EOC urges new action on equal pay

In February 2001, the Equal Opportunities Commission's Equal Pay Task Force published its report into UK performance on equal pay. The gap between men and women's earnings has narrowed from 31% to 18% since the passage of the Equal Pay Act 1970. The Task Force put forward a broad package of recommendations to close the remaining gap, including that employers should carry out gender pay reviews, but its proposals have received a mixed reception from the government, employers and trade unions.

In October 1999, the Equal Opportunities Commission (EOC) set up an Equal Pay Task Force chaired by Bob Mason, the director of human resources planning at British Telecommunications, to explore the pay gap between men and women. The work of the Task Force, made up of employer and trade union representatives from the public and private sectors and independent experts, culminated in the publication of a report, Just pay, in February 2001.

Key findings

The Task Force report notes that women in full-time work earn, on average, 82% of the average hourly pay of male full-time employees (including overtime). This represents only a only a two percentage-point reduction in the gender pay gap since 1997 (UK9709165N). When part-time working is included, the pay gap is said to be the widest of any state in the EU (TN0103201U). The report notes the far-reaching consequences of the pay gap: "For individual women, they can include personal poverty and social exclusion, particularly for single mothers ... [with] implications for child poverty. The pay gap also inhibits women's ability to build up adequate occupational pensions. It restricts the resources available to them for investment in training and lifelong learning. It reduces their motivation. For ... employers, it [can encourage] a lack of competitiveness and a reduced capacity to recruit and retain good employees. It can also mean that they face laborious and expensive legal cases. For the government, the consequences include lost revenue in tax and National Insurance contributions and in time, continuing dependency amongst women on state benefit."

The Task Force cites three main explanatory factors: discrimination in pay, occupational segregation, and the unequal impact of women's family responsibilities. It focuses on that part of the pay gap caused by pay discrimination, believed to account for 25%-50% of the disparity.

Recommendations

The Task Force believes that the pay gap due to discrimination at work could be reduced by 50% within the next five years by:

• awareness raising;

• modernising equal pay legislation;

• ensuring that employers and unions know how to implement equal pay reviews;

• enhancing transparency and developing accountability for delivering pay equality; and

• amending social, economic and labour market policies to complement equal pay measures.

Legislative reform is at the heart of the Task Force's proposals. It "strongly" recommends that the Equal Pay Act 1970 is amended to require employers to carry out regular equal pay reviews. In a two-stage process, employers would firstly undertake a pay system equality check; for those which identify a pay gap, a more detailed equal pay review should follow. The Task Force proposes that, following consultation, the EOC should produce more detailed proposals in a revised Code of Practice. Other proposed legislative reforms relate to improving the effectiveness of employment tribunal procedures.

In addition, the Task Force advocates voluntary "capacity-building" measures to help ensure that employers and unions know how to implement equal pay, including:

• providing EOC literature;

• working with the Advisory, Conciliation and Arbitration Service (ACAS) to advise employers in carrying out equal pay reviews;

• setting up an Equal Pay Forum to develop and promote good practice;

• exploring funding possibilities with government for the provision of consultancy services to advise employers how to conduct reviews; and

• persuading software companies to develop payroll software that can process management information on equal pay.

In terms of macro-policy, the Task Force considers it important that the government places equal pay at the core of its social, economic and labour market policy agendas. This could include: the agenda it sets the Low Pay Commission (UK9807135F); the national skills audit; its own national childcare strategy; and its work/life balance initiatives (UK0102115F).

Government reaction

While the Labour Party government accepts that employers should be encouraged to carry out pay reviews, it rejects the Task Force's proposal that they should be mandatory. According to employment minister Tessa Jowell, "much can be done by good practice, and by good example ... We want to ensure that pay reviews are both workable for business and effective for women." The government is committed to monitoring voluntary progress on equal pay reviews. It has agreed an initial GBP 100,000 extra for the EOC to work with employers on building the capacity to conduct pay reviews, including developing appropriate computerised pay systems.

Speaking at an Industrial Society seminar on 27 March 2001, Ms Jowell set out the next steps of the government's approach to making existing legislation work better and working with employers "to challenge the culture that sustains discrimination and unequal chances for women at work". These include: annual awards to recognise good practice by employers in promoting equal opportunities and pay; appointing "fair pay champions" from a wide range of backgrounds who will publicly promote the benefits of fairness and equality in pay; and establishing a women's employment and pay review. Headed by a leading business figure, this body will work with "fair pay champions" alongside the EOC to build support for voluntary pay reviews and identify further areas in which awareness of existing equality law can be raised. Employers will also be encouraged to provide: higher-value part-time work and job shares; term-time contracts; and "job pool" opportunities that could meet their skill and vacancy needs.

The government has also accepted a number of proposals arising out of its own consultation exercise on existing legislation. On 11 December 2000, the Department for Education and Employment published a consultation paper, Towards equal pay for women (UK0101107N) that focused on streamlining equal pay tribunal procedures, one of the Task Force's recommendations. Ms Jowell commented: "Task Force recommendations in this area are welcome confirmation that our proposals are well-founded. We will consider how best to take on board relevant Task Force recommendations alongside the next steps in our work on streamlining tribunal procedures."

Union and employer views

Trade unions welcomed the report's recommendations. John Monks, general secretary of the Trades Union Congress (TUC) said that the report "offers many solutions which would help narrow the gender pay gap which despite 30 years of equal pay legislation remains depressingly wide ... But we are disappointed that the government is not to accept the Task Force recommendations that the law be changed to force employers to carry out gender pay reviews." The TUC was pleased at funding for the EOC to develop "best practice" pay review models, but doubted that "bad employers" would comply. Overall, the TUC views the latest government plans to tackle the pay gap as "a positive step forward - particularly for part-time women workers."

For their part, employers expressed doubts about the Task Force's recommendations. The Chartered Institute of Personnel and Development (CIPD) argued that a legal requirement for equal pay audits might not be as effective as hoped. Commenting on its own research, to be published shortly, its advisor on equal opportunities, Dianah Worman, said: "employee pressure and unions are the biggest drivers for taking action to redress equal pay imbalances." More forcefully, the Confederation of British Industry (CBI) said the Task Force had come up with "ineffective and disproportionate" proposals. Susan Anderson, the CBI's director of human resources policy, commented: "The pay gap is a problem but the Task Force is directing too much of its firepower at the wrong target. Statutory pay auditing would have little impact and would be a real [administrative] burden ... Many small firms would not have the resources or expertise."

The CBI claimed that there is no evidence clearly demonstrating that unfair discrimination by employers is the main cause of the pay gap. It argues that the main causes are the sectoral and occupational concentration of women, and that they tend to have less work experience, largely because of family responsibilities. It believes that the situation would be best changed by giving "more choices to women who are trying to balance work with family responsibilities" by measures such as improving childcare facilities, promoting flexible working patterns, providing better-quality careers advice, and breaking down gender stereotypes. Correspondingly, employers back the voluntary steps recently proposed by the government. Ms Anderson observed: "[They are] all about tackling the different causes of the gender pay gap - not just unfair discrimination ... This initiative is designed to help women with their career choices. It is far more sensible than imposing ineffective legislation on all employers to curb the discriminatory practices of just a few ... Business will play its part in helping to develop a voluntary pay review system."

Stephen Alambritis from the Federation of Small Businesses said: "We welcome the pragmatic approach the government is taking ... It is important to get the right balance between the needs of employers and employees. The voluntary approach to pay reviews will be particularly welcomed by small businesses."

Commentary

There is a broad consensus that, despite long-standing equal pay and sex discrimination legislation, a significant and unjustified gap persists in the UK between the pay of women and men. Closing the pay gap fits with union campaigns on equality, employers' concerns with "family-friendly" working and maximising workforce potential, and the government's agenda on modernisation, social inclusion and equal opportunity. The Task Force's report suggests that closing the pay gap requires concerted efforts, including compulsory equal pay audits and streamlining the employment tribunal system (some 2,400 equal pay complaints were made to tribunals in 1999-2000, with mounting frustration at the lengthy and costly legal process). So far, the government has concentrated on the latter, and on tailored voluntary measures.

A "best practice" approach could have an impact on the practices of some leading employers. The Task Force report itself cites existing examples of "good practice" including at Glaxo Wellcome, HSBC and the National Health Service. It also praises the Transport and General Workers' Union for organising a pay audit of its members at every organisation where they work. However, the EOC notes that a voluntary approach has its limits: "the vast majority of employers do not believe they have a gender pay gap and therefore do not believe an equal pay review is necessary." Likewise, a survey of over 300 human resources managers conducted in summer 2000 found that only a third of firms analysed pay information in this way.

The government's rejection of the Task Force's key proposal that employers undertake mandatory pay reviews defuses a potential pre-election row with sectors of the business community. With advances in areas such as maternity leave and pay, work-life balance initiatives, and the national minimum wage, Labour is being careful not to confront employers with additional and potentially costly legislative proposals. The CBI has already raised objections to some government proposals to streamline employment tribunals on the grounds that they may make it more difficult for tribunals to dismiss weak claims. However, Labour's latest steps to encourage voluntary employer action against unequal pay has both secured widespread backing and added impetus to the drive initiated by the Task Force.

Notwithstanding this, Labour's more limited proposals are unlikely to solve the problem of unequal pay. Arguably, it needs to consider wider and more radical measures even beyond those advocated by the Task Force - for example, reviewing the tax and benefit system. Similarly, proposals such as those pertaining to flexible working patterns might in fact reinforce existing gender roles, with implications for women's real advancement in the workplace. (J Parker, IRRU)