Courts, at least in the UK, openly recognise the effects played by labour market forces
over pay. During the proceedings relating to the case Newcastle Upon Tyne NHS
Hospitals Trust v Armstrong & Ors, Mr. Underhill (2010), Judge of the UKEAT (UK
Employment Appeal Tribunal), referring to Rainey v Greater Glasgow Health Board case,
maintained that “it is well-established that a … defence based on market forces is
admissible in principle.” The same viewpoint was practically expressed by the European
Court of Justice when examining the case Enderby v Frenchay Health Authority, brought
before it by the Court of Appeal of England and Wales. The ECJ basically maintained that
the proportion of pay increases attributable to market forces can be accepted provided
that “the pay differential is objectively justified to the extent of that proportion.” The ECJ
also upheld that it is the national Court which has to assess whether and for which
proportion salary differences can be attributable to market forces (Longo, 2012).
This court case clearly highlights the circumstance that when a higher-than-the-
standard-grade salary level is granted to an individual on account of market forces, it
also needs to be determined whether the labour market pressures justify the whole
additional payment. In other words, whenever market forces supplements are conceded
they have to be proportionate to the recruitment difficulties and cannot be higher than
reasonably suggested by the pressures coming from the labour market.
It is hence admissible that, in presence of exceptional, uncommon circumstances, jobs of
equal value could be paid differently by means of market forces supplements payment.
Nonetheless, employers should be extremely careful and ready to show and provide
documentary evidence, if and when required, of the objective grounds justifying the
application of market forces supplements. As anticipated above, this will clearly reveal to
be crucial in the event a pay discrimination claim should be brought before a Court.
Prior to concede a market forces supplement, employers should always strive to recruit
and retain quality staff offering salaries encompassed in the salary range associated with
the relevant job grade. Only once all of the attempts made have revealed to be
unproductive, employers should consider offering market forces supplements. Difficulties
in attracting and retaining quality staff have to be verifiable, as well as the attempts to
having had recourse to possibly improved recruitment and retention approaches (Longo,
2012).
The circumstance that the supplement is regularly assessed and reviewed will also turn
to be eventually useful in front of a Court. This will contribute to provide evidence that
market forces defence is not an excuse used to justify salary differences, but that it is
actually a consequence of the labour market pressures, and that this is actually why the
labour market is constantly monitored and the supplement regularly assessed and
reviewed.
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An additional important aspect, also emerged in the Enderby v Frenchay Health Authority
case, is that employers should always be able to keep separate the salary related to the
job grade and that associated with the market forces in order to eventually enable the
Court to determine the impact of the latter over the former.
Checklist
Employers offering market forces supplements should both ensure that some activities
will regularly be carried out and that some other aspects constantly monitored.
The market forces element should be kept separated from fixed pay and clear evidence
of this should be given in the salary slip of the individual(s) concerned.
All of the documentary evidence which have accounted for an employer having decided
to resort to the payment of market forces supplements has to be gathered and
maintained. Proofs have to be relevant and proportionate to the additional sum granted
to the person concerned or to put it another way, these should be able to support the
grounds for which the entire supplement has been paid and not just being able to justify
part of it.
Evidence will include documentation of the recruitment process failure, eventually tried
also by means of external recruitment consultants, agencies and specialists, as well as
documentation of the findings of the regular assessment and review of the conditions
which have accounted for granting the supplement. Whether the exceptional
circumstances persist, the addition will continue to be paid; differently it has to
proportionally be reduced or completely removed according to the current conditions.
Finally, as a good rule of risk management, cases for market forces payment should be
prepared according to two main characteristics, more in particular these should be both
specific and measurable.
Reliability and validity of job evaluation
Job evaluation, irrespective of the approach used to design it, clearly is a demanding
process and its outcome may be prone to attract criticism and to be subject to a wide
range of drawbacks, giving sometimes rise to serious problems within the organization.
As contended by Armstrong and Cummins (2008), however, these undesirable effects
are usually caused by the bad execution of the scheme rather than by its inappropriate
design.
Evaluators should invariably carry out some forms of tests, checks and control of the
final version of the scheme they develop before its communication, introduction and
practical implementation. More specifically, these should always find the way to assess,
before considering definitively concluded their work, the reliability and validity of the
scheme they have designed.
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Jon evaluation reliability
Assessing the reliability of job evaluation results is everything but straightforward and
may require reward managers to have recourse to extra resources, provided that
employers are willing to make these available.
The most effective way to assess the outcome produced by job evaluation is to submit
the final rank emerged from the exercise to a panel formed by different evaluators who
have not originally been involved in the process. Whether these should associate the
same jobs with the same grade, on the basis of the same information, the system could
be deemed sorely reliable.
For demanding this process clearly is, it should not be neglected that on the other hand
it can enable:
• Evaluators to identify misleading and confused factor plans descriptions and
inappropriate, incomplete or incorrect job information;
• Employers to determine the expertise and capability of the evaluators in charge
of performing the exercise (Armstrong and Cummins, 2008). Albeit, in case of
diverging results, it will not be easy for an employer identify which of the two
teams has actually drawn the wrong conclusion.
Job evaluation validity
In general, a scheme can be deemed as valid when it is perceived as fair by employees
and can proof to be legally sound. Evaluators should hence demonstrate not only to be
capable to identify the right and most appropriate score to associate with each job, but
also to be able to consistently and appropriately pinpoint and outline the reasons and
arguments leading to the identification of a determined score rather than another (Arvey,
1986).
The methods mostly frequently used to assess the validity of the outcome produced by
job evaluation are called: criterion-related, content and construct validity.
The criterion-related approach is mainly aiming at determining whether it has been
attained a satisfactory level of consistency between internal relativities and the external
labour market data.
In the case of a scheme devised by means of an analytical approach, the content validity
methodology aims at determining whether the correct and relevant factors have actually
been identified, whereas in a non-analytical scheme, this method aims at identifying
whether the right benchmark jobs have been correctly identified and consistently graded.
The construct validity approach aims at ensuring the validity of the overall system by
means of determining if the final result of the process is actually coherent with the pre-
set aims and objectives. In order to assess a scheme validity by means of this approach,
a double evaluation process, based on two different methods, should be carried out
(Armstrong and Cummins, 2008).
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For different reasons, however, none of these approaches can actually be deemed as
completely fail-safe: the ascertained existence of a good degree of consistency between
internal hierarchies and external rates in actual fact does not insure employers against
the risk of equal pay claims. Similarly, having identified that right jobs factors does not
necessary entails that the final ranking will be correct, whereas carrying out two
different processes to establish validity would turn to be exceedingly demanding and
hardly realistic to be implemented in practice. These are basically the reasons why
evaluators prefer having recourse to an additional form of validity test called felt-fair test.
Felt-fair test
The concept of felt-fair pay was developed by Elliot Jaques (1961, 1964) during an
investigation on pay inequalities he was invited to carry out into the British firm Glacier,
on invitation of the organization’s trade unions officials. Jaques spent approximately a
year and a half asking to the factory’s employees what their opinion about pay
inequalities was. Unexpectedly, he found out that all of the organization employees
practically shared the same idea about the value and worthiness of the jobs performed
within the factory. Albeit he had realized that there was a widespread consent amongst
the employees about the value and worth of the different jobs, it was not immediately
obvious on which grounds this clear and shared perception was actually based. The
riddle was later suddenly solved thanks to three employees who told him that differences
in salary were in some ways associated with time: “floor operators were paid by the hour,
junior officers by the week, managers by the month and executives by the year” (Kleiner,
2001). Two years later, Jaques developed the concept of time span or “by when” concept
according to which the longer the length of time – time span – required to carry out the
duties typical of a role, the larger the amount of pay to be earned, perceived as fair –
hence felt fair – by individuals.
In addition to the time span of discretion, Jaques (1961) also considered crucially
important defining the potential capabilities of individuals, so that his model is essentially
based on matching together three variables: the time-span of discretion associated with
the work (W), the individual capacity for work or time-span of capacity (C) and pay (P).
The findings of Jaques research revealed that individuals develop an unconscious, but
surprisingly extensively shared perception and idea about jobs worthiness and the
related pay value and are consequently able to determine and assess, on the basis of
this perception, whether the salary they receive can be deemed as fair or otherwise.
Salary structures and pay levels should ultimately be designed and developed, therefore,
in a way which is perceived and felt as fair by individuals.
In order to avoid giving rise to individual perception of salary inequalities, the pay
received (PR) by an individual should fall within the pay norm (PN); that is PR=PN.
Whereas a differential should emerge and the level of pay received should be perceived
by individuals as lower vis-à-vis the pay norm, PR<PN, even though capabilities should
be perceived as matching capacity, C=W, this will lead to a perceived pay inequity,
namely C=W>P; which means that capacity and work performed are superior to pay.
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This clearly is the case of underpayment. Individuals will draw the same conclusions also
in the opposite case that is in the case the pay they receive is higher than that
considered as the pay norm: PR>PN and hence C=W<P; capacity and work are in this
case inferior to the salary received and inequity derives from overpayment.
Jaques (1961) suggested that inequality leading to the sensation of being underpaid
arises when individuals feel to be paid at least 5 per cent less than the pay norm and
that individuals seriously take actions to change job when this rate rises up to a 20 per
cent differential.
The felt-fair test idea was developed from the Jaques broader concept of felt-fair pay or,
as appropriately suggested by Armstrong and Cummins (2008), the concept has “been
hijacked” by job evaluators on the basis of the generic assumption that whether the
established hierarchy of jobs is perceived as fair it is hence fair. It is of paramount
importance, however, identify on the basis of the perceptions of whom a pay system has
to be felt and considered fair.
Risher (1989) canvassed the idea that “the only measure of system validity is
management’s assessment”, meaning by that that whether the established job hierarchy
is perceived by the business management as fitting the company’s structure,
compensation strategy and career map, it is by extension fair. This concept clearly
totally neglects the main tenet on the basis of which a reward management strategy
should be built up and developed: that is, aligning organizational objectives with
individual objectives. The circumstance that a pay system is perceived as fair by the
business management might mean little or nothing for employees, insofar as supporting
the validity of pay system exclusively on the basis of this could reveal to be particularly
detrimental to a business. As appropriately averred by Armstrong and Cummins (2008)
in fact not only individuals develop their own idea and perception about jobs value, but
they tend to refuse at best and to repel at worst systems leading to results sensibly
swerving from their perception.
Research on the practical application of the approach proposed by Jaques is rather
contradictory: findings of a study carried out by Hughes (2009) “provides limited support
for Jaques theory”; by contrast, an investigation carried out in Finland and Latvia by
Carraher and Carraher (2004) reached a different conclusion: it “appears that Jaques'
proposition does accurately predict different degrees of satisfaction with pay levels.”
Regardless of the methodology and approach adopted to test the validity, sustainability
and fairness of a salary structure, what can definitely be considered undisputable is that
it cannot be believed that this important form of judgment could exclusively rest with a
business management. A wider employee involvement definitely represents the ideal
solution; the worse comes to the worst, this activity has been carried out involving from
the very beginning trade unions officials and employee representatives. This can
effectively contribute to make the final output produced by the project team accepted by
the entire company’s staff.
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Planning a series of initiatives aiming at giving the chance to the components of the
evaluation panel to meet with employees in order to explain them the methodology
adopted to develop the scheme and devise the final rank can clearly definitely help too.
During the unfolding of such initiatives, where union officials and employee
representatives will clearly be invited to participate as members of the evaluation panel,
favouring a genuinely open two-way communication process is paramount. This
represents the most effective way to test, before the scheme is introduced and
implemented, the feelings it can produce, the way it is likely to be perceived by
employees at large and the reactions it may cause amongst individuals.
To develop and introduce fair pay systems which meet individuals fairness expectations,
employers also need to duly take into consideration the influence exerted by the external
environment, namely the labour market rates. These data can be collected by employers
in several ways, albeit gathering consistent and reliable data is not always as
straightforward as it may seem. Initiatives aiming at carrying out employees’ felt-fair
test can also definitely represent a very good opportunity for the project team to clarify
the divergences eventually existing between what employees consider pay norm and
what the project team has identified as external labour market norm for each assessed
role.
This process might also require additional time and resources, but it is definitely well-
worth the efforts. Not only can it enable the evaluation panel members to timely make
some useful and constructive amendments to the overall scheme, but it can also
contribute to ensure that the moment the scheme is introduced, it is not perceived as an
unexpected surprise by all of the individuals concerned. Whether employees have been
involved in the scheme development from the outset, these will have the chance to
eventually manifest their disagreement about the aspects these do not consider
appropriate so that some adjustments could eventually be timely and promptly
implemented on the basis of employees’ feedback. This approach practically ensures
companies to receive employees’ acceptance of the scheme before its official disclosure
and introduction.
237
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