Overcoming the pay gap needs a rethink of equal pay benchmarking

A protracted row over equal pay has remained at the forefront of media attention in the UK, as the lingering pay-gap between male and female employees doing the same work comes under scrutiny in the UK. Despite the growing clamour for change, however, according to Innecto Reward Consulting’s Justine Woolf, equal pay can only be tackled once the benchmarking of pay-statistics at many firms receives an overhaul.

A century after a small portion of property-owning women became first to win female suffrage, Britain’s public and private institutions are still struggling to realise gender parity in the workplace. Several recent equal pay cases involving high-profile employers at Tesco, Sainsbury’s and Asda highlight the extent of the problem.

According to Justine Woolf, Client Director at Innecto Reward Consulting, many companies are re-examining equal pay issues and coming to the conclusion that they need solving - and quickly. “It’s clear that there are still several systematic barriers to achieving equal pay and we in HR need to work collaboratively to pinpoint and remove them,” Woolf added.

The problem begins with the matter of defining how employees are presently rewarded. The law dictates that employers cannot pay different amounts for ‘work of equal value’ (where the work conducted is regarded as equally challenging) or ‘like work’ (people doing the same or similar jobs) according to gender. The wording here, relating to ‘value’, does allow some leeway, as employers can differentiate on performance, and where market differentials show that although work may be of equal value, the market for one role is different to another. 

Despite this seemingly straight-forward legal framework, however, when companies try to understand their equal pay policy in line with the broader market, and benchmark around it, they run into issues. This is partly due to the fact that the market data in question is based on current incumbents, provided via salary surveys, and so already reflects existing gender bias.

Woolf cited the example of a typical supermarket, in order to illustrate this. She suggested that a hypothetical store with predominantly female shop workers and predominantly male distribution depot workers, could compare themselves to other supermarkets to judge their pay position against the market. However, “The problem is that if all your competitors have the same gender distribution across types of roles, then this skews the market data and your comparison just reinforces the gender-segregated market. Male distribution workers, for example, will end up with a higher market rate as it was already inflated to begin with.”

As a result, Woolf said, a strange situation arises, where the market itself is unfairly distorted, but currently it is a genuine material defence under equal pay legislation to justify the difference on market-comparison basis – so long as firms provide evidence that they regularly compare the pay of female and male staff to the market.

Overcoming equal pay issues

For HR directors that want to overcome this, Woolf offers a number of recommendations. “To start with, I think it would be useful to have a fuller understanding of the make-up of the market data which reward specialists rely so heavily on. Gender isn’t currently a feature but perhaps if gender data was collected alongside salary information we would have a clearer view on the relationship between the two.”

However, she also underlined the fact that better understanding of pay data will only move the issue on so far. "Beyond that, practical changes can be best realised via teamwork with HR colleagues, to ensure companies treat female employees just as favourably as their male counterparts. One of the key battlegrounds on this front is the recruitment process – as encouraging women into traditionally male roles is difficult without first addressing the gender segregation inherent in many recruitment processes."

"Once women are on board, it’s the job of colleagues in Learning & Development to ensure that all employees have the chance to further their career through personal and professional development. For example, it used to be fairly common practice for supermarkets to refuse training for part-time staff, without a thought for how this would stall career progression and entrench low earning potential for this predominantly female group of employees." 

Summarising the challenges ahead, Woolf concluded, “We’ve come a long way down the road to equal pay, but the end is not yet in sight. Unfortunately, there isn’t a silver bullet solution; instead it’s up to all of us in HR to pool our insight and make sure every employee gets a fair deal.”

Related: Improving gender equality to best-in-UK could add £111 billion to economy.