Pay and bonuses

The ‘old world’ of pay and benefits systems has led us to a place that does not seem very comfortable. There is still consistent underpayment of women. Massive equal pay claims are expected to imperil sections of the public sector and lead to cuts in services. Bonus schemes have rewarded individuals who bankrupted their company (and, in some cases, the country). An industry of job evaluation has been established as a defensive necessity for employers, but many employees still feel a burning sense of unfairness about their pay.

What are we trying to achieve? The legal context is perilously limited as a starting place, as it is simply concerned with eliminating oppressively small wages (with National Minimum Wage), and manifest discrimination on the ‘equality’ grounds. But there is little legal imperative to “fair” pay, once the hurdle of unlawfully discriminatory differentials is overcome.

It may be lawful to single out workers who do not have the benefit of specific legal protections, but it will tend to undermine feelings of fairness. For example, those who never take ‘sickies’ are functionally working harder than those who do. They may argue they are being ‘discriminated against’ if they are salaried, since they work more hours for the same pay. They may have no legal redress, but is your organisation paying the price some other way? Workers can use subterfuge to restore a sense of ‘equity’ if they feel they are being unfairly treated, but this is never to the employer’s benefit.

Minimum and hourly wage structures tend to reward work by the hour, but perhaps the reality of the new world of work is to be found in piecework rates. This may be a useful approach for some jobs, but for many it is not easy to measure the “piece”. You could argue that if I am twice as productive, I should I get twice the hourly rate. But if the organisation has not established a clear expression of “value” in the jobs, and a way of measuring outputs, then what constitutes ‘productive’ will not be clear and reward structures will be adrift.

Bonus schemes come in a wonderful variety of shapes and sizes, but what is a bit startling is the number that seem to reward undesirable behaviour or outcomes.

Some schemes focus on individual achievement, and although some competition between members of a workgroup can help to get everyone to up their game, sometimes the outcome is corrosive not productive. And so many bonus schemes appear to result in women being paid substantially less. There is no reason why we should not arrive at individual bonus schemes that are gender neutral and encourage the type of performance the business needs, but many fail to do that.

Structuring short term and long term reward systems is becoming trickier. Pension funding is becoming ever more difficult, so are employees going to need two jobs to earn enough to fund daily life and save for a pension? Existing working time maxima apply on a ‘per job’ basis (except for the under 18s), so two jobs may be a way for some workers to earn enough. But this raises questions about the long term health implications for the workers, and quality implications for the organisation’s customers.

The European law-making process seems determined to regulate and control and reduce variation, in the interests of protecting workers from exploitation. At what point, though, is a worker being protected not from exploitation, but from work itself?

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.   Tel: 08452 303050  Fax: 08452 303060

www.irenicon.co.uk

What is Equality?

Equality is a word that started out as a mathematical expression before finding its way in to the political world.

It seems to have moved into the legal world being used in the context of ‘equality before the law’ – justice being theoretically applied to all regardless of rank, gender, race, status etc. This is linked to the idea that justice is blind and to the ideal that law is for everyone and irrelevant personal characteristics are not seen by the law.

The idea of blind justice ran parallel to acts of parliament discriminating against women (who until the end of the 19^th century did not own property in their own right when they got married and did not get the vote until the 20^th century), homosexuals (whose behaviour in the UK was criminalised until the mid 20^th century), dissenting religions, who could not hold public office in the UK without becoming Anglicans, ……..and so much more.

The rhetoric of equality and the reality of equality in the UK have always been out of step.

Now the notion of equality has moved into the world of public service and employment. The new ‘Equality’ is moving towards “all things need to be made equal in order for justice to be applied” This introduces the notion of positive discrimination. Despite press reports to the contrary positive sex discrimination in recruitment has never been lawful in the UK and all women shortlists are no more lawful than all men shortlists as the law currently stands.

Will the Equality Bill in its final format change that?

The clause I was looking at is set out below: The definition of equality here is equality between individuals. This is not the ordinary English definition of the word, which is how UK statutes are traditionally interpreted. The EU tradition is to look at the intent of the people who passed the directive that is being implemented. If we look to Europe it is arguable that the intent of the legislature is equality of treatment rather than equality of outcome. Many of the relevant directives contain the words ‘equal treatment’ .

“The Commission for Equality and Human Rights will:

(a) promote understanding of the importance of equality and diversity,

(b) encourage good practice in relation to equality and diversity,

(c) promote equality of opportunity,

(d) promote awareness and understanding of rights under the equality

enactments,

(e) enforce the equality enactments,

(f) work towards the elimination of unlawful discrimination, and

(g) work towards the elimination of unlawful harassment.

 

“diversity” means the fact that individuals are different,

“equality” means equality between individuals, and

“unlawful” is to be construed in accordance with section 36.”

 

City women earn 60% less than men

The latest figures on equal pay and promotion in the City of London show large gaps in the earnings between men and women and a glass ceiling. http://tinyurl.com/cou8m9

If City women were as Unionised (and as prone to take tribunal claims) as they counter parts in local government and the NHS then the City would be awash with claims.

This would undoubtedly add to the City’s woes and increase the pace of off shoring. Should employers cut the wages of higher paid men? This would produce equality and economy all round. Whilst this will produce resentment and even hardship for some individuals, it may rebase the City for when an upturn comes.

Challenge to NHS equal pay system rejected

The continuing saga of the government’s difficulty with equal pay reached an interesting moment today when a Newcastle tribunal rejected the Union’s challenges to the Agenda for Change job evaluation system. Implemented at great expense the system was designed to reduce uncertainty and equal pay problems.

The tribunal decision is not binding on other cases, but it was agreed this would be at test case. http://tinyurl.com/c3j5s6. Interestingly enough the ‘red circling’ a common technique where higher paid employees’ packages are frozen to allow their colleagues to catch up over time was unsuccessfully challenged. This means that men who are overpaid under the current system can continue to retain their benefits at least for the meantime.

Historically many equal pay problems were ‘solved’ by freezing the higher paid workers pay and allowing inflation and salary increases to eliminate the difference over time. In these days of low increases and even deflation it is interesting to consider whether the new approach might be to give notice to terminate the existing higher paid contracts on the grounds that they are unlawful in terms of equal pay and offer lower paid, non discriminatory ones all round.

No doubt this is the last thing that any individual worker would want to be on the receiving end of!.   Yet it appears many local authorities will be taking such steps as they work through the massive backlog of equal pay claims http://tinyurl.com/dblhoj

What a tangled web we are weaving. Millions spent, pay differentials as they were and no closer to a resolution.

Tools ‹ Irenicon’s Blog – Employment law in a mad world — WordPress

Tools ‹ Irenicon’s Blog – Employment law in a mad world — WordPress.

http://tinyurl.com/cfy4fz   Glasgow Equal Opps body and local council arguing about comments on Council Equal Pay Performance.

While this goes on the affected staff’s pay is not resolved and mass tribunal claims await determination.

If we don’t adopt a new approach this is a foretaste of what the private sector will face as equality audits are moved out into the private sector.

Equal pay increases tribunal claims

The 2008 statistics on employment tribunal claims hide some interesting information for the ordinary employer.   The number of claims increased from 132,577 to 189,303 but this was substantially fuelled by an increase in equal pay claims, which increased by 18,693 to a 62,706.

Most of these claims were against government organisations.  Local authorities in particular grapple with equal pay.

Having created the system of equal pay it seems the government itself can not comply with it. Expensive equal pay and job evaluation exercises have rolled through the education system, local government and NHS.  A whole industry exists to evaluate jobs and pay.

Equal pay legislation has been around since the 1970s.  The original Act was delayed five years to allow employers to put their house in order but still the government did not do so, leaving women  underpaid and the tax payer to pick up the tab years later.

Women still don’t earn as much as men, employers still don’t really understand equal pay.  And a lot of tax payers money goes on defending employment tribunal claims.

Ask any ordinary manager and they have no idea of the concept of ‘work of equal value’ as opposed to ‘like work’.   If you have any idea of what I am talking about you are much further ahead than most.

If the government can’t successfully implement equal pay without being sued all over the place, is it time to look at the what is really going on?

Many ordinary employers are sitting ducks for equal pay claims.  Despite years of ACAS advice, EOC guidance and so on, even fully staffed HR departments can’t always explain how pay levels are determined and owner-managers have no chance.

Is there not a simpler, cheaper way to achieve fairness than all this paperwork?  Is there no other way? And when some bright mind comes up with a great new scheme can we get the government to test it on itself to see if it is possible to comply with it before getting everyone else to comply?

This article was published in 2009.  Has anything changed?

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.   Tel: 08452 303050  Fax: 08452 303060  Website : www.irenicon.co.uk.  You can follow Annabel on twitter – http://twitter.com/AnnabelKaye