China, plus Jon Sopel is a household name whereas Ms Gracie wasn’t. The outcome was that the roles were shown to be the same and the BBC was forced to apologise and rectify such disparities.

Samira Ahmed was a BBC ‘Newswatch’ presenter who complained that Jeremy Vine earned six times more than her even though they did essentially the same role. The BBC’s justification was similar to the above Gracie case but again the court found against them.

Moving away from the BBC bubble as it may not be the best comparator for people in ‘normal’ jobs, there have been several high value cases where employees in certain female dominated roles have claimed their work is of ‘equal value’ to equivalent male dominated roles in the organisation.

For example, in a class action brought by a union, Glasgow City Council had to pay out over £500 million to female employees in schools and nurseries working in catering and cleaning roles who claimed their work was of equal value to male employees carrying out roles such as road building and repairs.

My final example involves Asda, who recently lost their appeal against a court’s decision to award significant compensation to female employees working instore who were paid less than male warehouse workers who they claimed did work of equal value but were paid more. Again, this was a multi-million pound claim.

When considering equal pay it is also important to remember that ‘pay’ doesn’t just relate to basic salary. There have been some cases in the City of London where financial institutions have had to pay compensation of millions of pounds to female investment bankers whose bonuses were significantly lower than their male counterparts for no justifiable reason. The same would apply to lack of parity regarding benefits such as company cars, holidays, pension contributions etc.

In order to bring a claim against their employer an employee must provide a suitable ‘comparator’ i.e. a female must provide details of a higher paid male. If it is then established that her role is the same, or of equal value etc the burden of proof shifts and it is then up to the employer to show that they have not discriminated based on her sex rather than for the employee to prove that she was discriminated against. In effect this means that the employer is presumed to be guilty until they can show they are innocent.

Whereas the above BBC examples suggest otherwise, it is possible to defend an equal pay claim but the employer will need to prove that the difference in pay is not related to sex. For example, employers have sometimes been able to successfully argue that past performance justifies the difference, also average pay in different geographical regions and even length of service. Legally these are called ‘material factors’.

It’s an expensive, difficult and unpredictable business trying to defend an equal pay claim though so our advice would be to tackle any issues head on and proactively remove any anomalies in your organisation where one sex may be paid less than another before you receive any claims.

Gender Pay Gap

The legislation requires all companies who employ at least 250 employees in the UK to publish the difference between average male and female pay in their organisation i.e. their ‘Gender Pay Gap’ and to make the figures publicly available from 2017 onwards. This seems to have focused minds in a lot of companies and brought attention to the disparity in pay between male and female staff resulting in some excellent work to address the balance.

Various gross weekly average pay figures must be published each year as at 31 March, including both mean and median pay levels. Average bonus figures are also reported.

As this has been the case since 2017 there are now 3 years’ worth of figures that can be compared.

It is very easy to check any company’s gender pay gap. A 2 minute internet search told me Vodafone, which has an excellent reputation for diversity work, has a latest GPG figure of 13.8 percent compared to a UK average of 15.5 percent. Barclays’ figure was 26.1 percent.

Although neither company can be sued for these figures, if you were a highly talented female looking for an executive role, based purely on published gender pay gap figures which company would you apply to?

Sorry Barclays, I’m sure you are a great employer and have excellent initiatives to tackle your gender pay gap. Although my 2 minute search also showed me that the figure has remained about the same for the last 3 years so maybe a change of approach is needed? The point I am making here is not to scold Barclays for bad practice as I have no idea why they have such a large gap, but to illustrate the point that a quick search can lead to some pretty damning conclusions.

Thanks to the BBC and ONS for the graph below, which illustrates that the Gender Pay Gap in the UK has been falling impressively in recent years and has almost halved since the year 2,000. But in this day and age should it really still be 15.5 percent?

Actions Employers can take to tackle Equal Pay Disparities

Tackling equal pay is quite a specialist area and we would recommend that, if you don’t have an in house HR Employee Relations expert, you should speak to a suitably experienced HR consultant such as 186hr or contact ACAS who, in my experience give good advice regarding matters such as this. They also issued an excellent guidance document earlier this year, although they will normally guide you rather than do the work for you and their individual consultancy rates can be quite expensive.

The start point for taking action would normally be to carry out an Equal Pay Audit to determine if there is a problem and, if so, the scale of the problem.

If the audit shows there is a problem then there is good news and bad news. The good news is that it will give you sufficient data to act before being taken to a costly court or Tribunal that would involve significant legal costs and compensation awards (the BBC radio presenter Sarah Montague received a £400,000 Settlement). Unlike claims for Unfair Dismissal, compensation levels in this area are unlimited and the individual can claim for up to six years of unequal pay so it is well worth taking seriously and being proactive.

The bad news is that rectifying the problem will be costly as it involves increasing salaries. The BBC increased the salaries of over 500 female employees in an effort to comply. Glasgow City Council had to increase their annual salary bill by millions of pounds following their court case, on top of the eyewatering compensation figure.

You may also remember several high profile male BBC presenters agreeing to a reduction in their pay e.g. Gary Lineker, so that is another possible action you can take to limit the financial damage, although it is not an easy thing to do and you should take specialist advice before starting such conversations.

In summary there are only really two actions to be sure of avoiding legal action, identify the specific problem through an equal pay audit and then amend pay accordingly.

Although it is not for everybody, a job grading scheme can help an employer in numerous ways, especially to ensure equal pay.

Actions to tackle a Gender Pay Gap

There is no legal minimum Gender Pay Gap and no penalties for not tackling it. The main benefits of tackling your GPG are in regards to workplace culture, how you are viewed by employees and the community, and the knock on effects of improved recruitment, retention and employee satisfaction.

It should also reduce the likelihood of future equal pay claims being made against you

Whereas the actions explained above under equal pay are pretty much instant, Gender Pay Gap actions are more of a slow burner. There are lots of different actions you can take depending on what fits with your culture and aims right now.

The following recommended actions are based on studying 3 separate reports of what actions have been shown to successfully reduce gender pay gaps in UK organisations.

When working with companies on narrowing their gender pay gap we encourage them to view the actions as an evolution that takes several years of small changes rather than a revolution of enforced high impact changes that in our experience don’t get the buy in of a lot of key people and can cause resentment and ‘political correctness gone mad’ type comments.

In essence, we advocate working on your gender pay gap by treating it like eating the proverbial elephant i.e. do it in manageable chunks that the business and its culture can cope with, in a planned way ensuring the whole team know and buy in to what you are trying to achieve and how you are going to achieve it.

We normally categorise the actions into Buy, Build and Retain, where Buy includes recruitment initiatives such as involving senior females in senior recruitment; either encouraging or requiring agencies to provide minimum levels of female candidates for senior roles; advertising in publications and websites with high female readership; introducing a ‘bounty’ scheme for employees to refer applicants for roles, with a higher bounty where a female is appointed; targeting female winners of industry or sector awards.

Build type actions include training courses, either general diversity courses such as 186hr’s Diversity and Respect in the Workplace course or unconscious bias training (see last week’s blog). Also targeted courses where high potential female employees are identified and offered the chance to attend management development programmes, often including external female mentors. You may also consider putting together some form of graduate recruitment and / or development scheme bearing in mind over fifty percent of graduates are female and are clearly high potential candidates.

Retain would include making the company more attractive for its female employees, aiming for them to feel valued and want to stay and further their career e.g. through female groups where a high profile speaker is invited to a quarterly all female employee lunch; improving your flexible working and maternity pay / leave policies; or even just some quick hits e.g. celebrating International Women’s Day on 8 March or publishing and working towards a stated goal e.g. to aid female staff recruitment and retention Vodafone state ‘we are committed to become the world’s best employer for women over the next ten years’.

All of the above would be classed as ‘positive action’ where you have mechanisms to support female employees to develop into your senior managers of tomorrow but there are no guarantees, as opposed to ‘positive discrimination’ where you actively favour females over males in key decisions e.g. deciding to recruit a female into a particular role. That would be classed as sex discrimination and puts you at risk of losing a Tribunal claim unless you can prove that your action was a ‘proportionate means of achieving a legitimate aim’ which is fiendishly difficult to do.

At 186hr we have extensive experience of advising on and managing all aspects of HR, with a particular specialism in Employee Relations issues, diversity and employment law. Call us today to discuss your needs or talk through your specific requirements.