Conducting an Equal Pay Audit

Clare Parkinson

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17 Jan 2019

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The equal pay act sets provisions for organisations to follow the same pay system. Under the Act, you must give men and women doing identical work, the same treatment.

Equal recompense applies to all contractual terms of employment and not only an employee’s salary. It should include benefits such as holiday entitlements, bonuses, pension contributions and more.

The aim of this audit is to improve the working lives of protected groups, women in particular. The primary goal of the audit is to make you more mindful of the need to review your pay system. This ensures that men and women are paid equally to carry out similar tasks.

For companies with over 50 staff members, a pay audit is the most effective way of checking that your organisation is complying with its obligation to its employees.

Equality Act 2010

Under the 2010 Equality act, if a member of your team feels they aren’t receiving equal pay, they can write to you asking for more information. The audit will provide information to determine if there’s a wage difference and the reasons for it.

In cases where you can’t resolve the problem internally, your employee may contact an employment tribunal. They can either do this whilst working at the company or up to six months after leaving.

A job evaluation scheme allows you to identify where women and men are conducting work of equal value.

Why audit?

Under the Equality Act of 2010, women doing the same work as men should also be paid the same.

The best way to review your current wage system is with a pay audit. It consists of comparing the salary of protected groups doing equal work in your company. It should also be able to highlight the cause of pay gaps (if any) by gender, ethnicity, disability or working pattern.

With an effective audit, you’ll be confident that your pay system is able to deliver a fair compensation package to your employees. You are also protected against the risk of staff members making a claim against you.

What is an equal pay audit?

This type of audit helps you comply with your duties under the Equality act of 2010. When done right, the audit compares the pay of workers performing equal work to determine if there's a gap due to sex, sexual orientation and other protected acts.

You'll need to make a plan of action after conducting your audit. You should address and resolve cases of pay disparity between staff members as soon as they come up.

Conducting your equal pay audit

An effective report of your audit should include the following factors:

1. The scope of the audit

You’ll need to make some important decisions before deciding on the scope of your audit. Although it might be a good idea to include every employee in the initial audit, due to practical reasons it might be difficult to achieve.

2. Equal work for equal pay

There are three main types of equal work:

  1. Like work, this involves employees with similar skills in carrying out similar tasks.
  2. Work rated as equivalent are jobs rated under a fair job evaluation scheme as being of equal value in terms of its demand.
  3. Work of equal value are jobs that are not the same and are not rated as similar. But, they are of equal value in terms of the effort and skills needed.

3. Collecting pay data:

After identifying who in your staff is doing the same work, gather and compare their pay packages to find any gaps.

It's useful to have a statistical picture of the workforce covered in the audit. Include information like gender distribution (by grade or equal workgroups), male and female staff (by age and length of service) and part-time staff (by gender and grade or equal work groups).

You’ll then need to analyse the wages of the male and female employees in each group. To do this, you calculate the average basic salary and total average pay. You then calculate the difference between the average pay and total pay for men and women in each equal workgroup.

With this data, you can now compare the amounts received in each element of pay.

4. Causes of gender pay difference

After collecting and analysing salary alterations, you'll need to justify the causes. You may notice significant differences between the pay for men and women within your company. If so, you need to identify which aspects cause the most differences and why.

As a rule of thumb, you should investigate any discrepancies in pay over 5%. This is not definitive – you should investigate any reoccurring disparity or patterns you come across.

5. Action plan

After gathering, analysing and investigating pay gaps, you’ll then need to put an action plan in place. You should create a plan to close any gaps that aren't justified on grounds other than one of the protected acts.

Even if you haven't found disparity, you'll still need to track and review your pay system and policy often. This helps to maintain your current standard.

The data collected from the previous steps will then serve as the basis of your equal pay audit report. You can present this report to an EAT if an employee makes a claim against you.

Specialist advice

Our experts can support you with completing a pay audit or creating an equal pay audit template. Using our equality tool, we can also test the fairness of your company’s wage system and highlight any areas of concern. Call us free on: 0800 145 3384.

About the Author

Clare Parkinson has over 20 years’ experience in the Croner Reward business. As Business Manager, Clare leads a team of Reward Consultants who specialise in the delivery of pay and grading related advice, including tailored pay benchmarking and gender pay reports.

Over the years, Clare has contributed to various industry publications on topics such as gender pay, executive remuneration and market pay trends.

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