According to a recent IOD/Croner Award survey carried out between July and August this year, the average pay gap between men and women has increased substantially for the first time in four years.
Female directors earned an average of £55,000 per annum compared with the average basic salary for male directors of £72,000 per annum. This 24% pay gap is the widest between the sexes since 2001.
One of the potential reasons put forward for this increase in the gender pay gap is that, due to an increased demand for work-life balance, more women who have to juggle child care commitments are setting up their own businesses. They are less inclined to award themselves high levels of remuneration, as they do not wish to take money out of their own businesses, particularly initially whilst they are in the start-up phase.
The biggest pay gap was in the financial services sector where the average pay of female directors was 35% lower than their male counterparts.
Equal Pay Questionnaires
One would have thought that the fact that claimants can now issue equal pay questionnaires in the same way that they can under the race discrimination and sex discrimination legislation would have led to a decrease as opposed to an increase in the gender pay gap. If an employer does not respond to an equal pay questionnaire or if its response is evasive or equivocal the employment tribunal can draw adverse inferences of discrimination.
The Equal Pay Act 1970 implies an equality clause into every employment contract. This means that a woman or man is contractually entitled to receive equal pay with every man or woman in the same employment who is doing like work, work rated as equivalent, or work of equal value, unless the difference in pay can be genuinely explained by some reason other than sex.
The key question arising from the survey is whether the directors surveyed were actually doing work of equal value. Such an assessment is usually complex and an independent expert is usually instructed to determine this difficult question when proceedings are brought to enforce equal pay rights.
Minimising potential liability
Employers should take steps to try to ensure that their pay structures and grading systems are transparent in order to avoid claims, as their financial impact can be substantial. Remedies include the equalisation of contractual terms going forward in the future. Compensation can also be awarded in respect of arrears of pay for up to six years prior to the date that proceedings were issued.
Employers should also familiarise themselves with the EOC Code of Practice on Equal Pay. Consider regular pay audits, whether conducted internally or by a consultant. Watch out for inconsistencies in pay. Even if you know the reason for them, think about how you would prove those reasons to a tribunal, and how the reasons might play to an external arbiter who did not know the personalities involved and the inner workings of your organisation. Employers should treat complaints about pay, seriously. Watch out for veiled references to gender – based bias by disgruntled employees. They should ensure that employees have regular appraisals which are well documented, so that, if for example, any difference in pay is genuinely based on performance grounds, you will have documentary evidence to support this, if you are in the unfortunate position of having to defend an equal pay claim.