Adopt a systematic approach to meet equal pay requirements in Hong Kong

In recent months the topic of pay equality has received much attention in the global media. According to the World Economic Forum’s Global Gender Gap 2015 report, it will take 118 years until the global pay gap between men and women is closed. Perhaps in response to such statistics, a number of multinational corporations, including Facebook and Microsoft, have announced that they pay men and women “equally”, and governments in various jurisdictions have unveiled new initiatives to eliminate sex discrimination in relation to pay. These include regulations in the UK which will force employers to publish data about their gender pay gap, and an initiative in the US called the White House Equal Pay Pledge whereby companies commit to conducting an annual gender pay analysis.

So what is the position in Hong Kong? Figures published by the Census and Statistics Department show that, in 2014, median male monthly employment earnings were HK$15,000 while median female monthly employment earnings were only HK$11,000.

Given what appears to be quite a significant difference in pay between the genders, does Hong Kong law recognise the concept of equal pay between men and women? 

Certain ordinances (i.e. the Sex Discrimination Ordinance, the Race Discrimination Ordinance, the Family Status Discrimination Ordinance and the Disability Discrimination Ordinance) prohibit discrimination on the grounds of sex, pregnancy, family status, marital status, race and disability. In the context of pay, however, the focus tends to be on gender and the pay differential between men and women.

The Sex Discrimination Ordinance states that “a person discriminates against a woman in any circumstances relevant for the purposes of any provision of this ordinance if … on the ground of her sex he treats her less favourably than he treats or would treat a man”. This could leave a company open to equal pay complaints, as stated in the Equal Opportunities Commission’s Guide to Employers on Equal Pay between Men and Women under the Sex Discrimination Ordinance: “There are two channels to pursue an equal pay complaint. A person may lodge a complaint in writing to the Equal Opportunities Commission or directly bring civil proceedings against an act of discrimination.”

It is interesting to note, though, that there are no reported cases in Hong Kong of female employees relying on the Sex Discrimination Ordinance to pursue a claim for equal pay. This may be because most discrimination complaints do not reach the courts, but instead are resolved through confidential conciliation at the Equal Opportunities Commission. However, as Pamela Tan, Commissioner for Labour at the Conference on Equal Pay for Work of Equal Value: International Best Practice, noted in a 2013 address, “The concept ‘equal pay for work of equal value’ is a relatively new one in Hong Kong.” As with jurisdictions such as the UK and the US, where there are many previous examples of women successfully taking action against employers on the basis of discriminatory pay practices, cases could start to appear in Hong Kong once the concept becomes more established. No company will want to be known as the first to have to defend such civil proceedings.

What are the causes of pay differences and are they always discriminatory?

The simple fact that a female employee is paid less than her male colleague who performs the same role does not automatically mean that she is the victim of pay discrimination by her employer. The burden of proving that a pay differential is not discriminatory rests with the employer. This means that if an employer is unable to show that a difference in pay is due to a valid reason other than gender, an inference of discrimination may be drawn in relation to the pay disparity.

Of course, there may be a number of reasons for differences in pay which are unrelated gender, the most common being: length of service, performance, experience, qualifications and market factors (e.g. responding to a skills shortage). It is, however, important to ensure that what appears to be a neutral reason for a pay differential is not indirectly influenced by gender. 

An example of where a pay differential can be indirectly influenced by gender is entry salary. Research by Linda Babcock, a professor at Carnegie Mellon University and co-author of the book Women Don’t Ask: Negotiation and the Gender Divide, has shown that men are more likely to negotiate their starting salary than women, with the upshot that male starting salaries tend to be higher. In addition, women’s starting salaries can suffer from anchoring bias, where a manager takes into account the candidate’s current salary and thereby perpetuates an existing gender bias. Since the determination of an individual’s starting salary can have a long-term impact on pay equality, the better approach is to disregard current salary (and any attempts to negotiate) and instead pay for what the job is worth.

As regards pay progression during employment, many employers operate salary bands or scales applicable to particular grades of employee. Within these salary bands, discrimination risk can arise when decisions about pay progression are discretionary. Employers should monitor the distribution of male and female employees within each pay band and, if women are largely clustered at the bottom end of a band and men at the top, this may indicate that there is a problem. To minimise the risk of discrimination, employers should have guidelines in place to ensure that pay progression is determined as far as possible on an objective basis. 

How can an employer check that it is paying men and women equally?

The Equal Opportunities Commission is a long-time advocate of equal pay and has published detailed guidance for employers on achieving pay equality, including an equal pay self-audit kit. 

An equal pay audit involves comparing the pay of men and women who carry out equal work to identify whether there is a difference between the pay received by men and women and the reason(s) for any such difference. If a pay gap cannot be explained on the basis of a reason other than sex, the employer should take steps to rectify it. 

Achieving pay equality: tips and advice for HR practitioners

• Adopt a systematic approach to determining pay that is free from gender bias and applied consistently to all staff.
• Implement pay policies which are transparent and well understood by staff. Pay arrangements which are clear and straightforward are much less likely to be challenged.
• Bear in mind that although discretionary pay systems can be an important tool for rewarding employees, they are particularly prone to bias and at risk of challenge by employees who feel unfairly treated.
• Document the rationale for pay decisions in writing and retain a record on file.
• Recognise that decisions relating to pay and performance can be influenced by unconscious bias. Consider introducing unconscious bias training for managers responsible for pay decisions. 
• Consider making an express commitment to pay equality between men and women via an equal pay statement or policy.
• Consider conducting periodic equal pay audits to review your pay practices.
• Monitor pay outcomes across all employee groups and take corrective action whenever pay disparity is identified.

Further information on remuneration in Hong Kong is available from our International Employment Issues microsite here.

This article originally appeared in the Jul/Aug edition of Human Resources, the official journal of the Hong Kong Institute of Human Resource Management, and is reproduced with permission from HKIHRM and Classified Post.