Report A4 Green 003 - Equality and Human Rights Commission



Equality and Human Rights Commission:Equal Pay Audit findings reportContents TOC \o "1-2" \h \z \u Executive Summary PAGEREF _Toc55806216 \h 3Key findings PAGEREF _Toc55806217 \h 3Recommendations PAGEREF _Toc55806218 \h 3Our approach to equal pay audits PAGEREF _Toc55806219 \h 4Scope and identification of equal work PAGEREF _Toc55806220 \h 4Caveats PAGEREF _Toc55806221 \h 5Sample considerations PAGEREF _Toc55806222 \h 6Chart 1 – distribution of sex across grades PAGEREF _Toc55806223 \h 6Chart 2 – proportional distribution of sex across grades PAGEREF _Toc55806224 \h 6Chart 3 - distribution of ethnicity across grades PAGEREF _Toc55806225 \h 7Chart 4 - proportional distribution of ethnicity across grades PAGEREF _Toc55806226 \h 7Chart 5 - distribution of disability across grades PAGEREF _Toc55806227 \h 8Whole organisation analysis PAGEREF _Toc55806228 \h 9Equal pay analysis - sex PAGEREF _Toc55806229 \h 9Equal pay analysis - ethnicity PAGEREF _Toc55806230 \h 12Equal pay analysis - disability PAGEREF _Toc55806231 \h 14Policy, process and practice review PAGEREF _Toc55806232 \h 17Individual pay history overview PAGEREF _Toc55806233 \h 17Job sizing and external benchmarking PAGEREF _Toc55806234 \h 18Starting salary PAGEREF _Toc55806235 \h 18Pay progression PAGEREF _Toc55806236 \h 19Off-cycle increases PAGEREF _Toc55806237 \h 20Key findings and recommendations PAGEREF _Toc55806238 \h 21Key findings PAGEREF _Toc55806239 \h 21Recommendations PAGEREF _Toc55806240 \h 21Executive SummaryIt is important to recognise that equal pay audits typically identify gaps. The Equality and Human Rights Commission’s own advice states:‘it is rare to emerge from a properly conducted pay audit without some gender pay differences or aspects of pay policy requiring change…that doesn’t mean that pay discrimination has occurred, or if it has that it has been deliberate. Pay differences between men and women may have been caused by the impact of historical factors…some differences may be justified.’Key findingsAcross all three protected characteristics, positive and negative gaps have been identified which indicates a lack of systematic bias in favour of one characteristic. The majority of gaps identified are below the 5% threshold for investigation recommended by the Commission. Where gaps exceed the threshold, an investigation of individual pay history indicates that differentials predominantly relate to: the TUPE transfer of staff into the Commission and associated pay phasing payments.the level transfer of staff from the wider Civil Service.The point of commencement is the only time that the organisation offers flexibility regarding individual salary i.e. the potential to start above the minimum point of the relevant pay range. The policy and criteria associated with such salary decisions is clear. However, one case was identified where the audit trail of decision-making is incomplete.Recommendations Disclosure of monitoring information by Commission staff has affected the identification gaps for disability and ethnicity. It is recommended that the organisation continue to push for higher rates of disclosure to enable future audits to reflect the widest population possible.The policies and processes associated with pay management are clearly articulated and enable the consideration of material factors when determining appointment salaries. It is recommended that the Commission ensures an audit trail exists for all decisions involving approval by the Executive Group in line with the policy. Our approach to equal pay audits Under the Equality Act 2010, women are entitled to equal pay with men doing equal work. It is therefore critical that the Commission is confident that its pay system delivers equal pay and that gaps between individuals can be justified in terms of material factors unrelated to their protected characteristics.Korn Ferry’s approach to equal pay audits mirrors the Commission’s best practice guidance and follows these steps: -Scope and identification of equal workThe Commission elected to go beyond the typical audit which solely looks at sex pay differentials to include the following characteristics: - SexEthnicityDisabilityIn order to understand the impact of pay policy, it was agreed to conduct analysis at organisational level and for the following disaggregated cuts of data: -RegionNetworkTeamAnalysis at organisational level is detailed within this report. The disaggregated cuts are provided in a separate Excel file.In order to identify equal pay gaps, it is critical to robustly identify where equal value lies. Ideally, there should be a factor-based, analytical method used to evaluate the roles to underpin that measure of equal value and ensure robust comparisons. The Korn Ferry Hay Job Evaluation Method is a tool that meets tribunal standards and Commission advice, being both analytical and factor-based. The method is used by the Commission to size roles and allocate to the appropriate grade. The review of outliers detailed within the investigation section of this report identified that the Commission has a clear policy for evaluation and, where scores are challenged, reverts to Korn Ferry for expert advice. As a consequence of these findings, the Commission’s grading structure has been used to determine equal work. We have carried out analysis on the data to assess whether there are any overall issues. The significance set by the Commission states that a population difference between characteristics or a difference between individuals of 5% or more is significant and should be investigated further.CaveatsThis commentary is based on the analysis of the data submitted by the Commission; the accuracy of the advice and recommendations contained in this report is reliant upon the quality, completeness and accuracy of the information provided by you to Korn Ferry. Please note that the following analysis does not constitute or replace any legal advice nor is it a comprehensive listing of potential claims or issues.Sample considerationsThe following charts detail the sample size and distribution for each in-scope characteristic within the Commission’s grading structure. Chart 1 – distribution of sex across grades Chart 2 – proportional distribution of sex across grades It can be observed at organisational level that 59% of the sample identify as female and 41% male. There are no individuals who have failed to disclose their sex. There is good female representation across the levels with the highest proportions in grades 4, 5 and 6.Chart 3 - distribution of ethnicity across gradesChart 4 - proportional distribution of ethnicity across gradesA total of 23 individuals (11%) identify as an ethnic minority across the organisation. This represents a combination of all ethnicity categories collected by the Commission which have been aggregated to create the largest sample possible for analysis. A further 11 individuals (5% of staff) have elected not to declare their ethnicity and were excluded from analysis for this characteristic. Chart 5 - distribution of disability across gradesChart 6 - proportional distribution of disability across gradesA total of 32 individuals (16%) consider themselves to be disabled across the Commission. A further 22 individuals (11% of staff) have elected not to declare whether they consider themselves to be disabled and were excluded from analysis for this characteristic. When considering statistical significance, proportions must be reviewed in conjunction with the sample size in each grouping. With very small samples within a grade, the proportion may vary widely and thus blur the overall analysis observation. This effect has been observed for disaggregated analysis relating to ethnicity and disability, therefore the focus of the investigation is based on gaps identified at whole organisational level. As noted previously, a separate Excel analysis file has been provided to the Commission which details all gap analysis. Whole organisation analysisThe same calculation has been applied to identify equal pay gaps, irrespective of characteristic. To identify the gaps, the salary of the protected characteristic is deducted from the non-protected characteristic and the difference expressed as a percentage of the non-protected characteristic. For example, the sex equal pay gap is calculated by subtracting the female salary from the male salary with the difference expressed as a percentage of the male salary. Using the median as a measure of average earnings tends to be less affected by a small number of extremely high earners (which can skew the distribution of earnings). However, using the mean average can help to capture differences across the distribution (for example,?showing lots of women in the low earning extreme or lots of men in the high earning extreme). Both calculations are included in the analysis and are detailed below.Equal pay analysis - sexThe following tables detail the average and median pay for males and females for each grade within the organisation.Chart 7 – average base pay by gradeChart 8 – median base pay by gradeTable 1 – sex equal pay gaps A positive difference in the table below occurs where male employees are paid more than female employees whereas a negative difference is shown where female employees are paid more than male employees (based on average or median pay). In this table the colour red denotes any differences in average or median base pay falling over the 5% threshold for investigation recommended by the Commission.GradeFemale(mean average)Male (meanAverage)Pay gap (mean)Female(Median)Male (median)Pay gap(median) L2Associate?24,099.26?23,351.72-3.2%?23,246.40?23,246.400.0%L3Senior Associate?31,654.46?32,023.531.2%?29,738.28?29,738.280.0%L4Senior Associate?37,511.68?38,316.052.1%?37,439.88?37,439.880.0%L5Principal?48,991.00?48,864.23-0.3%?47,268.60?47,268.600.0%L6Senior Principal?58,481.79?58,667.280.3%?58,744.65?58,744.680.0%Director?70,036.40?76,359.008.3%?71,260.00?79,680.0010.6%Executive Director?95,297.16?94,822.08-0.5%?95,297.16?94,822.08-0.5%CEO?120,760.80--?120,760.80--Overall?43,287.91?43,182.66-0.2%?37,439.88?37,439.880.0%Key observationsBoth positive and negative gaps can be observed in the analysis, this indicates a lack of systematic bias towards one sex over another. The Director level indicates gaps at average and median above the 5% threshold for investigation. This population covers two distinct sizes of portfolio, as established by job evaluation scores. When pay gaps are calculated for the two distinct Director groups the average and median pay gaps reduce below the 5% threshold for investigation. All gaps within the wider organisation are below the 5% threshold for investigation.The median gap across all grades within the wider organisation is 0% indicating that the ‘typical’ salary for males and females is the same. The small mean gap across the same organisational grades indicates a lack of significant outliers, either high or low paid. Equal pay analysis - ethnicityThe following tables detail the average and median pay for individuals identifying as an ethnic minority and white for each grade within the organisation.Chart 9 – average base pay by gradeChart 10 – median base pay by gradeTable 2 – ethnicity equal pay gaps A positive difference in the table below occurs where white employees are paid more than ethnic minority employees whereas a negative difference is shown where ethnic minority employees are paid more than white employees (based on average or median pay). In this table the colour red denotes any differences in average or median base pay falling over the 5% threshold for investigation recommended by the Commission.GradeEthnic minority (mean average)White(meanAverage)Pay gap (mean)Ethnic minority (Median)White (median)Pay gap(median) L2Associate?24,056.11?23,611.64-1.9%?23,246.40?23,246.400.0%L3Senior Associate?32,436.36?31,634.26-2.5%?34,028.04?29,738.28-14.4%L4Senior Associate?37,439.88?37,863.571.1%?37,439.88?37,439.880.0%L5Principal?50,142.84?49,465.29-1.4%?47,268.60?47,268.600.0%L6Senior Principal-?58,547.18--?58,744.68-Director?82,102.50?70,971.50-15.7%?82,102.50?71,420.00-15.0%Executive Director-?94,980.44--?94,822.08-CEO?120,760.80--?120,760.80--Overall?42,170.82?43,700.673.5%?34,876.68?37,439.886.8%Key observationsBoth positive and negative gaps can be observed in the analysis, this indicates a lack of systematic bias towards one characteristic over another. The Director level indicates gaps at average and median above the 5% threshold for investigation. This population covers two distinct sizes of portfolio, as established by job evaluation scores. When these populations are taken into account the average and median pay gap remains above the threshold for the larger portfolio (Legal, Finance, Procurement & Performance, and People & Infrastructure); being -14% on average and median. A review of individual pay history identified that the ethnic minority post holders transferred from the wider Civil Service and retained their salary. This is in-line with Commission policy and relates to the broader consideration of this practice detailed within the policy, process and practice review section of this report. All gaps within the wider organisation are below the 5% threshold for investigation: with the exception of Senior Associate (Level 3) median. On investigation, this is because a higher number of ethnic minority staff are on the maximum of the pay scale. The median gap across the remaining grades within the wider organisation is 0% indicating that the ‘typical’ salary for white and ethnic minority staff is the same. The small mean gap across the same organisational grades indicates a lack of significant outliers, either high or low paid. A number of individuals within the wider organisational grades have elected not to disclose their characteristics and are therefore excluded from the analysis. Given the mean and median salaries for this group, their subsequent disclosure and inclusion would be likely to influence the gaps. Equal pay analysis - disabilityThe following tables detail the average and median pay for individuals who consider themselves disabled and those individuals who do not, for each grade within the organisation.Chart 11 – average base pay by gradeChart 12 – median base pay by gradeTable 3 – disability equal pay gaps A positive difference in the table below occurs where employees who do not consider themselves to be disabled are paid more than employees who do, whereas a negative difference is shown where employees who do consider themselves to be disabled are paid more than employees who do not (based on average or median pay). In this table the colour red denotes any differences in average or median base pay falling over the 5% threshold for investigation recommended by the Commission.GradeConsider themselves disabled (mean average)Do not consider themselves disabled White(meanAverage)Pay gap (mean)Consider themselves disabled (Median)Do not consider themselves disabled (median)Pay gap(median) L2Associate?23,667.66?23,571.05-0.4%?23,667.66?23,246.40-1.8%L3Senior Associate?32,450.13?31,324.60-3.6%?33,876.72?29,738.28-13.9%L4Senior Associate?38,698.23?37,762.80-2.5%?37,439.88?37,439.880.0%L5Principal?52,895.98?48,181.97-9.8%?50,838.96?47,268.60-7.6%L6Senior Principal?65,124.96?57,554.84-13.2%?65,124.96?58,738.68-10.9%Director-?72,477.44--?71,580.00-Executive Director-?94,980.44--?94,822.08-CEO-?120,760.80--?120,760.80-Overall?40,873.67?43,873.896.8%?37,439.88?37,439.880.0%Key observationsThere are three grades with gaps exceeding the threshold for investigation, Senior Associate (level 3), Principal (level 5) and Senior Principal (level 6). All but one of the gaps observed is negative, which indicates that staff who consider themselves to be disabled are paid higher than their non-disabled colleagues across wider organisational grades. On further review the length of service profile indicates that these individuals have been with the organisation for longer and are at a higher position in the relevant pay ranges. A number of individuals within the wider organisational grades have elected not to disclose their characteristics and are therefore excluded from the analysis. Given the mean and median salaries for this group, their subsequent disclosure and inclusion would be likely to influence the gaps.Policy, process and practice review There are a number of pay management mechanisms that will directly affect an organisation’s ability to effectively manage individual pay over time. Korn Ferry’s 3P process for the investigation of pay gaps is designed to understand the causal factors by reviewing the organisational policy and process associated with pay management decisions; and whether these are followed in practice. The review included two elements of investigation: -Discussions with organisational representatives to understand the policy and process. Review of the pay history of individuals with a high salary when compared to the median salary for the opposing characteristic within their grade. Details of the salary changes throughout each individual’s career and all documented evidence relating to decisions was provided by the Commission for a review of the factors contributing to pay differentials. Individual pay history overviewA total of 25 files were reviewed. The key factors underpinning the pay differentials can be described as follows: -Fifteen cases (60%) relate to the formation of the Commission. The organisation included the TUPE of staff from three legacy Commissions: Commission for Racial Equality, Disability Rights Commission and Equal Opportunities Commission. Individuals who transferred received pay phasing, which moved their salaries to a point on the Commission’s pay scales that reflected their legacy salaries. From this point all individuals have been subject to the same policies and processes as other colleagues. Seven cases (28%) relate to individuals transferring to the Commission on a level transfer from the wider Civil Service; four of these on a temporary loan basis. In all cases the individuals retained their existing salary in compliance with the process outlined below. Two cases (8%) relate to individuals joining the Commission from outside the Civil Service. One case meets the criteria specified for the determination of starting salaries described below. In one of these cases the audit trail is unclear and commentary is provided. One case (4%) relates to an individual who was subject to pay protection in-line with the Commission’s policy following redeployment to a suitable alternative role as part of a redundancy exercise. At the end of the period of protection, the individual’s salary reduces to the maximum of the relevant pay band, which is in-line with the defined policy. From this point, the individual has been subject to the same policies and processes as other colleagues. The following observations represent a combination of findings from both aspects of the investigation process.Job sizing and external benchmarking All roles within the organisation are evaluated using Korn Ferry?Hay Guide Chart - Profile Method (previously known as the Hay Group job evaluation method) which provides a robust and defensible understanding of internal relativities when applied in the manner it is intended to be used. The evaluation scores determine which level roles are assigned and this, in turn, identifies the pay range. External benchmarking does not appear to form part of the Commission’s annual pay review process. This is largely due to the limitations of the HM Treasury pay remit process, which constrains funds available for uplift payments. The pressure of the external market may be considered for specific circumstances and more information is provided in the starting salary section below. Starting salaryCandidates are selected via an assessment process, with the highest scoring individual identified by recruitment panel consensus. Salary offers are subject to the following documented process: Starting salaries are offered at the minimum of the relevant pay range for external staff, except where a business case has received sign-off from the relevant Executive Director and Executive Group.A business case requesting a higher starting salary must be submitted to the Commission’s Executive Group by e-mail. Approval must be granted by the Group, including by the Director of People and Infrastructure, Director of Finance and Procurement and the Chief Executive Officer, before formal offers are made to a candidate.Level transfers from the Civil Service will be at the individual’s current salary or capped at the pay band max, whichever is lower. Approval for offers under these terms also require approval from the Executive Group.Business cases for higher starting salaries are required to cover demonstrable evidence of:Difficulties in recruiting i.e. there must be no other appointable candidates and a shortage of applicants for the role who meet the essential requirements. Specialist skills and knowledge the candidate will bring to the role. Criticality of the role i.e. a clear impact on the Commission’s delivery if not filled by an individual with the level of skills and experience demonstrated by the identified candidate. Refusal of an offer at the relevant salary band minima. The candidate must have been offered the role on the band minima and had the benefits package explained to them and turned this down before a higher offer is made. The candidate’s current salary as stated in documented evidence.Confirmed budget by the Recruiting Manager in consultation with the relevant Director and the Finance Team. The salary must be affordable within the current staffing budget.The individual pay history review identified one case where the audit trail was not complete. The following aspects of the decision-making process were unclear: -Difficulties in recruitingRejection of an offer at salary band minima Following further review of this case we recognise that contemporaneous discussions took place, but they were not recorded in line with the published policy.All other cases were found to have a clear audit trail with decisions made in-line with EHRC policy and associated documentation available. Pay progressionSalaries are reviewed annually in line with guidance published by HM Treasury. Incremental points were removed by the Commission and a percentage uplift is calculated annually in-line with Civil Service Pay Remit Guidance. In recent years the organisation has sought to narrow pay bands by applying a differential uplift and focusing a marginally higher percentage uplift to all individuals at the minima. The review process did not identify any exceptions. Promotion salary The Commission’s pay ranges do not overlap. At the point of promotion an individual moves to the minimum point of the new range. This process was followed in all applicable cases reviewed. Off-cycle increases The Commission does not have a published process for off-cycle increases or retention payments. No instances of such payments were identified as part of the case review process. Key findings and recommendationsKey findingsAcross all three protected characteristics, positive and negative gaps have been identified which indicates a lack of systematic bias in favour of one characteristic. The majority of gaps identified are below the 5% threshold for investigation recommended by the Commission. Where gaps exceed the threshold, an investigation of individual pay history indicates that differentials predominantly relate to: the TUPE transfer of staff into the EHRC and associated pay phasing payments;the level of transfer of staff from the wider Civil Service;The point of commencement is the only time that the organisation offers flexibility regarding individual salary i.e. the potential to start above the minimum point of the relevant pay range. The policy and criteria associated with such salary decisions is clear. However, one case was identified where the audit trail of decision-making is incomplete.Recommendations Disclosure of monitoring information by Commission staff has affected the identification gaps for disability and ethnicity. It is recommended that the organisation continue to push for higher rates of disclosure to enable future audits to reflect the widest population possible.The policies and processes associated with pay management are clearly articulated and enable the consideration of material factors when determining appointment salaries. It is recommended that the Commission ensures an audit trail exists for all decisions involving approval by the Executive Group in line with the policy. Contact the AuthorClaire Field: Associate Client Partner Korn Ferry, ManchesterE-mail: claire.field@, Mobile: 07469 118 596 ? Copyright 2019, Korn Ferry.ALL RIGHTS RESERVED. Do not modify or create derivative works from contents. Statement of Confidentiality: This proposal and supporting materials contain trade secrets and proprietary business information of Korn Ferry. This information may be photocopied by Example Client Name for use in evaluating the project, but is not to be shared with other organizations, consultants, or vendors without the express written permission of Korn Ferry.? Copyright 2019, Korn Ferry.ALL RIGHTS RESERVED. Do not modify or create derivative works from contents. Statement of Confidentiality: This proposal and supporting materials contain trade secrets and proprietary business information of Korn Ferry. This information may be photocopied by Example Client Name for use in evaluating the project, but is not to be shared with other organizations, consultants, or vendors without the express written permission of Korn Ferry.About Korn FerryKorn Ferry is a global organizational consulting firm. We help clients synchronize strategy and talent to drive superior performance. We work with organizations to design their structures, roles, and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop, and motivate their people.About Korn FerryKorn Ferry is a global organizational consulting firm. We help clients synchronize strategy and talent to drive superior performance. We work with organizations to design their structures, roles, and responsibilities. We help them hire the right people to bring their strategy to life. And we advise them on how to reward, develop, and motivate their people. ................
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