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Local Government Progress

on Equal Pay

REPORT TO THE NATIONAL ASSEMBLY FOR WALES’

EQUALITY OF OPPORTUNITY COMMITTEE

29

TH

NOVEMBER 2006

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Background

1. Local Government has a generally excellent reputation on equality of opportunity issues and has long been at the forefront of developing good policy and practice which today mainstreams equality within employment and service delivery. However, it must be recognised that there are some areas where equal pay is a problem, and there is of course a moral and legal imperative to put this right, to which local government is fully committed.

2. The vast majority of equal pay issues relate to the application of bonus schemes within male dominated occupations. The history of such schemes is far from one of deliberate discrimination against women. In 1967 the then National board for Prices and Incomes addressed the need for higher productivity, linking this with the relatively low-paid groups within public sector manual workforces. It was recommended that higher wages could be achieved in a time of pay-freeze if productivity was improved. Schemes were to be based on properly undertaken work studies.

3. The concentration of work study effort was on jobs carried out normally by full-time male manual workers in areas that tended to lend themselves to productivity schemes. The mid seventies saw growing recognition that bonuses were distorting differentials (although this was not seen as primarily a sex discrimination issue because the ‘equal value’ concept had not yet been developed in law), and that schemes had not always maintained the productivity link. However, by this time most of the work lending itself to bonus had been covered by schemes, and a situation had developed where the majority of full-time male manual workers were paid bonus while most female manuals were not (Few part time workers (male or female received bonus).

4. Compulsory Competitive Tendering Legislation had a major impact on bonus schemes. As a result many schemes were re-shaped in the early and late 80’s following the CCT legislation. Across many areas of the UK bonus ceased to be a local government problem as large areas of manual work were outsourced to the private sector. However, within Wales there has been a strong commitment to the Direct Labour Organisation which has generally kept the work, and the problems, in house.

5. In 1987 NJC for Manual Workers agreed a new national basic pay structure for manual workers based on Job Evaluation, with ‘equal value’ basic rates. However it did not address the issue of bonus as this was considered a matter for local decision. (It is now being recognised by the National Employer’s Organisation (EO) for Local Government’s successor organisation the Local Government Employers

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6. The 1997 Single Status Agreement within local government brought former ‘manual’ and ‘white collar’ staff on to a single pay spine and committed local authorities to harmonising terms and conditions for the two groups. This included a review of local grading structures to ensure that they were fair and non-discriminatory. It was recognised that job evaluation was the only way to ensure that new structures were equal pay proofed.

Progress on Pay and Grading Reviews

7. Across the UK progress on job evaluation was very slow before the 2004 Local Government Pay Agreement. The reasons for this were many and various. For example:

• The 1997 agreement set no timetables

• Job evaluation was treated almost as an employee right not a management tool, so very high numbers of jobs were included • Job evaluation was not seen as a priority by members so resources

were often not allocated to what was a very resource intensive exercise

• The unions did not treat job evaluation as a priority – they had concerns about the impact on their membership of pay cuts for bonus earners and others

• There were industrial relations problems about choice of schemes, process and union involvement

• There were seemingly insolvable industrial relations issues regarding bonus, the unions would not agree to it being removed, the employers could not afford to consolidate it, job enrichment was often not possible, labour market supplements could not be legally justified;

• There were industrial relations issues relating to agreement on new pay and grading structures as cost savings often had to be made to cover the increased cost on the pay bill (3-5%).

• High commitment to Direct Labour Organisations in Wales, union (and often elected member) opposition to outsourcing, and relatively high union membership resulted in deadlock on bonus in many authorities.

8. As part of the 2002 local government pay settlement the independent Local Government Pay Commission was established to research all aspects of local government pay and rewards. Their 2003 Report vindicated the Employer’s view that pay in local government compared favourably with the market at the lower end. However the report did raise the unresolved problem of equal pay and urge its redress at a greater pace. The 2004 three year Local Government Pay Agreement therefore provided for a timetable of April 2007 for the completion of

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Job Evaluation and the implementation of new Pay and grading structures.

9. This timetable effectively served to focus authority’s efforts across England and Wales. Within Wales the resources allocated to the job evaluation process have increased considerably with teams set up to manage the process and many new job analysts being employed. WLGA Activity to Support Pay and Grading Reviews

10. Collaboration has been and still is a key element of job evaluation activity in Wales. The WLGA has facilitated a Pay and Grading Group for the last 6 years and this has been the main vehicle for sharing of information, problems and good practice, and developing collaborative solutions to issues. The WLGA has delivered the following:

• Ongoing exchange of information and good practice

• Training of over 150 officers in the GLPC JE scheme to increase the pool of resources

• Training of 15 officers to deliver GLPC JE training in Wales • Customising of JE training materials to the Welsh context • Joint seminar on pay structures with the Trades unions • 50 officers trained on equality principals for JE

• Database of JE materials

• CIPD Masterclasses for 25 senior HR officers on pay structures • Institute of Employment Studies Masterclasses for 25 senior HR

officers on pay structures

• 2 courses on Equal Pay Audits in 2006 and another for 2007 • 2 Equal Pay seminars with HR, Legal and Finance officers • Equal Pay seminar for elected members

• Presentation by JE expert (Sue Hastings) on speeding the process • A range of good practice presentations from other authorities etc. • Facilitation of a Welsh LINK software User Group

• The development of written legal guidance for authorities

• Facilitation of a strategic Equal Pay Group comprised of local authority HR, legal and finance officers supported by legal expertise • Ongoing provision of information to the Welsh Assembly and

Central Government on the equal pay situation in Wales

• Maintaining a constructive dialogue with the Welsh Local Government Trades Unions

• Maintaining communication and information exchange with ACAS 11. While it has often been suggested that the WLGA should facilitate a

collaborative approach to the JE process itself, this would not be advisable. Local Government, as 22 separate employers requires an individual employer approach to job evaluation with local conventions developed and applied which are appropriate to the individual authority

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distorting JE scores and undermining the equal pay process. What has been developed however, is an internal generic approach to roles such finance and administration which some authorities are adopting to speed the process.

Current Problems

12. The majority of Welsh authorities anticipate that they will complete the job evaluation process and can be ready to implement new pay and grading structures by April 2007 or shortly thereafter. However, completion of the job evaluation process is only the first hurdle and it is impossible to be certain of the length of time that may be taken in reaching agreement with the unions in the current circumstances. No Win No Fee Solicitors

13. The current circumstances have been dictated by the arrival on the scene of a no-win no fee solicitor in 2003. Starting in the North East of England (and continuing in Scotland and the Midlands) he has taken countless numbers of equal pay claims against authorities, effectively unpicking local collective agreements on new pay and grading structures.

14. The cases mainly involve claimants and comparators graded under the old manual workers Job Evaluation scheme, where male comparators have been paid substantially more through bonus or other incentive schemes. Claimants are women workers such as carers, cleaners and school cooks. The main thrust of these claims is the statutory right of those women receiving a pay raise under the grading review to 6 years back pay at the level of their male comparator.

15. Cases have also been taken against the trades unions on the grounds that they did not broker the best deal for the women members in terms of their statutory entitlement to back pay and gave undue weight to pay protection, which is not a statutory right, in the negotiation process.

16. A new firm of no-win no-fee solicitors is now operating within Birmingham City Council and more may yet jump on the very lucrative bandwagon. It is most unlikely that Wales will escape their attention.

Escalating Costs

17. These cases have cost local government (and the NHS) in these areas several hundred million to date. Costs are also constantly rising for a number of reasons:

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• The settlements were thought to be exempt from tax early as ‘compensation’ rather than back pay, this has been clarified by the tax office in no uncertain terms;

• The no-win no fee lawyer has put his fees down from 25% to 10% • A high profile case won against the unions (Allen v GMB) has

criticised the unions for not seeking to maximise the back pay settlement to female members

18. Another high profile case which has been appealed (Bainbridge v Redcar and Cleveland) has just been lost. This decision will mean that pay protection (for example for ex-manual workers who lose bonus under job evaluation) will also need to be paid at the same level to the women doing work of equal value, for the same length of time. This will raise costs by at least another 30%, or if a decision is taken to provide less pay protection will cause immense industrial relations and morale problems.

19. Costs in the North East had averaged £8 million per authority over 2004/5, with over £100 million paid out to date. However, costs have now escalated to the extent that these seem quite reasonable. The WLGA has undertaken detailed work to scope the potential cost of equal pay claims to Welsh local authorities resulting in a figure of at

least £200 to £300 million.

Trades Union Response

20. The trades union’s response to the Allen v GMB case and those others waiting to be heard, while understandable, has served to considerably exacerbate the situation. Their current UK position is:

• No Single Status to introduce new pay and grading structures can be considered unless they include provision for back pay

• No deals can be done to resolve the back pay issues ahead of the negotiations on the new pay and grading structure – it must be one package

• Local authorities will need to provide clear evidence of their financial position and ability to meet back pay claims

• All local deals will need to be agreed by the unions at a national level (taking 2/3 months on average)

• All local deals to be put to a ballot of union members (around 66% of whom will have lost out or got nothing in the process and may well not be minded to vote yes)

• A national protocol has been established between the trades unions to take equal pay cases in those authorities where they consider insufficient progress is being made to resolve the equal pay situation.

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21. This position clearly makes it extremely difficult for a local authority to negotiate a locally agreed deal. So while the employers may have finished job evaluation and be ready to roll out new structures, the national circumstances may contrive to prevent progress.

Capitalisation and Central Government Response

22. A number of authorities in England have been allowed to capitalise these costs (effectively to borrow money from the Treasury). Capitalisation is by no means a panacea. It means a long term debt that cost the authority money in interest, it could decimate local capital programmes (the building and maintenance of roads, schools, community centres etc.) and impact on jobs and services because of the revenue costs of servicing the debt. However, while not an ideal solution capitalisation does at least make resolution of the problems possible at a local level.

23. However, the Treasury has recently made an announcement on the capping of capitalisation in defence of Gordon Brown’s ‘Golden Rule’ on public sector borrowing. The cap has been set at £200 - £250 million for England and Wales in this financial year. This sum will go nowhere near meeting the likely requirements. In addition a rigid timetable for bids has been set with no final decisions being made until after the end of December in the relevant financial year (which will hamper those authorities wishing to negotiate on this issue now in time for the 2007 deadline, or well before December 2007 in the new financial year). 24. Many authorities in Wales will not have sufficient funds at their

disposal or in their reserves to meet the costs of back pay settlements. Without the opportunity to capitalise, or at least part capitalise, it is very difficult if not impossible to see how this situation can be resolved. 25. This is very much a catch 22 situation now. Without the money to

settle on back pay the authorities will not be able to reach local agreement. If they cannot reach local agreement (which would need to be backed up by the relevant employees signing ACAS brokered COT3s) then either the trades unions or a no-win no fee solicitor are very likely to start taking equal pay claims against the authorities. This will increase costs as a tribunal will not make an assessment of affordability, it will simply apply employment law and the statutory 6 years back pay provisions if the authority loses the case.

26. The WLGA has joined the LGA and the LGE in lobbying Central Government on this issue. Despite the many £millions provided to fund Agenda for Change in the NHS, the Government has to date stayed firm in viewing this as local government’s problem alone to solve.

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27. A further very real problem that will have an impact is the lack of ACAS resources. ACAS have been instrumental in the North East and elsewhere in facilitating the COT3 process whereby employees sign away their right to take an equal pay claim in return for a specified payment. However, ACAS resources have been drastically reduced across the UK due to the efficiency agenda. They have warned the WLGA that with the likely timescale and numbers of potential claims they will not be able to meet the demand for their services.

28. Using ACAS has the advantage that all union members can be signed up under one COT3 if there is a collective agreement with the trades unions. This cuts down the amount of work that needs to be done. If ACAS are not able to assist then independent solicitors will need to be used, at a cost of around £100 per employee, with all employees needing to be signed up individually.

Conclusion

29. Clearly the current situation provides an object lesson on the very real potential costs of not addressing equalities issues in a timely manner. Local government is fully committed to putting right any equal pay anomalies and making redress for any past unfairness where appropriate. The work to translate this commitment into practice is being progressed as a priority within each authority. However, the weight of the challenge facing local authorities in resolving the current situation is overwhelming while the potential impact on jobs and services in local government and the ultimate cost to the taxpayer is a matter of the gravest concern.

Anna Freeman

Director of Employment

anna.freeman@wlga.gov.uk

References

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