MCQ
ag98
Week4EqualityMeritandVariablepay.pptxEqual pay
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Group 1
Halez
Sidra
Jharrnaa
Shenglan
Natalie
Group 2
Pavla
Aswin
Omar
Moosa
Ashwini
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Equal Pay
How do we ensure that we are paying all people equally?
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https://www.gov.uk/guidance/equality-act-2010-guidance
Equality Act, 2010
Equal Pay (EP)
Includes:
EP legislation
Certain EP cases
Pay transparency
Gender reporting and EP audits
Causes of unequal pay
Biased job evaluation systems
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EP legislation: The UK Equality Act, 2010
The act covers all aspects of discrimination
In Reward, the Act is not only concerned with pay:
Basic pay
Bonuses
Benefits such as annual holiday entitlement
Reward processes such as job evaluation
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The Equality Act, 2010 has replaced the Equal Pay Act 1970, Sex Discrimination Act 1975, Race Relations Act 1976, Disability Discrimination Act 1995, Employment Equality (Religion or Belief) Regulations 2003, Employment Equality (Sexual Orientation) Regulations 2003 and the Employment Equality (Age) Regulations 2006.
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Equality Act, 2010
Women are entitled to equal pay with men (and vice versa) if they are doing:
Like for like work (men and woman doing the same/very similar job)
Work rated as equivalent by job evaluation
Work of equal value (jobs that require a similar level of skills and ability)
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Equal pay in the UK
To reduce the difference in reward between men and women
To ensure other protected groups, e.g. ethnic minorities receive equal pay
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UAE Federal Decree Law No. 2 of 2015
Combating Discrimination and Hatred to embracing tolerance and encourage nationalities and faiths in the UAE to co-exist peacefully.
The Law complements existing legislation such as the Penal Code (covers public office crimes, religious or ritual crimes and financial crimes) and the Cyber Crimes Law (using technology) which have been in force since 1987 and 2012.
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UAE Federal Decree Law No. 2 of 2015
Employers should be aware of Article 17 of the Law which states that a ‘representative, manager or agent of a company’ will be punished (by the same penalties that would apply if they had committed the offence themselves) if a crime prohibited by the Law is committed by any personnel of the company in its name and on its behalf, and provided that the representative, manager or agent is aware of the same.
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UAE EQUAL PAY LAW – SEPTEMBER 2020 The updated UAE Labour Law No. 8 of 1980 took effect on 25 September 2020, and is intended to strengthen the UAE's commitment to gender equality in the workplace, according to a government press release.
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UAE EQUAL PAY LAW – SEPTEMBER 2020
updates the wording of Article 32 of the UAE Labour Law
It is understood that market ‘standards’ [presumed to be market rates] will be used as a reference in wage assessments
prioritises equal pay, enforces equality between the genders in the months and years ahead
authorities discretion to consider how best the MoHRE and the government will develop the procedures and standards (such as payroll audits / powers to the local Courts / WPS monitoring for non-free zone companies) to implement and promote equal pay, and penalise employers who are not paying staff equally.
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UAE EQUAL PAY LAW – HR’S ROLE
The immediate next step for your company, the legal and HR teams is to review pay scales, pay policies and actual payroll to ensure you are achieving pay equality wherever possible.
One real risk will be where employers pay different salaries for the same role based on nationalities. Whilst the Equal Pay law does not address this particular point, if a female employee from one country is earning less than a male employee from a different country, and both are doing the same role, there is a clear and obvious risk of this contravening the new Article 32.
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Genuine material factor defense
An employer can objectively justify unequal pay on the grounds of:
Differences in skills, qualifications, productivity etc.
Market forces
Red circling (pay protection) following job evaluation …
Provided any difference is unrelated to gender
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A defense to an equal pay claim is that the claimant is paid less because of a material factor not because of gender. Material factors must be capable of objective justification. Much of the case law that assist is pre-Equality Act 2010 but the defense is contained in the Equality Act 2010.
https://www.citizensadvice.org.uk/law-and-courts/discrimination/what-are-the-different-types-of-discrimination/justifying-discrimination/
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Important equal pay cases
Red circling
Snoxell v. Vauxhall Motors LTD (1977): Pay protection should not last indefinitely
Award for bonuses
Cleveland Council dinner ladies (1996): Application of bonuses discriminated (ensure men and women get same bonus)
Length of service
Cadman v. Health and Safety Executive (2006): Length of service may not be a defense (Cadman suggested paid less than a male equivalent. Job description was looked at to see how long a person was required to have experience in the job). Length of Service may not be a defense.
Transparency
Barton v. Investec (1989): Court said employer need to be able to explain policies.
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Transparency
Barton v. Investec (1989): Court said employer need to be able to explain policies. Mrs Barton was awarded an additional an extra half a million pounds in this case.
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First equal value case: Julie Hayward v. Cammell Laird (Read case)
Her case centred on the fact that although she was working in a kitchen, the level of training required and the skills and demands made upon her were equivalent to many of her male colleagues in the shipyard (men who painted the ships).
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First equal value case: Julie Hayward v. Cammell Laird (Read case)
Julie won a landmark legal victory for the right of women to equal pay.
Her case took 10 years and £50,000 of public money to prove
After three industrial tribunals, she won an appeal at the House of Lords.
The case was the first to accept the principle of equal pay for work of equal value - after the government was forced to amend the Equal Pay Act in 1984 to bring the UK into line with the rest of the then European Economic Community.
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Cooking up a case for equal pay - in the kitchen at Cammell Laird shipyard
http://news.bbc.co.uk/2/hi/business/8032750.stm
http://www.bl.uk/learning/histcitizen/sisterhood/clips/equality-and-work/equal-pay/146389.html
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Local Government Equal Pay (EP) crisis
Large number of claims by women pending
Encouraged by ‘no-win, no fee’ lawyers
Estimated cost of settlement £3 billion
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Can an employer in the UK stop you from Talking about your wages?
Employees have the legal right to discuss pay if they choose to, and it’s illegal for employers to ban those discussions but they can suggest you don’t talk about salaries in work time!
Thanks to the Equality Act of 2010, employees have the right to discuss salary for the purposes of collective bargaining or protection – so that if everyone’s being underpaid, people can come together and ask for more.
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Gender reporting
Organisations must publish the difference between men/women’s
Hourly pay, i.e. average and median
Bonuses, i.e. numbers receiving an amounts in last 12 months
Total men/women in each quartile pay band
An employer can have a large gender pay gap and no discrimination i.e. civil engineers as fewer females filling these senior jobs.
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UAE EQUAL PAY LAW – SEPTEMBER 2020 The Gender Balance Council was established in 2015 in the UAE with the aim of increasing the UAE's ranking on the United Nations Development Programme's Gender Inequality Index. The UAE currently ranks first in the Gulf region and 35th globally for gender equality.
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Why does a gender pay gap often exist in the workplace?
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https://padlet.com/claudiamaher1/Bookmarks
Gender gap in earnings
Some possible causes:
Women in lower paid service sector
Part-timers are often not promoted
Women tend to have shorter service
Availability for overtime pay
Male prejudice against women
Reward practices that discriminate etc.
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What is an equal pay audit?
An equal pay audit is a reward policy/process which compares the pay of men and women doing equal work in your organisation to:
identify any differences in pay between men and women doing equal work.
investigate the causes of any (differences in pay between men and women doing equal work).
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Equality and Human Rights Commission (EHRC): recommended EP audit steps Equal pay audit is a reward policy/process:
Agree scope of review and information required
Decide who to compare, e.g. men/women, ethnic minorities, staff in same grade or band
Compare reward, i.e. basic pay, average earnings, overtime etc. in each set
Establish causes of pay gaps (see next slide)
Take action, e.g. reduce time to reach scale maxima (long scales prevented women to getting to the top of the scale because of taking maternity leave). Some banks have reduced their pay scale levels.
https://www.equalityhumanrights.com/en/multipage-guide/equal-pay-audit-step-1-deciding-scope
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EHRC = Equality and Human Rights Commission
EHRC ‘high risk’ reward practices, 2009
Lack of transparency in reward
Discretionary (flexible) pay systems, e.g. PRP (performance-related pay)
Non-payment of bonuses during maternity leave
Organisations with more than one grading/pay system
Long pay scales, e.g. more than 6 incremental points
Managerial discretion on starting pay
Market-based, job family structures
Indefinite or lengthy pay protection policies
Inappropriate job evaluation schemes
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Biased/discriminatory job evaluation
What could possible discrimination in this case look like?
How could it be addressed in a fair manner?
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| Maintenance Fitter |
| Company Nurse |
| Factor | Fitter | Nurse |
| Job Experience | 10 | 1 |
| Training Required | 5 | 7 |
| Equipment Responsibility | 8 | 3 |
| Safety Responsibility | 3 | 6 |
| Management Responsibility | 3 | 0 |
| Lifting Required | 4 | 2 |
| Strength Required | 7 | 2 |
| Sustained Physical Effort | 5 | 1 |
| Physical Environment | 6 | 0 |
| Working Position | 6 | 0 |
| Hazards | 7 | 0 |
| TOTAL | 64 | 22 |
Discriminatory factors and marks
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| Discriminatory Factors |
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| Factor | Fitter | Nurse |
| Basic Knowledge | 6 | 8 |
| Complexity Of Task | 6 | 7 |
| Training | 5 | 7 |
| People Responsibility | 3 | 8 |
| Equipment Responsibility | 8 | 5 |
| Mental Effort | 5 | 6 |
| Visual Attention | 6 | 6 |
| Physical Activity | 8 | 5 |
| Working Conditions | 6 | 1 |
| TOTAL | 53 | 54 |
Non-Discriminatory factors and marks
| Thought to be non-discriminatory |
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Merit and Variable Pay
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Learning outcomes
At the end of this class you should be able to:
Define the key terms relevant to this session.
Demonstrate a sound knowledge and understanding of contingent and variable pay and understand when and how to use it.
Demonstrate a sound knowledge and understanding of merit pay and understand when and how to use it.
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Defining the key terms
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Defining key terms
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| Types of pay | |
| Competency / Contingent pay | Consist of payments which are related to performance, competency, contribution, skills or length of service. Provide pay progression by adding to the base pay. |
| Merit pay | Individual performance, competency or contribution-related schemes are referred to as merit pay schemes in textbook. |
| Skill-based pay | Most often used for manual workers and aims to encourage and reward the acquisition of additional skills and is added to the base rate for the job. |
| Cash bonuses/Variable pay | Cash bonuses, commission, profit sharing may be paid to individual or team, for performance. Payments are not consolidated with base pay. |
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Basic pay progression
MERIT PAY: Basic pay progression is related to:
Performance (output) – i.e. how much you make or sell?
Competence or skills (input) i.e. what you put into a job
Contribution (output and input) i.e. 1 and 2 above
Experience (length of service) – progress up scales/basic pay
VARIABLE PAY: Performance-related pay is related to:
A one-off payment (e.g. bonus, commission, incentives, profit sharing)
Dependent on performance of individual, team or organisation
It can be high one year, low another (i.e. big bonus one year and none the next)
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Basic pay progression
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| Which is best for | Basic pay/ Basic pay increase | Bonus |
| Rewarding sales staff | ||
| Having most impact in job adverts | ||
| Obtaining mortgages/loans | ||
| Continued good performance | ||
| Pensions | ||
| Younger staff | ||
| Skills development | ||
| Older staff |
Basic pay progression
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| Which is best for | Basic pay/Basic pay increase | Bonus |
| Rewarding sales staff | Bad | Good |
| Having most impact in job adverts | Good | Bad |
| Obtaining mortgages/loans | Good | Bad |
| Continued good performance | Bad | Good |
| Pensions | Good | Bad |
| Younger staff i.e. CIPD recommend staff bonus preferred | Bad | Good |
| Skills development | Good | Bad |
| Older staff | Good | Bad |
Rewarding performance
Basic pay progression (often called merit pay)
PRP/Bonuses for individuals
PRP/Bonus for teams and gainsharing
Employee incentive and recognition schemes
Sales commission
Profit-related pay and share schemes
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| INDIVIDUAL’S MARKET POSITION | Below 95% of median (paid less than market) | 95-105% of median | Above 105% of median | |
| INDIVIDUAL PERFORMANCE RATING | Basic pay increase | Basic pay increase | Basic pay increase | |
| A (EXCELLENT) | 10% | 8% | 6% | |
| B (VERY GOOD) | 8% | 6% | 4% | |
| C (EFFECTIVE) | 4% | 3% | 0% | |
| D (DEVELOPING) | 3% | 0% | 0% |
Merit pay increases Example: Barclays Retail Bank Dependent on an individual’s performance rating and position in the market
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Performance-related pay (PRP)
Acts as an incentive to motivate people to improve their performance
Individual differences in performance can be accurately and fairly measured
Pay differences can be related to performance differences
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Agreed outcomes (targets)
Performance measures
Performance
Rating
Formula
Performance pay
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Does Performance Related Pay Work?
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Individuals performance-related pay (PRP): Does it work?
PRP :
Rewards employees in a way they see as fair
Motivates individuals to achieve high performance
Sends a strong message about what the organisation expects of employees
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Armstrong, M. (2002) Employee reward. CIPD: London.
Current thinking related to PRP
Need a good performance management system
Implementation is where it fails (i.e. if managers don’t do it well)
Best as an incentive rather than a discretionary retrospective award (i.e. if you communicate with the employee what the bonus is before they start the project not at the end of the project)
Bonus amounts should be significant whether it works or not
Bonuses are the norm in the private sector
Merit and contribution pay are common in the public sector
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Team-based pay (TBP)
Requirements for success:
TBP must fit with the organisation’s culture
Teams must be:
Clearly defined
Have clear performance measures
Be stable, flexible and multi-skilled
Have considerable autonomy
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Performance-related pay for teams
Types of teams:
Permanent, self contained work teams, e.g. call centre employees
Project and ad hoc teams, e.g. building Expo 2020
Organisational team, e.g. everyone working in a particular department
Types of team reward:
Pure team-based pay (TBP), which means bonuses for permanent, self contained work team
One-off bonuses to project teams
Gainsharing bonuses, which means sharing cost savings between the organisation and employees
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| CUSTOMER ADVISERS and equivalent | MANAGERS and equivalent | |
| % OF BRANCH TARGET ACHIEVED | % OF SALARY | % OF SALARY |
| 0-79 | 0% | 0% |
| 80 | 3% | 3% |
| 90 | 5% | 6.3% |
| 100 | 10% | 15% |
| 110 | 15% | 20% |
| 120 | 20% | 25% |
Team bonus scheme
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Yorkshire Building Society
Dependent on branch performance
Rewarding sales staff
General considerations:
Type of product
Type of sales staff
Organisation of sales
Sales prominence or difficulty
Sales time cycle
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Rewarding sales staff
Elements:
Basic salary
Commission (% of sales revenue)
Bonus for meeting business objectives
Other incentives, e.g. gifts for success in competitions (i.e. best sales assistant in branch)
Commission dangers:
Short-term focus
Customer interests can suffer
Individual versus team
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Rewarding sales staff exercise (20 mins)
Consider the following sales jobs:
A pharmaceutical representative whose clients are doctors
A sales executive selling fighter aircraft to Middle Eastern governments
A call centre sales person selling home insurance by phone
A sales person selling new cars
Head of equity sales in an investment bank in the city
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For each of these jobs:
Decide the level of basic pay
High/Medium/Low compared to the working population
Decide which sort)s) of contingent/variable pay is/are appropriate
Merit pay, individual, bonus, team bonus, incentives, commission, profit-related pay
ANSWERS TO SALES STAFF QUESTIONS
Group discussion
For each of these jobs:
Decide the level of basic pay
High/Medium/Low compared to the working population
Decide which sort)s) of contingent/variable pay is/are appropriate
Merit pay, individual, bonus, team bonus, incentives, commission, profit-related pay
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Answers to the above exercise: Rewarding sales staff
Selling fighter aircraft:
High basic pay – a high technical product
Merit pay, bonus and most likely profit-related pay. Example: BAE
Not commission – length of time to secure sale, maintenance contracts etc. just as important as sale
Also ethical considerations very important
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Answers to the above exercise: Rewarding sales staff
Call centre sales person selling insurance:
Low basic pay – typical of call centre employment
Individual, team and call centre performance bonuses, perhaps commission
Incentives would be the most effective (i.e. best call centre person of the month)
Often a continuation of all these
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Answers to the above exercise: Rewarding sales staff
A sales person selling new cars:
Low basic pay
Commission seems the obvious choice
But, bonus is becoming very common based on a series of parameters, e.g. customer satisfaction, car sales life style, showroom attractiveness
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Answers to the above exercise: Rewarding sales staff
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Tesco: Private Sector Distribution Depot
Team pay to reduce accidents:
Divided drivers into teams
Put new and experienced drivers together
Bonus of £1,500 to team to reduce accidents
In 1st year company saved £300,000
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Team pay in the NHS
TBP pilot schemes (2004):
Some success: important projects got done
Teamwork was more important to staff than money – money often used for staff development
Size of team was not important
Staff decided their own targets
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Types:
Profit-related money given as a bonus, e.g. John Lewis
https://www.youtube.com/watch?v=XCx82lOfg2E
https://www.youtube.com/watch?v=-SPSOda58yE
Share schemes
Share ownership scheme – where an employee can buy discounted shares in the company (from pre-taxed pay).
Share gifting scheme (or a free shares scheme) – where the company gives shares to the employees free of charge. These shares normally have to be held in a trust structure for a period of time.
Share options – the option to buy shares at a future date at the share price on the date of issue (i.e. if you buy shares within a 3 year period at today’s share price).
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Drake (2020)
(3) Profit sharing and share schemes
Virtal Tour of John-Lewis Oxford St
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https://www.youtube.com/watch?v=3ZCuv76Mn_Y&app=desktop
https://www.youtube.com/watch?v=l6uwqei3XeA
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The Guardian, 2020
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Example Share Ownership Plans UK
Drake (2020)
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(4) Skills- and competence-related pay
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Competency-related pay
Pay dependent on an employee’s competency level
Example:
Entry level
Target level
Development level
Advanced level
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Competency-related pay
Competency-related pay is most suited to:
Organisations where staff competence is a key objective e.g. NHS (hospital staff) and teachers etc.
Knowledge workers e.g. researcher (reward for knowledge)
Where competence frameworks exist and competences can be assessed
Reward staff who move job without a promotion e.g. (in a broad banded structure – pay increase developing skills and competence without them being promoted).
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Competency-related pay
There are two types of competencies:
Behavioural competencies related to the personal characteristics that individuals bring to their work.
Technical competencies related to what people know and be able to do.
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Agreed competency requirements
Competency level definitions
Evidence of competency achieved
Rating or assessment
Methodology
Competency pay
Basic pay progression dependent on an individual’s level of skill or competence
Which type of pay do you choose?
Choose the right sort to motivate each group of your employees
Reinforce business or organisational goals, e.g. financial services industry moved from commission to contribution pay
Only pay for things that can be measured
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