Case Study: Equal pay - Lloyds TSB Group

In 2002 Lloyds TSB worked with the EOC to create and trial a new process for conducting equal pay audits. The company used it themselves in 2003 to conduct a groupwide equal pay audit, encompassing over 70,000 employees. Some pay inequalities were identified, not just between men and women, but across the organisation. Although some historic factors appeared to have had an effect, such as length of service, it was impossible to explain other apparent inequalities.

The company had intended to make individual salary adjustments to correct any anomalies but, following the audit, Lloyds TSB decided to design a completely new salary structure for the Group to be implemented in 2004.

Pay is now managed around pay zone principles, based on the individual’s contribution. Reward is founded on open dialogue between individual and line manager with clear terms of engagement. There is guidance for decision makers on equal pay principles, facilitated action planning to rectify any issues identified and monitoring of results.

A booklet was issued to all staff explaining the new structure and principles behind the approach. All key HR staff and business partners have attended specific training, and presentations took place to all the top management teams across the Group. Regular training days and workshops are provided and there is consistent communication from the Chief Executive downwards.

Lloyds has also developed a bespoke pay analysis tool to enable regular detailed audits by individual business units. This allows pay inequalities to be much more easily identified and addressed.

A reduction in the pay gap has been seen at almost every grade, and in many grades the gap has almost halved. The vast majority of grades now have a gap of under 3%.

Before the introduction of the new reward strategy 20% of staff were below the new minimum salary level, but after the introduction this fell to just 2%.