At the heart of equal pay is the fundamental belief that people with similar qualifications and work in roles are treated fairly, irrespective of protected characteristics, such as race and gender.

Currently, more than 20 local authorities are at various stages of equal pay disputes, with the largest bills reported at £770 million. The challenges surrounding equal pay have the potential to further escalate with the intended legislation to incorporate race and disability into pay gap reporting under the Equality Bill proposed by the UK Labour government to be published later this year. Addressing the underlying causes for pay inequality rather than the surface-level challenges is therefore more critical than ever for the financial sustainability of local government.

Common equal pay challenges in local UK authorities

Councils often fall victim to pitfalls in interpreting the notion of equivalence in different types of work, failing to pay the same rate for work that is “similar, equivalent or of equal value.” This problem is often compounded by the fact that cross-organization governance and data management offer limited visibility on pay and grading. For instance, the legal notion of equivalence that enables comparison across associated employers includes outsourced entities that are under the umbrella of a local authority trading company.

Local authorities face significant challenges in complying with equal pay law due to their diverse workforces and roles, leading to varying representation of protected characteristics. For instance, men form 93% of the British waste collection workforce, while women represent 83% of social workers. It is essential to implement cross-cutting governance on equal pay to ensure that changes in pay or conditions in one job area are accurately reflected in all equivalent roles. Negotiated agreements with trade unions can affect equal pay compliance across the authority. Additionally, equal pay governance is not static; issues can resurface over time, as seen in a council dispute that re-emerged years after a resolution in 2005.

Financial and workforce challenges rooting from pay inequality

Noncompliance with pay equity rules is costly for local authorities, both financially and reputationally. Pay disparities hinder recruitment and retention, which is increasingly critical as the labor force shrinks. Over the past 12 years, England's councils have lost nearly 500,000 employees, a 31.5% decrease, with over two-thirds of current staff aged over 40. Reputation, particularly regarding fairness, is vital for attracting talent; in 2016, “public sector ethos” was the top motivation for joining local government. Equal pay disputes can damage this perception, harming the entity's brand and organizational culture, leading to employee dissatisfaction and a view of the employer as unjust. Local councils must actively address the root causes of pay inequality and ensure equitable rewards, as mere compliance with equal pay reporting is insufficient.

How data-driven insights can address equal pay disputes and financial sustainability

Financial sustainability and equal pay are foundational to the success of every local authority. Both are protected by law. Both go hand in hand and cannot be separated. Both require a thorough understanding of the pay data. Without this, it is not possible to meet the challenges of equal pay legislation.

Understanding the nature of the overall employee cost base is the immediate need. This is critical for developing the local authority’s approach to workforce planning, a function that is key to ensuring longer-term financial sustainability. The place to start is with data that is currently available, first assessing its appropriateness in terms of its quality and accessibility.

Ensuring job security by mapping skills to roles and reskilling workforce

The next step for the council is to assess whether current work activities align with future needs. This involves mapping tasks and required skills for each role, identifying overlaps and gaps in the workforce strategy. A comprehensive understanding of tasks and skills will highlight optimization opportunities, such as automation and role reallocation.

This mapping exercise will also provide insight into the current workforce, ensuring fairness and equality in pay by aligning compensation with skills. By doing so, the council can take proactive steps to enhance job security for employees, including initiatives for reskilling and adapting to future demands.

No one-size-fits-all solution in navigating pay equity strategy

There is no one-size-fits-all solution to the pay equity challenge. Organizations must begin by thoroughly understanding their pay composition, reviewing current and historical structures, and analyzing the tasks and skills required for each role. This approach ensures fairness across roles, helps attract and retain diverse talent, optimizes operations, and prepares the organization for future needs.

Additionally, aligning workforce strategies with appropriate governance and processes is crucial for delivering transparency and equality in pay. This alignment enables local authorities to effectively assess equal pay implications during future negotiations or regulatory changes. While equal pay legislation may seem onerous, compliance presents an opportunity to identify long-term benefits and ensure financial sustainability, reinforcing the organization’s public ethos.