Pay equity

Equal work, defined twice

Pay equity is a legal test before it is an HR metric, and the test differs by jurisdiction.

In Great Britain, section 65 of the Equality Act 2010 counts three kinds of work as equal: like work (the same or broadly similar), work rated as equivalent under a job evaluation study, and work of equal value, where the demands are equal in terms such as effort, skill and decision-making. The equal pay provisions extend to England, Wales and Scotland; section 217 does not extend them to Northern Ireland, so an employer there needs to check the rules that apply locally.

In the United States, the federal Equal Pay Act of 1963 prohibits paying one sex less than the other within the same establishment for equal work on jobs that require equal skill, effort and responsibility under similar working conditions. Its coverage broadly follows the Fair Labor Standards Act, but it also includes executive, administrative and professional employees normally exempt from minimum-wage and overtime requirements. State laws can add to it; this entry covers federal law only.

What can justify a difference

Neither regime requires identical pay for everyone in a role. In Great Britain, an employer can defend a difference by showing it is due to a material factor that does not involve treating the person less favourably because of sex (section 69). Where that factor puts one sex at a particular disadvantage, it must also be a proportionate means of achieving a legitimate aim. Under the Equal Pay Act, the exceptions are a seniority system, a merit system, a system that measures earnings by quantity or quality of production, and a differential based on a factor other than sex.

If you cannot name the factor behind a gap, you cannot rely on it. “He asked for more” is a reason you would have to defend, not one that defends itself.

Running a pay equity analysis

A pay equity analysis is the employer’s own check that each difference has a lawful explanation. There is no statutory template for a small company; this order keeps the comparison honest:

Keep the analysis separate from gender pay gap reporting. In Great Britain, employers with 250 or more employees on the snapshot date (5 April for most employers outside the public sector) publish six figures within a year, including mean and median hourly pay gaps and bonus gaps (GOV.UK). Those figures describe the whole workforce, so they can reveal where to look but cannot show whether two specific people are paid equally (calculation guidance).

Pay secrecy does not protect a gap

In Great Britain, a contract term that stops an employee discussing pay is unenforceable when the conversation aims to find out whether pay is connected to a protected characteristic (section 77). Asking, sharing or receiving that information is protected against victimisation. A salary band for each level, applied without exceptions for negotiation pressure, gives you an answer when that conversation reaches you. For the disclosure obligations coming from the EU, see pay transparency.