Pay and reward

Pay and reward

Introducing a reward system

What is a reward system?

A reward system uses pay incentive schemes, such as bonus systems or variable pay based on performance, with the aim of motivating staff.

Discretion in reward systems

Any element of discretion in awarding bonuses can be highly vulnerable to bias. Stereotypical views and attitudes to the value of different types of work and staff, including perceptions about what is 'women's work', may influence decisions, whether consciously or not.

Employers and managers are often unaware of the impact their decisions may have on providing fair and equal pay, and the effect that this has on staff morale.

Avoiding discrimination in reward systems

Transparency in pay systems is an essential factor in uncovering and tackling unlawful pay discrimination. The more complex and less transparent the system is, the more vulnerable it will be to pay inequalities. A transparent reward system enables staff to understand not only their rate of pay, but how any reward system operates. It also helps minimise uncertainty or perceptions of unfairness, and reduces the possibility of equal pay claims being brought against a business.

Anyone given discretion to award bonuses, commission, and performance pay, or who has responsibility for implementing pay and reward systems and carrying out reviews should be fully trained in the reward system itself, and in the equalities aspects of pay and reward.

Avoiding discrimination when establishing criteria for reward systems

When setting criteria for a reward system, avoid those which may be more difficult for one group to achieve than another.

For example, using length of service alone as a criterion for determining pay or reward is potentially discriminatory. Women are more likely to have caring responsibilities and may have breaks in service because of this. They are generally less likely to meet a long service requirement.

Similarly, a requirement to work non-standard hours, or to work hours which are variable at short notice, could also potentially discriminate against staff with caring responsibilities. Some of these factors may discriminate on the grounds of age or disability, which would also be unlawful.

Discrimination and part-time staff

The majority of part-time workers are women. It is unlawful to discriminate against part-time workers and this group of staff should not be excluded from reward schemes. Part-time workers are normally entitled to payment at the same hourly rate of pay as full-time workers when they are doing work which requires similar levels of knowledge, skills, effort and responsibility.

You should ensure that targets in the reward scheme are not impossible for part-time staff to achieve. Where awards are made on the grounds of ‘outstanding achievement’, assumptions should not be made about the commitment of part-time staff which may potentially exclude them.

Avoiding stereotypical views

When developing a reward system, ensure stereotypical views are not represented in the competence criteria. These should not favour attributes and roles perceived to be 'male' (for example, assertiveness, leadership, decision making skills) or 'female' (for example, co-operation, communication, listening, caring) but should be balanced and unbiased.

Run a pilot and evaluate

Running a pilot of a proposed reward system means payments made over a specified time period can be reviewed. Where this reveals any significant differences or inequalities by gender, teams, departments, fulltime and part-time staff, or any other protected characteristic, this can be investigated, and the situation amended before the scheme is fully implemented.

Keep records

Ensure that all decisions on how rewards have been made are properly documented and retained. Should your business ever be challenged in an employment tribunal, such documentation can provide valuable evidence.

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