Retales™: How to conduct an equal pay audit

Wal-Mart hit the headlines this week after the US Supreme Court overturned a ruling which could have led to over a million female Wal-Mart employees claiming that they were being paid less than male employees. Although this is a US ruling, equal pay is a growing issue both at home and abroad, and high-profile class actions are becoming increasingly common in the UK.

The UK Government recently proposed new legislation that will require employers who have discriminated because of gender in relation to contractual terms or non-contractual pay matters to conduct an equal pay audit. Many employers are already carrying out audits in order to identify, and resolve, pay inequalities. Given the growing number of equal pay claims, whether brought individually or as class actions, conducting an equal pay audit is a valuable exercise for all employers.

There are five key steps to consider when conducting an equal pay audit:

1. Scope - establish the scope of the audit. A comprehensive audit would include all employees in your organisation. However, this may not be practical and it may be appropriate to consider undertaking the audit in stages.
2. Equal work - identify where men and women are doing 'equal work' ('like work'; 'work rated as equivalent' or 'work of equal value'). For many retailers, with a large and diverse workforce, this can be a complex exercise.
3. Data - collect and compare pay data to identify any significant equal pay gaps. This may entail calculating average basic pay and total earnings and comparing access to, and amounts received, of each element of the pay package.
4. Causes - establish the causes of any significant pay gaps and assess the reasons for them, which may, or may not, be gender-related.
5. Action plan - depending on your findings, develop an equal pay action plan to remedy any direct or indirect pay discrimination. Pay systems should also be kept under regular review, to ensure they remain free of bias.

If you would like further advice on how to conduct an equal pay audit, please contact Nick Thorpe, Employment Partner.