Retail Economist - 18 October 2010

A hard act to follow - the equality Act

To many the new Equality Act brought into law this month might seem little more than a lot of fuss about not a great deal, changing very little and arguably not going far enough on some issues. However as Peter Burgess, MD of Retail Human Resources, discusses, there are some interesting and important issues arising from amidst the rhetoric.

After much speculation and doubt about whether the new coalition government would in fact implement Harriet Harman's Equality Act, the majority of its provisions came into force this month. So what has changed now that this massive and well-trumpeted piece of legislation has come into force? Well not a lot really.

The main provisions of the Act have simply consolidated previous equality legislation. It includes the provisions of The Sex Discrimination Act 1975 (amended in 1986), The Race Relations Act 1976 (amended in 2000 and 2003) and The Disability Discrimination Act 1995. As such, apart from making the life easier for those who like to teach Diversity Workshops, what was the point of this very expensive piece of legislation other than for Harriet's legacy?

Certainly it makes sense to bring such legislation up-to-date, after all the world has changed a lot since the Equal Pay Act of 1970. However there are two new pieces of law within the 2010 Act that have gone almost unnoticed and one is of particular interest.

As of October 1st it was no longer legal to have medical questionnaires as part of a job selection process. The government was clearly minded not to allow such questionnaires to be used as a subtle form of disability discrimination. Certainly it is hard to see the justification for such questions which can be embarrassing and certainly intrusive. I am sure there will be cries from some quarters about absenteeism. However there is still no restriction on asking a potential employee about their absence record or indeed asking their previous employer. There is also no restriction on how employers manage absence.

The far more interesting aspect of the new Act for me, however, is the provision about secret salary policies. From October 1st clauses in employment contracts that require people to keep details of their salary secret became unenforcable. As a result if you discuss your salary with others in the business openly, your employer cannot take any action against you. Is this a big deal? Well yes actually.

The private sector rarely has open salary policies. Most companies operate on the basis that they will get people for what they can. There is nothing immoral in that, it is the market playing its proper role. There's just one problem, though: it doesn't work. This very month a new study from the Equality and Human Rights Commission reported that women typically earn less than men by about 16%.

So are companies deliberately paying women less than men? I don't think so. Indeed I suspect that they are largely unaware of such differentials. One part of the Act that was not implemented was the requirement for larger organisations to measure gender-based wage discrepancies. We know for a fact that women were discriminated against before the 1975 Act and we know that it takes at least a generation before the intentions of such Acts actually take effect (I am sure no one believes that age discrimination ended back with the 2006 legislation, for example!) With pay we have a historic underpayment of women that has persisted not only because women didn't know about the discrepancies but perhaps also because their employers didn't know it either.

The new Act will help but only a little. How many people actually know that secret salary policies are now unenforceable? Doubtless the next stage will be to forbid employers to actually have these clauses. Sadly I do not think we will see the day when open salary policies are compulsory. Consequently we will never see true fairness in the work place with regard to salaries.

My own company is perhaps unique in the recruitment industry for having a totally transparent salary policy. Having always operated such a policy it is hard to imagine working in any other way. The merit of that policy is underpinned by two key principles:

  1. It must be fair to pay people doing the same job the same pay. Of course if one person does that job more effectively then they should be paid more. No sensible employee could argue against that.
  2. It is not the amount of money that people are paid that is the key motivator or de-motivator. It is the perceived fairness or otherwise of the salary level. There have been many pieces of research over the years that all indicate the same thing. Any employer that has unfair pay differentials and doesn't think these get discussed is delusional. That unfairness will be eating away at staff morale and therefore productivity.

While not always seeing eye-to-eye with the viewpoints of some of the more vocal trade unions, on this issue I find myself in complete alignment with UNISON's director of organising and membership Bronwyn McKenna when she stated this month: "Women need action to stamp out stubborn pay discrimination. Boosting transparency, having regular gender pay audits, and updating the law to make it easier for women to challenge their pay, would be giant leaps towards fairness."

The new government's Junior Equality Minister is Lynne Featherstone who happens to be the local MP for this business. Perhaps she would like to look at the issue again, and if so, Lynne, please do feel free to come and talk to us.