Pay is, understandably, a sensitive topic for many. But with recent encouragement from the BVA to demonstrate greater transparency regarding pay structures and decision making, how far does this require veterinary practices to change their current arrangements?
Typically, within the veterinary sector pay is mandated by the “market rates” expected of those joining a practice, and once established, through negotiation between employer and employee. This process is in sharp contrast to, for example, general practitioners, who have clearly defined pay grades and nationally set pay awards.
A matter of equal pay
From a legal perspective, there is no such thing as “fair” pay, only equal pay. Thus, outside of negotiated pay agreements with a trade union or national pay awards, pay is determined by the employer. It is up to the employer to decide what factors to take into account, whether this includes inflation, retail price index (RPI) or what their competitors are paying.
Once a baseline pay structure is in place, the employer must simply ensure the rate is equal to or above the national minimum wage and that the structure does not discriminate. (So part-time employees receive pro-rata pay, and female employees are paid the same as males for performing the same work or work of equal value.)
Equal pay law is complex, but work can be rated equal through a job evaluation scheme or determined as equal value by an employment tribunal
Equal pay law is complex, but work can be rated equal through a job evaluation scheme or determined as equal value by an employment tribunal. In assessing this question, tribunals consider a female employee’s work in comparison to that of a particular male in the business, looking at the demands made of them in terms of effort, skill and decision making. This is notoriously hard for employers to decipher. However, the first step should, of course, be to ensure that all employees performing the same roles are paid equally before moving to comparable roles.
This leaves a huge amount of discretion to employers, but it is not unusual: law, construction, engineering and accountancy all work in the same way. The primary driver tends to be market forces, and if practices are competing for talent, pay is the inevitable way to stand out. However, in reality, the issue doesn’t end there as, typically, female employees are less likely to ask for a raise than male colleagues.
Innovative offerings
In recent years, we have seen an increase in innovation around reward offerings, and employees tend to be looking for the full package rather than cold hard cash. The pandemic has forced many individuals to reassess priorities in terms of work–life balance, family and location.
New telemedicine entrants to the veterinary market are often able to offer more flexibility and differing pay structures than traditional practices, often coupled with more competitive offerings in terms of benefits, such as more generous parental leave policies. There’s a clear trend towards employees valuing packages as a whole and taking into account what will work best for them at their current stage of life.
In an ideal world, pay would, of course, be more transparent than a one-on-one conversation around an employee’s contributions over the past 12 months. Pay awards that consider the volume of hours worked, or fees billed, can feel unfair to employees who are restricted on hours due to caring commitments. In these circumstances, it may be better to link pay rises to appraisal scores so all those meeting expectations get a consistent raise, with exceptional performances rewarded with a one-off bonus or other annual scheme.
The difficulty with rewarding performance through basic pay is that it becomes perpetual – one annual increase then creates a bigger percentage raise next year
The difficulty with rewarding performance through basic pay is that it becomes perpetual – one annual increase then creates a bigger percentage raise next year if pay rises are otherwise across the board. A few bumper years for an employee can suddenly see them in a whole new pay bracket to their peers, which can build resentment and lead to employees looking elsewhere.
There’s no requirement for employers to consult employees on pay structures unless mandated by a collective bargaining agreement or other contractual right. Aside from unionised businesses, it is rare for any consultation to take place. On the contrary, employers regularly consult with employees (usually informally by way of surveys and conversations) as to what they would find beneficial from a benefits perspective.
Pay reviews
While most employment contracts provide for an annual pay review (with no commitment to an increase), there have been calls for pay to be reviewed more frequently in light of the current cost-of-living crisis. Some employers have taken this approach, but this tends to be dictated by market forces requiring preventative action to avoid losing talent.
Instead, most employers have responded to the crisis by issuing one-off cost-of-living payments or bonuses or re-evaluating the benefits packages to seek more value for employees. Shopping vouchers, online cashback schemes and corporate discounts have all been popular to try to make hard-earned wages go further without hitting a practice’s bottom line.
Reviewing pay structures
A series of different pay structures may also be relevant in a business.
For junior and administrative staff, the main issue is to ensure employees receive the national minimum wage (NMW) on average for the hours they work. NMW law can be complex, and if employers are in any doubt as to whether they are meeting the requirements (different calculations apply to different types of work), they should seek legal advice for reassurance. Failure to pay the NMW can result in claims for back pay, plus penalties of up to 200 percent of the underpayment and being included on HMRC’s “named and shamed” list.
National minimum wage law can be complex, and if employers are in any doubt as to whether they are meeting the requirements […] they should seek legal advice for reassurance
For most adults, the NMW rose to £10.42 per hour with effect from 1 April 2023 (confusingly entitled the national living wage rate, which applies to adults aged 23 and over). However, in September 2022, the living wage foundation, which calculates a rate based on the real cost of living, recommended that employers pay at least £10.90 per hour (rising to £11.95 per hour in London).
On the other hand, more senior staff may benefit from or welcome performance-related pay. As above, this needs to be managed carefully to avoid indirectly discriminating against certain groups. But it can help businesses align commercial aims with workplace morale. Schemes such as rewarding sales or upsells, minimising costs or being efficient in consultations have all been adopted by employers.
A word of warning in relation to the NMW – employers should always ensure they don’t fall below this floor when adopting variable pay patterns. Employers may also wish to consider the admin burden of monitoring and recording performance for these purposes and whether managing these metrics makes the business less efficient overall.
Summary
If practices fall foul of discrimination laws, employees can bring claims for their financial losses, plus awards for injury to feelings. Discrimination compensation is uncapped and, therefore, can present a trap for employers seeking to have variable pay structures.
The matter of pay is a thorny one which can, inadvertently, lead employers down the path to a tribunal claim. The best advice is for employers to consider advice when in any doubt.
