Step one: Getting started

To get started on your equal pay audit you need to:

This part of the toolkit covers these three items. But first, as a small business you will want to know how long this audit will take.

How long will this take?

The time required for the audit is affected, first, by the number of separate jobs (jobs not people) there are in your firm and, second, by how many comparisons you need to make between the pay of men and women and between other groups of employees (for example, between ethnic minority employees and their white colleagues). Our research for this toolkit shows that most small businesses only have a handful of jobs, rarely more than ten, often fewer. Also, many small businesses have far more employees of one sex than the other, so there are only a few pay comparisons between the pay on men and women to check. The Computerco case study below is an example of this.

The five steps of the pay audit can be done separately when time allows. As a rough estimate, it will take up to half a day of one person's time to audit a 20-person business with five different jobs. It will take less time if you have easy access to payroll records and know the jobs well. It is very unlikely to take any business with up to 50 employees more than one day of one person's time.

Case study

Computerco employs 15 people in 5 jobs (excluding the MD) - Sales Director, Technical Director, Salespeople, Engineers and an Office Manager. However, only the Office Manager is female; all employees are white and there is no one who has a known disability. As this company worked through the audit it found it only had 3 pay comparisons to make. The equal pay audit took a couple of hours.

A. Who should be involved?

The equal pay audit requires a detailed understanding of the jobs in your firm and the way in which your payment system operates. For many small businesses the owner, or overall manager, will be the person with this knowledge and he or she will be able to carry out the audit. But they may need help from someone else with relevant knowledge. As you read the next two sections, think about who in your business will need to be involved to make this audit a success.

If your workforce is unionised you may wish to involve the union in the audit. If not, you may find it useful to involve your employees. This may mean the audit takes a little longer but it will be worth it in terms of employee relations.

Many of the pay checks in the audit are straightforward, but you may wish to consider bringing in outside expertise. The Advisory, Conciliation and Arbitration Service (ACAS), offers practical, independent and impartial help throughout Britain.

B. Checking that you have the information you need to carry out the audit

You will need to collect together two broad types of information about your employees:

  1. Some personal details about each employee including name or employee number, job title, start date, hours of work and whether they are male or female. If you are going to include ethnicity and disability in your audit, you will need to include this information in the table.
  2. Pay information for each of your employees: you will need their basic pay, total earnings and other work related benefits. This information should be in your payroll system. If your employees work different hours: some full-time, others part-time, and different patterns of hours, you will need to work out each employee's basic hourly rate. If all employees have the same full-time hours, you can use annual salaries instead, but you will then need to convert part-time salaries into their full-time equivalents.

Unequal pay linked to an employee's ethnic origin or race would also be regarded as unlawful discrimination. If you do not know the ethnic origins of your staff, you might be tempted to make a broad judgement. But doing that runs the real risk of mistakes. It is better to ask your employees to identify their own ethnicity. Similarly, you may not have records of whether employees have a disability. Remember that many disabilities – diabetes, epilepsy - may not be visible or obvious. Again, you are advised to ask your employees to identify any disabilities.

In practice, many small firms have few or no employees in some ethnic categories. When you compare pay you may need to make broad comparisons between the pay of all ethnic minority employees compared to the pay of all white employees doing equal work - or between whatever are your predominant ethnic groups.

To comply with the Equality Act your audit needs to check that men and women receive equal pay for equal work. So you need to compare the pay of men and women as a minimum. If this is all you can do, it is a very useful start. Don't be daunted if you cannot do a full audit. Aim to improve your employee information and extend the audit in future.

Total earnings include basic pay plus any additions to basic pay, such as overtime earnings, shift pay, bonuses, commission, or any other payments. Benefits include holidays, sick pay, company cars, pension contributions, or any other form of non-cash benefit.

If you are used to working with spreadsheets this is a useful way to build up all the relevant information. You will also find it useful, but not essential, to have access to any standard spreadsheet software (such as Microsoft Excel) so that you can analyse the information. But do not worry if you do not use spreadsheets as this audit can be carried out manually. There is a sample spreadsheet or table to help you set out the information needed for this audit. You will complete the remaining columns of the spreadsheet, where necessary, in steps two and three of the audit. There are tools to help you decide which of your employees are doing equal work in step two and advice on calculating and comparing pay in step three.

C. Understanding equal pay and equal work

Equal pay means ensuring that what you pay your employees is not affected, even unintentionally, by factors such as their sex, their race, or whether they have a disability. The law says that you should provide equal pay when your employees are doing equal work. Men and women are doing equal work when their jobs:

  • Are the same or broadly similar: for example, a man and a woman who are both sales assistants but in different departments or selling different product ranges
  • Have been rated as equivalent under a job evaluation scheme
  • Are of equal value in terms of the demands their jobs place on them

The first of these is the easiest to understand - people doing pretty much the same job should be paid equally, regardless of whether they are men or women, from an ethnic minority or white, or whether they have a disability. This is often referred to as ‘like work’. There are some circumstances when differences in pay may be allowed between men and women (and other groups) doing like work, for example for longer service. There is more detail on when unequal pay may be justifiable in step four.

As very few SMEs use job evaluation, the second type of equal work listed above is less likely to be relevant. But using a sound job evaluation scheme is the best basis for knowing which of your employees should be paid equally. For more advice on job evaluation and whether it would be a good investment for your firm visit the Acas website.

That leaves the third type of equal work - work of ‘equal value’. Equal value is likely to be particularly important in many small firms, so it is worth spending a few minutes gaining an understanding of what it means.

Entirely different jobs can be equal in 'value', for example, a male warehouse worker and a female clerical worker - or a female cook and a male electrician. 'Value' here refers to the levels of skill and responsibility in the job - not what you think employees are worth to you financially. To decide whether jobs in your business may be equal in value you will need to weigh up the demands of those jobs by considering aspects like the skills and knowledge they require, the responsibilities and the sorts of problems the job holders have to sort out. There is an equal value estimator tool to help you do this in step three. If the demands of the different jobs pretty much even each other out when they are all weighed up together, then the jobs are likely to be of equal value.

Example: Different jobs that could be of equal value

The jobs of a male warehouse worker and a female clerical worker may be equal in value.  Both jobs need similar levels of understanding about the firm and its products, but the clerical worker needs telephone and keyboard skills, while the warehouse worker requires forklift truck driving and also physical effort for lifting cartons of goods.

Recap

So, in your equal pay audit you will need to compare the pay of your employees doing 'like work'(the same, or pretty much the same jobs), and those doing work of equal value (different jobs, but where the different demands of these jobs may balance each other out). You will find a full explanation of how to do this in steps two and three.

Example

If the firm's driver is a woman and the painter a man, or if the driver is white and the painter is Asian, and you find similar levels of skill, knowledge and responsibility, using the assessment tool in this toolkit, then they should receive equal pay.

What is pay?

Pay means pay and benefits provided by the contract of employment between you and your employee.

Who is covered?

The employment provisions of the Equality Act apply to both full-time and part-time employees. If a female part-time employee is doing equal work to a male full-time employee, she should get equal pay on a pro rata basis. This means that they should both be on the same hourly rate.

It is advisable to include all your employees in the audit, full-time and part-time, and whether permanent or not. Missing out someone will mean that you have not done a full check and might increase the risk of an equal pay claim. But you will only have to compare the pay of those employees who are doing ‘equal work.’ We explore how you decide this in step three of the audit.

Summary

At the end of step one you should have:

  • Considered who needs to be involved in the audit
  • Checked whether you have the personal and pay information to carry out the audit
  • Set up your basic spreadsheet/table for the audit and listed your employees on it  
  • Thought about 'equal work'

Now you are ready to move to step two - to identify which of your employees may be doing equal work.

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