Equal Pay – the massive costs of getting it wrong

Jun 24, 2021 | Equal Pay



Getting it wrong on Equal Pay 



There have been some very costly Equal Pay settlements in the UK over recent times. I’m thinking here of a few councils that got t wrong on Equal Pay and ended up costing the organisation enormous sums. Consider a few examples – Birmingham City Council which has faced costs of over £750 million to settle Equal Pay claims, Welsh councils which paid out £75 million in 2012, and Glasgow Council which paid out a reported £548 million to compensate women for the money they should have been paid, in many cases going back to 2006, when their new job evaluation scheme was introduced. That same job evaluation scheme was supposed to ensure that men and women received equal pay for jobs of the same value – but something obviously went wrong.



And more recently, there’s a lot of news coverage Asda, and now about Tesco facing a £2.5 billion back pay bill. The Tesco issue is over whether shop floor workers can be compared to distribution centre staff, which the company disputed. However according to the European Court of Justice, supermarket shop floor workers’ pay can be compared to distribution centre staff. Tesco is fighting the equal pay claim, however it’s now established that its store workers, who are mostly women, are paid up to £3 an hour less than itheir warehouse and distribution centre workers, who are mostly men.



Tesco is now in danger of having to find the money to settle a back pay bill for thousands of workers, however still maintains that that the two roles could not be compared for the purposes of equal pay. But workers take a different view, saying that the roles are of equal value and should therefore, in all fairness, be paid the same. You would probably have heard of another Equal Pay case concerning Asda.




What it suggests is that Equal Pay challenges – once seen as a public sector problem – are now becoming mainstream, and affecting the private sector as well.




How has this come about? 




The lawyers representing the Tesco workers said that the women could compare themselves to those working in a different establishment if a “single source” has the authority to correct the pay differences. British courts had referred the case to EU judges in Luxembourg as the EU still retains jurisdiction on any cases brought before them prior to Brexit. It’s their job to clarify how the law should be interpreted. The European Court of Justice have stated that the principle of equal pay for male and female workers can be relied upon directly when it comes to both “equal work” and “work of equal value”.



The ECJ rejected Tesco’s arguments, and stated that if an employer qualified as a “single source”, then workers could rely on the law in national court cases concerning gender equality in pay, even if they work in different parts of the business. Other supermarkets must be sweating it now, especially if they’re fighting similar Equal Pay claims in the UK, but the implications are much wider. This judgement is sure to put the wind up not only other retailers, but any large organisation, be they public or private sector., Te British courts will ultimately make a judgement on the Tesco case, taking the ECJ ruling into account.




But isn’t job evaluation supposed to prevent this stuff? 



Well, yes it should do. It should also provide a good (though not complete) defence in the event of an Equal Pay issue. But it al depends on a number of other factors –



  • The job evaluation methodology your company uses. Is it an analytical job evaluation method? Or is it a basic job matching or whole job sizing approach? You want an analytical job evaluation method as the best defence – yet lots of companies shy away from introducing an analytical approach, regarding it as too technical, or too difficult to communicate to their managers and employees. It’s much easier for complainants to drive a coach and horses through the more rudimentary methods.



  • How consistently you apply the job evaluation methodology. It’s important to have a solid QA or validation process for all the evaluated jobs. In this process, your job analysts will discuss the job evaluation outcomes, the interpretations applied, any local conventions used, and checking that all job analysts are taking the same rigorous and consistent approach. If they are reviewing several hundred distinct roles, it’s important that they can “read across” the whole organisation to make sure that the grade outcomes are fair and consistent across different parts of the business.






  • The quality and calibre of people project managing and doing the job evaluations. This is where things often go wrong. I’ve seen many job evaluation teams that consistent of semi-articulate, barely-competent, low-credibility individuals who completed a basic 2-day course in the job evaluation methodology. I’ve always wondered how CPOs and HRDs imagine that someone with a high school education plus minimal training can do this stuff effectively (though this is not uncommon in HR, at least in the UK). Considering the important of job evaluation and salary benchmarking for the organisation – and how foundational job evaluation is for other HR activities – this is surprising to say the least. Would it not be better to get seasoned professionals? Might it go better if you hired on people who took their responsibilities seriously? People that take their time to understand the job properly? You need to exercise some care to get quality outcomes.



  • Taking time to really understand the jobs. If managers can’t be bothered to draft good job descriptions, it’s going to be difficult for your job analysts to get a clear picture of the role, or to understand it fully, then size, evaluated and grade the job. In HR departments, job evaluation is often regarded as a low-importance activity, and one that’s assigned to the more junior people in the function. You have to ask what message this is sending to jobholders, when they might never talk to a job analyst, or if they ever do, they’re often meeting up with someone that lacks competence in gathering the important facts of their job and in making sense of them.



  • Doing thorough comparisons on jobs with potential pay disparities. In the light of experience, and of the Equal Pay cases now reaching the courts, you would hope that employers will take a more serious-minded approach to job evaluation. Part of this has to be in making careful comparisons between jobs to make sure that they job evaluation methodology was applied consistently. Make sure that your benchmark or anchor jobs are thoroughly documents, and that each job has a full job evaluation rationale completed, showing your logic and resining. You might have to rely on such documents if a case goes to tribunal. II’m sure that a big reason for costly Equal Pay problems is complacency, that companies aren’t trading the issue seriously.



  • Know that jobs change. While there’s no lessening of the demand for job evaluation in the UK, jobs do change quite often, either being enlarged, enriched or varied in some way. It means that jobs have to be reviewed regularly to make sure they are still being compensated correctly relative to the marketplace, and relative to the other jobs in the company. Job evaluation and the accompanying activity of salary benchmarking are supposed to deliver fairness, but we would probably all acknowledge that’s it’s not a perfect system. No job evaluation methodology yet devised is free from its limitations, and at best job evaluation is only a pseudo-science, not a system of absolute logic. Companies want it as a defence though. And it’s better than the alternative of having no method of job sizing or allowing individual managers to do their own thing, which often leads to chaotic situations.




What next for Tesco? 



I’ve no doubt that it’s a much-argued and hotly contested issue, and understandably so, considering the enormous costs. A Tesco spokesman was quoted as saying: “The jobs in our stores and distribution centres are different. These roles require different skills and demands which lead to variations in pay – but this has absolutely nothing to do with gender”, and adding that “these claims are extremely complex and will take many years to reach a conclusion. We continue to strongly defend these claims.” Tesco might have lost the latest skirmish, but the battle is not yet over.



What about the other big supermarkets? Well, the other supermarkets continue to argue that distribution centres and the shop floor cannot be compared. Yet of course, in job evaluation we are obliged to make such comparisons. Legal experts suggest that the EU court ruling would make it much more difficult for supermarkets to make that argument. It’s worth mentioning that the UK’s Supreme Court ruled that Asda shop floor workers could compare their roles to those of their colleagues in distribution centres for the purposes of equal pay earlier this year. It seems that things are starting to change. I’ll be watching this one with interest.


If you require advice or support in complying with Equal Pay law, drop me a message via the Contact Page.

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