Toolkit step 4: Causes of pay gaps

Establishing the causes of any significant pay gaps and assessing the justifications for them

If you have found any significant pay gaps between the average basic pay of protected groups doing equal work, you need to find out which aspects of the pay system are contributing to the pay gaps and why. (For more on what a significant gap is see step 3).

Find out if there is a genuine reason - or reasons - for the difference in basic pay that has nothing to do with the gender or ethnicity of the jobholder.

Gaps in basic pay: what should be checked

You should check the pay policies and practices that determine basic pay. Examples might be starting pay, service, pay progression, protection, market factors and so on.

These need to be checked from a variety of standpoints: the policies which apply to these elements of pay; how these are being applied in practice, and the statistical impact by gender, ethnicity and disability.  It is how pay policies and practices actually affect pay that matters – not the intention behind them.

In practice, the most common explanations for significant pay gaps found in equal pay reviews tend to be one (or more, working in combination) of the factors listed below. There are links to more guidance and checklists on these. We suggest you check differences in average service first, as this is a common explanation for pay gaps. 

Remember that the main focus of your equal pay review is on systemic inequalities in pay between groups (rather than pay differences between individuals). So, when looking for explanations for gaps, concentrate on those aspects of your pay policies and practices that affect, or have affected, groups - for example, pay protection. However, you will probably find you need to examine the pay of some individuals when drilling down for explanations for some pay gaps.

Pay protection, assimilation arrangements and progression are all ways in which past levels of pay, or ‘pay history’, can be imported into new pay and grading structures, resulting in continuing pay discrimination. The purpose of pay equality impact assessments in the public sector is to help prevent this. See Equality impact assessments for more details on this. But in practice, the current pay of many individuals and groups is heavily influenced by what they have been paid in the past.

Gaps in other pay elements

If you have found any significant gaps in the average amounts received of any other pay element e.g. performance related pay, working time premia; benefits etc., you should check the pay policies and practices that influence these. Examples might be rules on eligibility for allowances, levels of allowances paid and so on.

The pay element needs to be checked from a variety of standpoints: whether its rules exclude any groups; the way it is implemented in practice and its statistical impact. It is how pay policies and practices actually affect pay that matters – not the intention behind them.

The checklists below have more information on:

Once this has been done you will be able to decide whether a particular pay policy, practice or pay element is discriminatory and whether the resultant pay gaps need to be closed. The process will also help build an equal pay action plan.

Assessing the reasons for pay gaps

Once you have found the cause of a pay gap you need to assess whether that cause would amount to a justification in law. Some employers tend to stop once they have found the cause of a pay gap - assuming that that is all that is required.

The question of what amounts to a satisfactory explanation of the pay gap is a complex area dependent on the detailed and individual circumstances of each organisation, as well as on equal pay case law. If there is any doubt, you should seek legal advice. 

Watchpoint

Calculating service
The most relevant date to use for calculating service for your pay review is likely to be date into job or grade. But many organisations do not keep reliable records of this, so you may need to use date of joining the organisation. Check the data field carefully because sometimes there has been a re-organisation in the past and employees’ start dates on the system relate to the date of that change, rather than their personal start dates.

 

See also Step 4 - additional information


Please send any feedback or enquiries to equalpayfeedback@equalityhumanrights.com.

back to top