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Equal Pay - An Issue Businesses Cannot Afford to Ignore

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Hardly a week passes when equal pay is not in the news. A recent example of this is the debate over BBC top earners’ salaries, published in July 2017, which has leant momentum to calls for greater transparency on gender pay divergence, not only in the industry but more widely. Some of the headlines are attention grabbing, pointing out very significant “gaps” between remuneration for male and female earners and suggesting, for the most part, persistent under-valuing of female skills and talent by employers.  

With increasing prominence of the equal pay agenda and relatively new gender pay gap reporting regime for larger employers, attention is unlikely to shift away from pay any time soon. So, what are the key requirements on employers and how does the legal framework impact on setting pay policy?

The concept of equal pay in the sense of fair treatment for men and women doing equal work has been with us for a while. Under the Equality Act 2010 (which follows earlier legislation in this area), men and women are entitled to receive equal pay for:

  • like work (work that is the same or broadly similar);
  • work rated as equivalent under a job evaluation scheme carried out by the employer; and
  • work of equal value in terms of the demands made on the employee as regards effort, skill and decision making.

Equal pay covers all aspects of pay and benefits including basic pay, overtime, non-discretionary bonuses, benefits in kind and access to pension schemes.

A disgruntled employee may bring a claim if they do not believe they are receiving equal pay. The claimant would have to establish his or her case based on a comparator of the other gender in the same employment. Following the recent decision in Asda Stores v Brierley & Others[1], comparators may be permitted from a “single source” of pay and conditions, even where the employment is not in the same establishment or service. In the Asda case, (predominantly female) store employees have been permitted to compare themselves against higher paid (predominantly male) employees in distribution centres for the purposes of their equal pay claims.

If the employer can show that a difference in the claimant’s pay versus that of the comparator is due to a genuine “material factor”, which is not directly or indirectly discriminatory, this may constitute a successful defence. Examples of potentially lawful reasons for paying men and women differently for equal work include past performance, seniority, different collectively-agreed pay scales for the job(s) in question and pay protection arrangements following a job re-grading exercise. However, what will be considered a justifiable difference will depend on the circumstances in each case. It will be for the employer to show that the material factor relied upon is the real reason for the difference in pay, that it is significant, and that it is not related to sex.

Paying male and female employees differently without valid justification can expose the employer to claims of sex discrimination as well as equal pay claims. Whilst the equal pay legislation deals with disparity of terms and conditions, sex discrimination claims can cover the terms of a job offer, promotion and other matters not regulated by the employment contract such as discretionary pay rises and bonuses.

The business case for equal pay reaches beyond the avoidance of legal liability (not to mention the associated management time and cost implications of dealing with claims). Being pro-active and genuinely committed to delivering equal pay can enhance an employer’s reputation, improve employee engagement, and be viewed positively by suppliers, customers and job applicants.

Conversely, lack of concern and failing to address the issue can lead to good employees seeking opportunities elsewhere and the employer being left with a narrower pool of talent from which to draw (well informed candidates will do their homework!). Additionally, procurement practices now tend to involve scrutiny of suppliers’ ethical and equality credentials, meaning that a failure to consider such matters could well limit commercial opportunities.

Requirements introduced in April 2017 place an obligation on employers with 250 or more employees to report annually on their gender pay gap. However, this is concerned with average pay for men and women regardless of their role and does not necessarily correlate with equal pay. For instance, no account is taken of the relative proportions of men and women in different occupations which can “skew” the picture nor of different rates of pay for comparable jobs. However, analysis of the data and narrative for any gap that is disclosed by the figures can help identify areas where pay policy requires adjustment or efforts to increase gender diversity can be targeted.

The key recommendation for an employer wishing to assess whether any steps need to be taken on equal pay is to conduct an equal pay audit and understand their starting point. From there, analysis of the reasons for any pay disparity should be undertaken to assess what further actions and policies need to be implemented. For further advice on Employment Law and assistance in relation to pay, benefits and equality matters, please contact the Chattertons Employment Law team.


[1] UKEAT/0011/17 (31 August 2017)