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Knowledge@Australian School of Business

Equal Pay: Setting the Standard to Even the Salary Gap

Published: November 07, 2011 in Knowledge@Australian School of Business
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It's no secret that Australia has a poor record on female participation in the workforce. Concerted efforts have recently been made to increase the number of women on boards and at executive levels, which 2010 figures placed at 10.3% and 8% respectively. Concern is also focused on the pipeline of women into more senior roles, a fraught issue considering Australia's female workforce participation rate of 58.7%, compared with males at 72.1%.

One of the issues is women's participation dips during the main childbearing and raising years, between the ages of 25 and 44. Australian mothers with young children have a lower participation rate than their counterparts in Canada, the US, UK and Sweden. But notably, to women's detriment, the key years when babies come along and Australian mothers take time out to raise their offspring clash spectacularly with the exact age bracket in which high-potential employees are typically earmarked for fast-track executive schemes.

At least the number of women in the workforce has been steadily growing, from 43.5% in 1978. Less can be said about narrowing the pay equity gap, which has improved only a fraction over the last 27 years, from 18.5% in 1984 to 17.2% in 2011. It's a scenario that should be more at home in the hit TV series Mad Men, set in the 1960s, than in 21st century Australia.

Why are women still undervalued from a remuneration standpoint in Australia? Anne Junor, deputy director of the Industrial Relations Research Centre at the University of New South Wales (UNSW), believes it may be due to the types of jobs that are most accessible to women. "Women predominate in service-sector jobs where the work process is less visible and the skills have not really been fully codified," Junor points out. "They also predominate in clerical jobs that are spread across many industries but aren't in the forefront of many employers' minds."

The Australian Standard on gender-inclusive job evaluation and grading has recently been drafted as a step towards redressing the pay equity balance, to help employers ensure they are not inadvertently undervaluing the workplace roles in which women are most prevalent – that is, where women hold more than 70% of the positions. The voluntary standard provides guidance on the design and implementation of fair and transparent job evaluation and grading processes, as well as guidance on the auditing of these processes for gender inclusiveness. Developed through Standards Australia and sponsored by the Equal Opportunity for Women in the Workplace Agency (EOWA), it is currently in draft form, and was published for comment from July to September. The drafting committee – comprising industry and employer bodies, academics, unions and job evaluation consultants – is now considering comments, with the resulting standard to be published in 2012.

Understanding What's Important

Fair and effective job evaluation processes are "fundamental to getting pay equity right", insists Philippa Hall, an EOWA pay equity consultant who is also a member of UNSW's Industrial Relations Research Centre Advisory Committee. "If you haven't understood the job properly and if you haven't given proper value to everything that's important about the job, there's no chance that you will be paying according to equal value," Hall says. She was tasked with drawing together the views of the drafting committee for developing the standard. Hall notes that it "has something to offer at any part of the process from understanding the job, to describing it, analysing it, evaluating it, through to grouping it into a hierarchy or grading framework".

The standard has its basis in a 2006 New Zealand (NZ) standard, which has to some extent raised the profile of the gender pay equity gap in that country. NZ remuneration reports and surveys now commonly provide information on gender pay gaps. The Australian standard has built upon its trans-Tasman counterpart by providing guidance on job grading, which plays a larger part in Australian job classification processes due to the pervasiveness of the industrial relations awards system. However, there's no evidence that the NZ standard has contributed to a narrowing of the pay equity gap. It is a voluntary standard and the take-up of it is unclear, says Hall. "There is also nothing known about how it is used in the areas where it has been adopted. Additionally, New Zealand's Pay and Employment Equity Plan of Action, which gave rise to the standard and which promoted action on pay equity, was discontinued from 2009 following the change of government in 2008. So there has been less focus on and less incentive to adopt the standard."

But how will a standard improve gender equity in the workplace?

"What we hope is that people who are describing, analysing, evaluating and grading jobs will use the standard to avoid taking the shortcuts that can lead to unintended gender bias. For example, evaluators might just assume they know what executive assistants do, rather than basing their analysis on comprehensive current job descriptions and so miss or undervalue important aspects of the jobs," says Hall.

Job analysis is the basis of job evaluation, according to Junor, who is the academic member of the standard's drafting committee. "Before you give a value to a job you need to analyse and understand the components. There has been a tendency to focus on discrete tasks rather than the way in which the tasks are put together to create a flow of work. I'm reluctant to use the term 'soft skills', but it's important to look at integrative skills – how people work with others. This standard does set out a series of steps for collecting good job data. The requirement is that you select the data, look at the factors and the weightings required in the job."

As well as introducing a grading system, the standard committee draws on the knowledge of its Finance Sector Union representative and emphasises the role of "points factor job evaluation", which is widely used in the powerful and influential financial services sector. The system expresses the worth of a job in "work value points". The points are determined by assessing eight sub-factors that are considered to be common to all jobs. These sub-factors are grouped into three primary areas – expertise, judgement and accountability. The eight factors are: knowledge and experience, breadth (of, among other things, tasks, geography and product and service), interpersonal skills, job environment, reasoning, independence and influence, impact and involvement/accountability.

Hall says: "I know that the standard has been drawn to the attention of some of the major finance sector organisations. What we would hope for is the adoption of the standard on a voluntary basis by some of these organisations that use job evaluation systems and want to get it right from a gender point of view. They are certainly in a position to resource the implementation of a standard like this."

Broader Benefits

The influential human resources (HR) community will be a conduit to permeating an awareness of the standard to workplaces and workers, suggests Junor. "With the help of a network of HR academics, we have sought to raise general awareness [among academics teaching HR] that this standard exists … Hopefully they will be working it into what they teach."

While designed to promote pay equity between genders, the standard's impact may be more widespread, suggests Wendy Montague, who as director of leadership and talent for HR consultancy Hay Group is a seasoned exponent of job evaluation processes. She believes the standard will be beneficial for equity across all slices of the diversity pie as it is "best practice in how you evaluate jobs". "A job in itself is theoretical but what makes it real is the person in the role – and that's where the opportunities are for bias," indicates Montague, also a member of the standard development committee.

Bias can creep into job evaluations under a number of guises – for example, when the person currently in the job is not very likeable. "If you've got a unique role and the person in the job is not getting along well with other people, then bias can creep in," notes Montague. "Job evaluation is not a science; it's more about relativity and understanding the job in the context of the organisational structure as well as the content of the job itself. That's why it's important that you get lots of views of what the role is during the job evaluation process."

Junor agrees: "It's really raising awareness about how you describe the job, how you match it up [with other roles in the organisation] and how you've been paying it to date. All these elements can raise issues from a gender bias perspective."

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