The move to close the gender pay gap has been languishing, but the recent Terranova Homes case has changed the landscape and will force employers to implement systems to ensure they are providing “equal pay for work of equal value”.

The journey towards gender pay equity in the New Zealand workplace has been stubbornly slow. Whilst the Equal Pay Act 1972 made it illegal to set separate rates of pay for men and women in identical roles, the introduction of such legislation in New Zealand and similarly, around the world, has not resolved the issue of the pay gap. The gap between both genders has been moving in the right direction, but women’s earnings are still less than men’s. Pay equity is a complex issue driven by many factors, not least by the type of work and the dominance of a particular gender in that work. Although it cannot be resolved by legislation alone, the recent Terranova pay equity decision made by the courts has significantly changed the landscape. The decision accepts the courts may consider what is paid to males in other industries, where it would be inappropriate to make comparisons within the same organisation or comparisons with employees in a similar industry. As such, employers will need to implement systems that will ensure they are providing “equal pay for work of equal value”.

Historically, women’s occupational opportunities and pay were set according to their gender. Differences in education, the types and importance of industries men and women worked in, and of course, deeply held societal attitudes about the types of work that were appropriate for men and women meant that a significant pay gap arose between the genders. Likewise, women tended to cluster in the low wage industries of the workforce and were more likely to work part-time. This landed them in jobs that offered little opportunity for development or advancement.

As time has progressed, attitudes have changed and women have managed to break out of the traditional, narrow occupational choices of the past. However, even with women’s improved educational attainments and participation across a broader range of occupations and industries, the wage gap has remained. This is particularly reflected in industries where there are high levels of female employment, such as health and community services, the retail trade and education. Employment in these industries often requires what have been traditionally seen as female traits or areas of strength, for example caring for people and communication skills. These traits have tended to be undervalued, especially when compared to those traits generally associated with men.

Whilst the Equal Pay Act 1972 has gone someway to resolving the issue of pay equity, the narrow interpretation of the Act up until recently, has meant that most believed the Act was limited to abolishing different wage rates between men and women in the same occupation. Korn Ferry ’s remuneration data tends to show that a man and a woman in the same organisation, doing the same job, will usually be paid a similar rate; albeit with men tending to be paid slightly higher. If you are already in a low paid industry, such as aged care, such a comparison will not necessarily highlight any underlying issues as both male and female caregivers will receive the same or similar rate within the company.

In 2012 Kristine Bartlett brought an action against her employer, Terranova. She claimed her pay rate did not provide for equal pay within the meaning of the Equal Pay Act. Rather than take the position that women were being discriminated against, this claim was based on the assumption that all caregivers, regardless of gender, are paid a discounted rate because the profession is predominantly occupied by women. The Employment Court and subsequently the Court of Appeal reviewed the Equal Pay Act 1972 in relation to this claim, in particular Section 3 (1) (b) which states that the court may consider the pay rate of a male comparator to determine whether gender discrimination is evident in pay rates of those in occupations dominated by females. They considered whether Parliament intended the comparator to be a male in the same industry or outside the industry. Both courts agreed that to select a male comparator within the same industry would tend to perpetuate an issue, as both genders would be disadvantaged by working in a female dominated industry/occupation. It was therefore determined that Section 3 (1) (b) would allow the courts to accept a comparator based on a male from outside the industry who performs an equivalent role in value to that of a woman in an industry/occupation dominated by females. The courts therefore recognised the right to “equal pay for work of equal value”.

As a result, the question of how you provide a globally consistent work value measurement system has arisen again, especially as it is clear the New Zealand Government intends approaching the issue of pay equity with renewed vigour. There are a limited number of gender-neutral job evaluation systems. Korn Ferry pioneered the “factor comparison” job evaluation method, which is the world’s most widely accepted tool and one of the few to be recognised as gender-neutral. It is also one of the few to offer work conditions as an additional dimension when considering value and gender.

What constitutes female and male predominant jobs varies from one jurisdiction to another and to a lesser extent, so does the definition of what constitutes “equal” or “comparable”. However, one thing that all three have in common is the definition of value.

In all cases, value is determined by measuring:

  • The skills required to do the job competently (Know-how)
  • The effort required by the job (Problem Solving)
  • The responsibilities of the job (Accountability), and commonly when comparing female and male predominant jobs
  • The working conditions affecting incumbents in the job.

Terranova’s landmark case has put a renewed focus on pay equity and will potentially create significant changes to how organisations set and benchmark salaries. We suggest that employers should familiarise themselves with the agreed principles on pay equity and work to implement them. Regular pay equity reviews using a globally recognised job evaluation method that also recognises working conditions as a dimension should be standard and measures put in place to attain equal pay where necessary.

Korn Ferry can assist you with an initial high-level pay equity analysis of your organisation and if required, complete a deeper analysis to identify those jobs where there are issues. We are also able to advise you on what measures you might take to attain equal pay. Download a sample of our new Pay Equity Analysis report and get in touch should you have any questions.

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