There are several perspectives on fairness at work. In pay terms, and from an organisation’s perspective, we identify three types:

• The fairness of pay outcomes – how the pay budget should be distributed (distributive justice).
• The fairness of the process used in making pay decisions (procedural justice).
• The quality of the treatment people receive when procedures are implemented (interactional justice).

These can create trust because they signal that people are respected and valued. By contrast, if people think an employer’s performance management and reward approach is not fair, they might not want to join or stay, and may lack commitment.

We explore other perspectives of fairness in our report The changing contours of fairness.

HR teams have an important role in defining what ‘fair’ means for their employer. In turn, this will help guide management’s reward decision making (such as how much to contribute to a workplace pension). Sharing this will show what employees can expect from the organisation and what it expects from them..

Publishing a narrative alongside pay disclosure data allows people professionals to show the fairness of reward outcomes.

Unfair treatment of female workers resulted in the Equal Pay Act of 1970, which outlaws any less favourable treatment between men and women in terms of pay and conditions of employment. This is now part of the Equality Act 2010 that applies in England, Scotland and Wales.

The law gives a woman the right to be paid the same as a man (and vice versa) when carrying out:

• Like work ─ two employees who are doing the same or broadly similar roles, or

• Work rated as equivalent by analytical job evaluation study ─ this could be totally different jobs which have been given the same rating as the result of an analytical job evaluation, or

• Work of equal value ─ when there are two jobs that are very different, but the employee claims that they require a similar level of skill and ability.

The right to make a claim under equal pay legislation applies to employees and to anyone with a contract to carry out any work personally.

The Equality Act 2010 also introduced legislation relating to pay secrecy clauses in employment contracts. These are unenforceable, and if an employee suffers any detriment from discussing their pay, this will be unlawful. It’s also unlawful to prevent or restrict workers from discussing their pay, but this is just within an organisation. Outside the workplace, employers can still require employees to keep their pay confidential.

If an employer is found guilty of pay discrimination, it must carry out an equal pay audit unless an exception applies. The audit must be published on the employer’s website and be left there for three years. If an employer fails to comply, a tribunal can impose a financial penalty.

The Equality and Human Rights Commission has published a range of guidance on all aspects of the Equality Act 2010, including a Code of practice on equal pay. Whilst not legally binding, it gives guidance on good practice and failure to follow it may be considered by tribunals or courts. CIPD members can find out more in our Equal pay law Q&As.

As well as gender, the law requires employers not to pay an employee less, or give them terms and conditions that put them at a disadvantage, because of their disability, race, religion, sexual orientation or another protected characteristic.

It’s essential to fairness to establish and understand levels of what we regard as high and low pay.

To protect the most vulnerable, the law requires employers to give workers a minimum rate of pay. In the UK, the National Minimum Wage applies to all workers aged 16 and over. The National Living Wage applies to those aged 23 or over.

Almost 10,000 organisations employing over 300,000 workers have signed up to the voluntary 'real' Living Wage, which is higher than the legal minimum, driven in part by considerations of fairness and financial wellbeing.

While UK law doesn’t cap the amount of money employers can give, large employers are required to disclose the amounts they pay their senior executives and, in the banking sector, there’s legislation limiting the size of bonuses in relation to salary.

In our report The view from below, we explored what employees really thought about their CEO’s pay. Remuneration committees are under pressure to address excessive executive pay.

Pay reporting aims to encourage employers to reward people fairly. All large UK employers are required legally to disclose certain earnings data by gender. Large, listed firms must also disclose data comparing CEO remuneration with the pay of the rest of their workforce. In addition, there are also voluntary pay disclosure initiatives.

While it’s optional for private and voluntary sector employers to issue a statement explaining the reasons behind their gender pay gaps, large, listed businesses must publish a narrative explaining their CEO pay ratios. These narratives can highlight the processes being used to try to make sure pay decisions are fair, such as:

• Job evaluation to determine pay rates.
• Panels to review salary increase decisions made by line managers.
• Data to review pay outcomes, for example analysing results by both gender and ethnicity to identify unexpected patterns.

HR information systems and data analytic capabilities can be costly, but people professionals can make the case for investment based on the benefits it will bring. For instance, current and potential employees will be able to see that contribution is rewarded fairly, investors will be able to identify that the right behaviours are being rewarded appropriately, while regulators will be able to check that remuneration is encouraging the right kinds of performance.

You can have a gender pay gap and still pay men and women fairly. The gender pay gap is calculated by taking all employees in an organisation and comparing the average pay between men and women. By contrast, equal pay looks at the difference in men and women’s pay for the same or similar work.

In the UK the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 require all private and voluntary sector employers with 250 or more UK employees to report their gender pay gap, based on data collected on 5 April each year – the ‘snapshot’ date. The report must contain particular data and have a signed statement from a director, or equivalent, confirming its accuracy. It must be published on the organisation’s website and (if applicable) in its annual report, and on the government’s gender pay gap reporting website, within a year of the snapshot date.

Similar reporting requirements apply to public authorities, though their snapshot date is 31 March. Again, they must report within 12 months of the snapshot date.

Not filing a report breaches the Equality Act 2010 and could prompt enforcement action by the Equality and Human Rights Commission.

Although not obligatory, the government expects most employers to include a narrative report alongside their figures to give relevant context to the data.

Our Gender pay gap reporting guide explains how to measure, report, communicate, and deal with a gender pay gap. We also published Lessons from reporting the gender pay gap.

Read the CIPD’s gender pay gap report.

The UK Government launched a consultation on ethnicity pay reporting which closed in January 2019 – read our response. However, since then, no decision has been taken to require employers to report.

In July 2020, the UK Government set up the Commission on Race and Ethnic Disparities to review inequality. Its report, published in March 2021, recommended: all employers that choose to publish their ethnicity pay figures should also publish a diagnosis and action plan to lay out the reasons for and the strategy to improve any disparities. Reported ethnicity pay data should also be disaggregated by different ethnicities to provide the best information possible to facilitate change. Account should also be taken of small sample sizes in particular regions and smaller organisations.

To help organisations do this, it asked the Department for Business, Energy and Industrial Strategy to produce guidance. Until this is published, we have produced guidance to help report on pay by ethnicity, which we have used in our own report disclosing ethnicity pay data.

Read the CIPD's ethnicity pay report.

Contacts

Acas – Equal pay

Acas – Gender pay gap reporting

GOV.UK – Corporate governance: new reporting regulations

GOV.UK – Gender pay gap reporting

Books and reports

ARMSTRONG, M. (2019) Armstrong's handbook of reward management practice: improving performance through reward. 6th ed. London: Kogan Page.

HOUSE OF COMMONS LIBRARY. (2018) The gender pay gap. Briefing paper.

INCOMES DATA SERVICES (2017) Equal pay. Employment law handbook. London: Thomson Reuters.

LOW PAY COMMISSION. (2019) The National Living Wage: beyond2020. The Commission.

PERKINS, S.J. and JONES, S.E. (2020) Reward management: alternatives, consequences and contexts. 4th ed. London: CIPD Kogan Page.

RUBENSTEIN, M. (2020) Discrimination: a guide to the relevant case law. 33rd ed. London: Michael Rubenstein Publishing.

THE COMMISSION ON RACE AND ETHNIC DISPARITIES. (2021) The report of the Commission on Race and Ethnic Disparities. 31 March.

Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print.

Journal articles

BROWN, J. (2021) Experts lament ‘unnecessary delay’ as gender pay reporting extended by six months. People Management (online). 24 February.

COTTON, C. (2019) Pay transparency: what is driving the interest and how should people professionals respond? CIPD Voice. Issue 21, October.

JONES, A. (2017) Tackling the root causes of mass equal pay claims. People Management (online). 4 October.

MARGOLIS, D. and PAREKH, R. (2019) What can businesses do to ensure equal pay? People Management (online). 26 March.

OWEN, J. (2020) Gender pay gap falls to record low, ONS figures show. People Management (online). 5 November.

OWEN, J. (2020) Quarter of large firms now calculating ethnicity pay gap, research suggests. People Management (online). 10 September

THOMAS, R. (2020) How to conduct an equal pay analysis. People Management (online). 25 February.

WILLMOTT, B. (2020) Why ethnicity pay gap reporting has to be introduced. Blog. 24 June.

CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.

Members and People Management subscribers can see articles on the People Management website.