Why is a General Pay Review Important for Companies in 2023?

In 1968 nearly 200 women walked out of the Ford Motor Company having discovered that they were being paid significantly less than their male counterparts. Although the jobs were different, they were similar in terms of skill level. To add insult to injury, even the men who were on a lower skill grade than them were paid more. They felt that changes needed to be made.

The action of these women had a serious effect on production. Without their skills, no seats could be finished - no seats, no cars. It was a stark acknowledgement of the importance the role these women fulfilled in the Dagenham located company. It also led directly to the implementation of the first ever act of parliament that directly addressed the disparities in the pay gaps between men and women - The Equal Pay Act of 1970.

Equality Act 2020

The Act has undergone several updates over the decades, with the latest one being the Equality Act of 2010, which ensured that equality of pay was written into all employees’ contracts - this was to ensure that a woman’s contractual terms stood equally side by side with their male counterparts.

Under schedule 19 of the 2010 Act, government organisations and public bodies were legally required to publish any gender pay gap data. This was further extended in 2017 to private organisations with more than 250 employees.

Consequently, more and more responsible businesses that also subscribe to the exigences of CSR Corporate Social Responsibility voluntarily carry out a regular annual pay review, even if they do not fall within the mandatory criteria.

Benefits of a regular pay review

The benefits of a regular pay review are manifold.

We have already mentioned a company’s Corporate Social Responsibility. Within this, initiatives that promote the values of diversity, equity and inclusion often give companies a leading edge when it comes to investor confidence and public image. Demonstrating a commitment to pay equality is a key part of this adherence to social responsibility.

A pay review also demonstrates to your workforce that you listen to them, and are committed to the creation of a fair and equitable working environment in which all employees’ rights are taken into account. In today’s social media world, where reputations can be won and lost in the length of time it takes for a social media post to be shared half a dozen times, significant brand damage can be wreaked should a disgruntled employee feel that they have been unfairly rewarded. Becoming known as a fair employer will not only help retain current employees, but will also help considerably in the recruitment of new ones - essential when you take into account current skills shortages.

How does a pay review work?

A pay review is a complex procedure and there is no one correct way of carrying one out. Every company is different, and a strategy is put into place according to its own unique trading environment.

Part of the review involves verifying job descriptions. While job titles are one way of differentiating different roles and pay grades, it is important to have a much deeper understanding of the responsibilities and skill levels required for each individual job role or grade. This will give greater leverage when comparing like for like jobs on an industry wide scale.

Evaluation also needs to take into account the specific achievements that some job roles involve, such as reaching sales targets and commission rates. Questions need to be answered, such as if performance expectations are exceeded, how does this fit into the overall evaluations?