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Does Pay Equity Exist?

Written by Don Young and Catherine Fitzsimons on March 3rd, 2021.      0 comments


Written by Don Young and Catherine Fitzsimons on March 3, 2020.

This article was published on https://socialink.org.nz/.

In our experience, most Not for Profit (NFP) organisations would agree that they strive to develop remuneration systems that are:

  • Fair and equitable
  • Defensible
  • Transparent (some more than others)
  • Affordable
Achieving this in good times is a challenge and when the going gets tough, it becomes even harder.   Many NFP organisations have been impacted by Covid-19 with a higher demand for services while having their income constrained or even contracted. Additionally, the current NZ legislative and employment environment is adding pressure with the upward movement of the minimum wage, and the focus on equity, transparency and the living wage. So, depending on how organisations are funded and the impact that Covid has had on that funding, it may be that the usual wage growth may not happen as it has done in previous years, and that every penny will be turned over a few times. This kind of scrutiny around affordability might also prompt consideration of some of the other principles above, particularly fairness and equity. Let’s see what that means.

Equal Pay: Same pay for the same job

This is the obvious thing that people think about when they think about fairness and equity in pay. Broadly speaking, this means that employers must ensure that two people doing the same job and performing at the same level are treated equally. Pay levels are set for the job and you cannot have different pay levels based on criteria such as gender. Legislation clearly prohibits differentiation in starting pay rates as well subsequent pay increases.

Pay Equity: Same pay for a different job of equal value

So, if equal pay means, for instance, that men and women are paid equal pay for doing the same job, what does pay equity mean? To achieve pay equity we need to make sure that different jobs are valued fairly to ensure that women and men in different jobs are paid the same for work that is different but is of equal value. This naturally becomes more complex and therefore it’s less easy to identify and address discrepancies. A number of jobs spring to mind that have traditionally been occupied mostly by women, and there is a growing sentiment that some of these jobs have been historically under-valued.

So how can you assess if they are of ‘equal value’ to any male-dominated roles which are being paid more?  To do this you need to compare the respective jobs by looking at things such as their respective skill-requirements, the experience required, etc. We do this through a process of job evaluation which allows us to compare jobs on the basis of common criteria, or factors, such as knowledge, experience, work complexity, interpersonal skills, people management responsibilities, etc.  Job evaluation, therefore, provides a systematic mechanism for rationally assessing the relative sizes of different jobs. Once we know which jobs are of similar ‘size’ (even though they may be very different in nature), we have a more reliable basis for comparing pay levels of specific groups of people within those roles. Reviewing an organisation from an equity perspective takes some effort, but the information derived helps to make better use of limited budgets to address areas of inequity. It may also pre-empt pay equity claims from groups of staff who feel that their roles have been under-valued.

Pay Parity: Paying ‘on par with’ other organisations by sector, industry, or other groupings

The Government has set up a task force to investigate Fair Pay Agreements and this has naturally created some discussion. This task force would seem to relate to establishing minimum conditions of employment across various sectors or industries, rather than trying to create broader pay parity, or the same pay for the same work at various levels across different employers, organisations and workplaces.

At one level, this could pose challenges for NFP organisations as we simply have to acknowledge that this sector by its nature operates differently from other sectors. The differences are multifaceted and relate to the people the sector attracts, the rewards it provides, and the nature of its management and governance constraints.  Indeed, the NFP sector faces complex challenges as its humanitarian purpose sits alongside the need to be accountable for the funds it raises and how it uses its resources. It is certainly unlikely that any FPA would overlap the NFP sector to the point that is untenable (they would be represented in discussions), but it could potentially create some additional pressures on smaller entities. At a broad level, it is unlikely for this sector to start paying staff what they are paid in, for example, the general market, based simply on affordability. This is the economic reality of the NFP sector. Even within the sector, ‘parity’ across NFP organisations would be challenging given their numerous different funding regimes.

Minimum Wage movements

There is no doubt minimum wage movements have created challenges for the NFP sector when it comes to allocating its scarce resources.  Our data shows clearly how many organisations have applied their limited budgets to the lower paid jobs, with little left for more senior positions.  These legislated movements are also likely to create compression in pay between jobs at different levels of an organisation, which can be a significant issue. Careful monitoring of remuneration practices and evaluation of the impact of legislated changes on levels of work in each organisation is essential.

Current State of Play

Some of these issues discussed are either outside the control of specific NFP organisations, are in the too-hard basket or might never arise. What organisations can do is test those things that they can control at the moment, for example to test whether there is a gender pay gap and if so, how can this be addressed.

Our findings at a broad level show that for the more junior positions, the NFP sector manages this very well - better than any other sector.  Our 2020 Gender Pay Gap# analysis for the ‘General Staff’ level, has the NFP sector with a zero gap. 

However, gender pay gaps are observed at the Mid-Management/Professional, Senior Management and CEO levels.  This illustrates the importance of reviewing, understanding, and managing pay practices for positions at all levels within your organisation.

#Gender Pay Gap is the gap between the average earnings of women compared to men

How can we help?

Obtain a high-level review of your organisation by participating in the NFP survey.  We recommend you then engage a consultant to review and discuss the outcomes with you.

Targeted spot checks to obtain remuneration information or advice for a position or employee including the ‘going rate’ for new positions.

Undertake a comprehensive review of your current remuneration framework if it is not meeting your needs.

If you would like some expert advice, don't hesitate to contact us today at info@strategicpay.co.nz or visit our website for more information https://www.strategicpay.co.nz/.

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