Equal pay in a small business

Mar 9, 2015 | Terms and Conditions

Most business owners know that equal pay is a legal requirement, but in a small business what does this actually mean, and what do small business owners need to do to protect themselves?

What is equal pay?

Equality of pay in a broad sense means making sure that discriminatory factors (such as sex, race, disability) do not influence employees’ pay.  What is specifically recognised as “equal pay” is the requirement that men and women must be paid equally when doing equal work.
Jobs are considered as being “equal work” when they are the same or broadly similar roles (also described as “like work”), have been rated as equivalent under a formal job evaluation scheme, or are of equal value in terms of the demands placed on employees performing those roles.

Finding out whether there’s a problem

To establish whether there is an equal pay issue in your business you need to conduct some kind of audit. That sounds like an administrative nightmare, time consuming and detracting from perhaps more important things. But in fact, in a small business especially, it can be straightforward and not too time-consuming or burdensome.
The first thing you need to do is work out which jobs you should be comparing with which. You need to decide which jobs are “like work” and which are not like work but are of “equal value”. This process will clearly be easier if employees have up-to-date job descriptions, so if you don’t have these, getting them in place is a good first step.
Once you have information about the roles, clearly identifying which jobs involve “like work” is relatively straightforward. Deciding which jobs are not “like work” but are of equal value is more challenging. To do this you need to look at factors such as skills, knowledge, responsibility levels and level of qualification required. There is a useful toolkit on the Equality Human Rights website which assists in scoring aspects of roles to establish whether they are of equal value.
Once you know which jobs to compare with which, look at the pay and benefits staff in those roles are receiving. Are they equal?
If there are discrepancies, why is that? It could be that individuals had different starting salaries due to market conditions at the time of recruitment, it could be that differing length of service has led to higher salaries, there could be additional benefits related to some jobs, or there may have been higher pay rises awarded to some individuals during the course of their employment.
You need to establish whether any differences are justifiable in order to work out whether there is an equal pay vulnerability. Consider what the reasons are for the differentials and establish whether you have evidence that will support that reason (details of recruitment difficulties, higher performance or similar). If you haven’t got evidence that a pay differential is genuinely and objectively essential for business reasons, you should take steps to address it.

Avoiding equal pay problems

Once you’ve established whether there are any equal pay issues in your business, and hopefully addressed them, you need to ensure disparities and vulnerabilities don’t creep in further down the line. There are a number of steps you can take to avoid this:

  • Put in place a salary structure or some kind of system for determining remuneration in your business
  • Make sure all staff have job descriptions and review these regularly to ensure they remain up to date
  • On a regular basis take a step back and look at pay across your business, to ensure you spot possible irregularities early on
  • Beware individual negotiation of salaries, either at the beginning or during employment. Bear in mind that men are more likely to attempt to negotiate on salary than women are, for a variety of reasons. If someone wants to negotiate a salary, you don’t necessarily need to say no, but consider the wider impact if you agree an increase
  • Conduct a review of everyone’s salary at the same time, not on an individual basis. If reviews of salary happen on an annual basis all at once, there is less likelihood of individual disparities creeping in

Paying staff equally and fairly makes good business sense. It reduces resentments, improves staff retention and avoids time-consuming grievances and even possible legal action. Taking some time to look at equal pay in your business and put measures in place to avoid problems later is well worth doing.
If you would like help in establishing whether you have any equal pay issues in your business, do get in touch.