With reports about differences in pay between high profile men and women seemingly in the news on a daily basis at the moment, there cannot be many people in the UK who have not wondered how their pay compares to colleagues of the opposite sex. In this article, Emma Thompson, employment law expert with Thackray Williams, explains the rules on equal pay and what you, as an employer, can do to ensure you comply with them.
The law in a nutshell
Under the Equal Pay Act 2010, it is illegal to pay men and women in the same organisation different amounts for doing equal work, unless there is a justification for doing so.
To be classed as equal work, the work being compared must be:
- the same or broadly similar;
- must have been rated as equivalent by a job evaluation; or
- must be work of equal value due to the effort, skill and decision-making involved.
Where employees think there may be unequal treatment of men and women, they are entitled to ask their colleagues what they earn for the purposes of comparison without any repercussions from their employer. It is not just their basic salary details that they can ask about – details of terms and conditions of employment can also be sought where, for example, a female employee suspects that male employees are being treated better when it comes to things like pension provision and entitlement to bonuses.
What are the risks if pay is found to be unequal?
The most obvious risk is that a disgruntled employee may seek to bring an equal pay claim in the employment tribunal, which could be very be costly: an employee can recover the difference in pay for up to six years, and there is always the risk that one claim could snowball into a group action as other employees in the same role seek to join in the claim.
Even where a claim is not made, unequal pay can be demoralising and divisive among the workforce and cause significant damage to your reputation.
But what if I have a good reason for paying differently?
Where men and women are paid differently for equal work, you may be able to defend this by showing a material difference between the employees that explains the different rates. This could relate to length of service or expertise and experience. Market forces may also be relevant, but if you are trying to rely on this explanation you will need to tread carefully. For example, if you run a gym and are paying a new male personal trainer more than a female personal trainer because, since recruiting the female personal trainer another gym has opened locally and it is now harder to recruit and retain personal trainers, you will need to have evidence of this. You will also need to ensure there is no element of discrimination in your approach and that you monitor this difference to ensure it is still justified.
An employment tribunal will study your explanation for any differences that exist, so it must stand-up to scrutiny.
Can I keep employees’ pay private?
Since 2014, you cannot stop employees discussing what they are paid where the purpose of those discussions is to look for any differences in pay between men and women. This is the case even where contracts of employment prohibit discussions between employees about rates of pay.
If an employee asks you about other employees’ pay, it is worth thinking about the purpose of the question. Tempting though it may be to refuse to give the information, particularly if it seems like a fishing expedition, this may not help your position in the long run.
Although there is no longer a statutory questionnaire procedure for equal pay enquiries, an employment tribunal is likely to take a dim view of an employer who does not respond to a question on the issue of equal pay in an open and honest manner. Given the potential costs of equal pay claims and the need to comply with data protection law when replying to questions, it really is worth getting legal advice on how to deal with equal pay enquiries, so that you can respond appropriately if questions are raised.
How can I avoid equal pay claims?
There are four immediate steps you can take to reduce the likelihood of a claim being made:
Step 1 – introduce and implement an equal pay policy. The Equality and Human Rights Commission (EHRC) offers guidance on what to include, and your solicitor can help to tailor a policy to your particular circumstances.
Step 2 - flush out any equal pay issues by carrying out an equal pay review. The ECHR’s guide on equal pay reviews takes you through the process.
Step 3 – act upon the findings of the review to iron out any differences in pay. This might mean changing pay or implementing pay freezes to allow other employees’ pay to catch up. This needs to be handled carefully and in accordance with legal advice. Using settlement agreements to implement and record any changes can help to ease the process.
Step 4 – consider putting in place a transparent pay system, as explained in the EHRC’s pay systems guidance.
For a confidential discussion about equal pay, or any other employment law matter, please contact Emma.