Equal Pay

The topic equal pay is receiving increasing coverage, even in mainstream media.

Several countries in the EU and US states have or are planning to mirror the societies’ demand for “equal pay for equal value” in their legislation, companies have realized that providing equal pay and equal opportunity not only promotes a fair society but also delivers tangible positive business impact:

A recent study by Mc Kinsey states that companies with gender-diverse management teams perform better. Providing equal opportunity greatly enriches the talent pool, equal pay results in better employee retention and engagement and reduces the financial risks of equal pay claims in court.


How to reach equal pay

 There is no need to reinvent the wheel by developing everything from scratch. The tools needed are already there, thus HR’s task is to use and combine them in a manner that nurtures a culture of equality and transparency rather than reinforcing old discriminating practices.


Job evaluation

The basis for all processes is an analytical job evaluation. IN contrast to non-analytical schemes, analytical job evaluation provides a higher success rate in equal pay courts and minimizes the potential for discrimination. When choosing or designing an analytical job evaluation scheme a few points must be taken into consideration:

  • The scheme itself should be free of bias. Since an analytical method breaks down the job’s requirement into separate factors, it must be ensured that the selection and weighting of these factors does not favour one gender.
  • The factors should be independent of each other to avoid double counting.
  • The factors should be balanced to enable fair and comparable measurement of both male- and female-dominated jobs.
  • The system as a whole should be able to evaluate the complete range of jobs, from unskilled helpers to business leaders.
  • And finally the system should provide ease of use and clear and understandable definitions as well as consistent and transparent results.

Even the most unbiased system may deliver wrong results if it is not operated correctly. Quality control and consistency checks are essential for the process and results should permanently be checked for bias and discrimination potential. Furthermore the job evaluation team should encompass representatives of all groups. Every person involved in the process, be it a member of the evaluation team, managers or employees needs the appropriate training for the role and should be aware of the possibility of hidden bias and how to avoid it.


Pay differentiation and performance

The first step in minimizing the gender pay gap is combining the results of the job evaluation with salary data and analyse the distribution of salaries within a grade among male and female employees as well as the distribution of male and female employees among all grades. Thus the presence of potential discrimination can be made visible if for example red and green circling processes favour one group.

The next step would be to look at pay differentiation within individual job families in relation to gender. If the salary data can provide the information, considering the influence of age and years in service deliver valuable insights as well.

A closer look at practices concerning promotions, eligibility for bonuses, benefits, and allowances and performance appraisals covers another important field. The criteria for pay differentiation must be scrutinised about their potential for discrimination.

Especially measuring performance can be difficult and is often based on rather subjective assessments of individual managers.


External factors

Despite of all efforts to follow the rule of “equal pay for equal value” there are still external factors that can cause an imbalance of a job’s grade and the salary. Markets change and the company’s budget for salary negotiations may decrease. Some jobs may be in high demand and it can be necessary to pay higher sums to fill positions or to retain position holders. It is necessary to provide a factual and objective rationale for such variations.

Thus HR is to monitor these developments closely and should be ready to intervene if those exceptions tend to become the rule.


Conclusion / the role of HR:

To change the culture of an organisation towards a more transparent setting and promoting equality can be a herculean task and HR plays a central role in achieving the objective.

Thus after setting up the basis and processes to ensure equal pay HR should not see itself as purely administrative process owner but as a driving force of this change.

HR should accompany the implementation of the processes in day to day practice not only as administrative expert but also as facilitator, consultant and moderator. Its role is to permanently challenge practices to avoid a fall back into old and biased structures. Furthermore HR can use its competency in learning and development to create an awareness for this topics among managers and employees.

Finally as an aspect of the Business Partner role HR should take up on its responsibility for fair and cost-effective salary management in its proceedings with the C-suite of the company.

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