Examining your pay system
This quick-start guide is designed to make it easier for small businesses to examine their pay systems to ensure they comply with equal pay law.
Our three-step equal pay review is for organisations with fewer than 50 employees.
If you employ 50 or more employees, we recommend that you undertake a more comprehensive equal pay audit instead.
Why you need to carry out this review
Under the Equality Act 2010, women are legally entitled to equal pay to men doing equal work. This means you need to be confident that your pay system delivers equal pay and protects you against the risk of an equal pay claim.
Equal pay applies to men as well as women
Much of the guidance on equal pay assumes the person making an equal pay claim is a woman. But the legislation applies just the same if a man is being paid less than a woman for equal work. The equal pay provisions in the Equality Act 2010 apply to both men and women but to avoid repetition and for clarity, these pages are written as though the claimant is a woman comparing her work and pay with those of a man.
Equal work can be defined in three ways:
- like work – this is where the work involves similar tasks that require similar skills, and any differences in the work are not of practical importance
- work rated as equivalent – this is where the work has been rated under a fair job evaluation scheme as being of equal value in terms of how demanding it is, and
- work of equal value - this is work which is not the same or rated as equivalent, but is of equal value in terms of factors such as effort, skill and decision-making.
You can find more information on equal work here.
A pay system is the basis on which you reward workers for their individual contribution, skill and performance. Equal pay is not about performance, it's about job demands. For more information, see the Acas guide to pay systems.
Pay means salary and other contractual terms of employment, such as bonuses, holiday entitlement, company cars, pensions contributions and other benefits.
As a guide, it should take no more than half a day to check out a 20-person business with five different job roles. It may take less time than this if you know the jobs well and have easy access to payroll and personnel records. If you do know the jobs well, you may be able to do this on your own. If not, you may need to involve the person who does.
The following data from your payroll and personnel records should be enough:
- each employee’s name or employee number, job title, start date, hours of work and whether they are male or female
- each employee’s basic pay, total earnings and other contractual work-related benefits. Total earnings include basic pay plus any additions such as overtime, shift pay, bonuses, commission, or any other payments. Benefits include holidays, sick pay, company cars, pension contributions, and any other form of non-cash benefit, and
- each employee’s basic hourly rate, given that some may work full-time and others part-time or flexibly.
There’s no need to carry out staff interviews or collect any other forms of information.
Three steps to an equal pay review
Once you have this information, follow these three steps to carry out your equal pay review:
While every effort has been made to ensure that this advice is accurate and up to date, it does not guarantee that you could successfully defend an equal pay claim. Only the courts or tribunals can give authoritative interpretations of the law.
Last updated: 19 Feb 2019