Equal pay legislation has been around for 40 years – so why are we still struggling with it, asks Ian Milton.

For most HR professionals, equal pay is a topic that seems to rear its head every few years, cause a degree of concern and then quietly go on the backburner. The legislation is been in place for over 39 years, meaning the majority of employees in many organisations were either still in school or not even born when the Equal Pay Act was passed into law in 1970. It is a concept that many organisations refer to, talk about and even have a code of practice to enforce said concept. Yet, after 39 years, the problem is, given the results from the recent EHRC review of the gender pay gap in the Financial Services industry, still very much a reality.

The EHRC review was released in September 2009 and should have made for some very uncomfortable reading for many in the HR community in Financial Services organisations. The findings were grim. A 55 per cent gap between men and women in terms of average full-time earnings actually translates to a 39 per cent gap on annual basis earnings and a 47 per cent gap on annual total earnings, suggesting the gap is exacerbated by larger bonuses going to men, so highlighting problems with performance related pay. 63 per cent of responding organisations reported significant pay gaps in more than half of all job grades in their organisations. Men occupy 66 per cent of managerial and senior jobs and nearly 75 per cent of professional jobs, possibly replicating the pay gaps through replicating gender stereotypes and attitudes, and less than 50 per cent of responses reporting that they have made any efforts to deal with gender pay gaps.

This review may have only been confined to Financial Services but its findings should be a siren call to all HR professionals in all industries. With a Equality Bill on the books of Parliament, new legislation passed in other jurisdictions such as the Lily Ledbetter Act in the US (with ramifications for any organisation with US operations) and finally an increasing number of class actions being taken by “no win, no fee” legal firms, many organisations may be unknowingly allowing a rather costly (in terms money, resources and reputation) and malignant sickness to pervade in their organisations. Equal Pay is an issue that continues to be ignored at the risk of company reputation and employee goodwill. There should be no illusions as to how quickly this issue could become very serious for any organisation. The residents of Leeds are now seeing the impact of Equal Pay and the results are neither healthy nor pretty.

We don’t yet know what exactly the EHRC will do with the findings of their review but any organisation should now be looking to see what can be done to resolve the issues raised by this review. The EHRC has come up with some very good recommendations for organisations, including implement training and communications programmes on equal pay to influence understanding and behaviours of decision-makers and build understanding of the business case of equality to help managers appreciate the impact on productivity, employee engagement and deliver better solutions.

The EHRC has picked up some interesting themes in their review. Equal Pay is not necessarily just about amending pay levels, although this is a good step in resolution. If an organisation is serious about dealing with this problem, there must be a determined effort to change the attitudes among line managers and decision makers to ensure that pay and other elements are determined in the fairest manner.

Experience says that pay reviews, despite the efforts of HR, tend to be hurried and “half thought out” as line managers attempt to get back to the day job. In some industries, particularly with high male populations, it is simply forgotten that line managers need to think harder about deciding or justifying their pay decisions. HR should equally be challenging line managers on their decisions and perhaps not allow the prevailing culture to dominate. There is a question in the EHRC results as to whether they are so poor because the Financial Services industry is still largely male dominated. Is it a matter of prevailing culture and behaviour that continues to allow bad habits to continue?

But what will happen as the demographics change? There is already shifting taking place in professions as females come to dominate numerically and yet still have to deal with a preponderance of males among senior management. Does this mean that the problem of Equal Pay will simply go away or will there be a different problem to deal with? Current legislation only allows an Equal Pay claim to be made on the grounds of gender. What would happen if there are grounds to consider such as ethnic background, disability, religious affiliation, sexual orientation, etc?

Equal Pay as a legal concept is almost 40 years old and organisations need to deal with this issue because the issue may start to become a lot larger and a lot more complicated.

Ian Milton is a senior reward consultant at Watson Wyatt.