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Equal Pay Law: Guide for Employers

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One of the fundamental employment rights is that women and men are entitled to equal pay and contractual benefits for doing comparable work.

The following guide examines the equal pay provisions under the Equality Act 2010, from what the law says about equal pay and an employer’s obligations under the Act, to best practice steps when it comes to implementing equal pay systems.

 

What does the law in the UK say about equal pay?

The provisions on equal pay in the UK are set out under the Equality Act 2010. This replaced previous legislation on equal pay under the Equal Pay Act 1970, the Sex Discrimination Act 1975 and the provisions relating to equality in the Pensions Act 1995.

The law on equal pay was introduced to narrow the gender pay gap between men and women, although the legislative provisions apply equally to both male and female workers.

Under the ‘equal pay for equal work’ principle enshrined in the 2010 Act, a person must not get paid less compared to someone of the opposite sex doing the same or equivalent work for the same employer. This includes all forms of remuneration, although the equal pay provisions apply to other contractual terms, not just pay, such as leave entitlements and fringe benefits.

The provisions on equal pay are scattered throughout the Act under the heading ‘Equality of Terms’, but are brought together in a statutory code of practice produced by the Equality and Human Rights Commission (EHRC). The code doesn’t itself impose legal obligations, but it does help to explain the statutory obligations imposed on employers under the Act.

Although the EHRC code relates to equal pay between men and women — where inequality of pay is often, but not exclusively, a gender issue — discriminatory pay practices may also be open to challenge on grounds of age, race or any other protected characteristic under the Act.

 

What are an employer’s obligations under the Equality Act 2010?

The law on equal pay is designed to ensure that all forms of pay and other contractual terms are determined without sex discrimination or bias. As such, the 2010 Act imposes a statutory obligation on every employer, regardless of size, to eliminate discriminatory pay practices and pay disparities in the workplace. That said, the way in which this obligation is discharged can vary according to the size and resources of the organisation in question.

Small employers are far less likely to have a human resources department, and will often have fewer written workplace policies and more informal practices than larger employers. They may also have less complicated pay systems and can, though not necessarily, have narrower gender pay gaps. Still, even though the extent of an employer’s gender equality duty is not always easy to interpret in practical terms, its’ purpose is simple: to ensure that where women and men are doing equal work for the same employer they receive the same rewards for it.

In pursuance of the ‘equal pay for equal work’ principle, employers are also responsible for ensuring that their pay systems are transparent. Where a pay system lacks transparency — because it’s not clear to an individual how each element of their pay packet contributes to their total earnings in a pay period — the employer must be able to demonstrate there’s no sex discrimination behind a pay differential. This means that where the pay structure is not transparent and a worker is able to show some indication of sex discrimination in their pay, the employer carries the burden of proving that the pay system does not discriminate.

 

What is an equal pay claim and who can bring one?

By law, both men and women must get equal pay for doing equal work. This is work that is classed as either the same, similar, equivalent or of equal value. This means that an employee must not get paid less, or work under less favourable terms, compared to someone of the opposite sex doing equal work for the same employer. If they do get less pay, or their contractual terms are less favourable than those of any male or female comparator, they may have the basis of a pay claim under the provisions of the Equality Act 2010.

Where there is deemed to be equal work, the Act implies a sex equality clause into the employee’s contract of employment, modifying it where necessary so that their pay and terms are no less favourable than anyone of the opposite sex doing the same or equivalent work.

Still, not every difference in pay or other contractual terms is because of a person’s gender. An employer may be able to provide a material reason to justify any difference that doesn’t discriminate on the basis of sex, such as evidence of additional experience or expertise for the higher paid jobholder. Even in cases where the employee can point to an indirect discriminatory effect of a particular pay practice, the employer may instead be able to demonstrate that this is a proportionate means of achieving a legitimate aim.

As such, if the employer is able to prove either a non-discriminatory material factor, or objectively justify any difference in pay etc, the claim for equal pay will fail. It is also a defence to any claim that the claimant and comparator are not in fact doing ‘equal work’, or the comparator is not one allowed by law because they are not in the ‘same employment’.

In contrast, if the claimant is able to identify a valid comparator with whom they’re doing equal work who receives better pay and terms — even if the comparator no longer works in that role — and the employer cannot demonstrate that the difference is because of a material factor unrelated to the sex of the jobholders, or otherwise objectively justify this difference, then the equality clause will take effect and the claim will succeed.

If a claim for equal pay claim is upheld, the employment tribunal can:

  • Make a declaration that the claimant is entitled to receive the same pay and contractual benefits as any comparator, so as to provide equality for that individual moving forward;
  • Order the employer pay any arrears of pay, together with interest, based on what the claimant should have been paid had they not been discriminated against on the basis of their sex. The award can date back six years prior to the date that proceedings were issued.

 

An equal pay claim can be issued by either an existing or former worker, although a claim must be issued in the tribunal within six months of the individual’s contract of employment coming to an end. It is, however, possible for a worker alleging inequality of pay to issue a claim in the civil courts for which there is a more generous six-year time limit.

 

How can employers comply with equal pay laws? 

Despite the implementation of legislation on equal pay and sex discrimination as far back as the 1970s, there remains sizeable gender pay gaps across the UK economy. As such, employers are continuing to find themselves defending claims for discriminatory pay practices.

Under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, employers with 250 or more employees are required to publish information relating to the gender pay gap in their organisation.

Part 2 of the EHRC code on good equal pay practice provides detailed guidance on how to prevent or eliminate any unjustifiable pay inequalities within your workplace. Even though an employer is not bound to follow the steps set out in the code, when considering an equal pay claim, the tribunals and courts are obliged to take into account any part of the code that appears relevant. By following the guidance in the code, it may therefore help to avoid an adverse decision in legal proceedings. The methods suggested to remedy unlawful gender pay inequality set out in the code can also be used to eliminate pay inequalities on other grounds.

Under Part 2 of the Code, the EHRC recommends that all employers regularly review and monitor their pay practices by way of equal pay audits. An equal pay audit is regarded by the EHRC as the most effective way of establishing whether an organisation is free from unlawful bias, and although not a legal requirement, conducting an audit will help employers to show that appropriate action has been taken to identify and eliminate pay discrimination.

It can also provide a risk assessment tool for pay structures, where disputes over equal pay generally arise not out of any deliberate intention to discriminate, but through pay systems not being kept under review and up-to-date.

The EHRC recommends a five-step equal pay audit model:

  • Deciding on the scope of the audit and identifying the information required
  • Determining where men and women are doing equal work
  • Collecting and then comparing pay data to identify any significant pay inequalities between roles of equal value, ensuring that this considers work that is the same or broadly similar, work rated as equivalent and work that can be shown to be of equal worth
  • Establishing the causes of any significant pay inequalities and assess the reasons for them
  • Developing an equal pay action plan to remedy any direct or indirect pay discrimination.

 

In broad terms, therefore, an equal pay audit should include comparing the pay of men and women doing equal work, identifying and explaining any pay differences, and eliminating those pay inequalities that cannot be explained on non-discriminatory grounds.

There are sound business as well as legal reasons for carrying out an equal pay audit. The benefits to an organisation of conducting an audit include:

  • Being able to identify, explain and, where unjustifiable, eliminate pay inequalities
  • Having rational, fair and transparent pay arrangements in place
  • Demonstrating to workers and to potential workers a commitment to equality of pay and other employment terms, and
  • Demonstrating the values of the organisation to those it does business with.

 

For any employer yet to be convinced of the importance of eliminating discriminatory pay practices, either by following the EHRC guidance or otherwise, a cautionary note can be found in the recent judgment of Asda Stores Ltd v Brierley and others [2021] UKSC 10. In this case, the appeal by supermarket bosses against a decision that shop floor workers (most of whom were women) were entitled to compare themselves to colleagues at distribution depot centres (most of whom were men) for equal pay purposes was dismissed by the Supreme Court.

This decision marks a key victory for thousands of shop floor workers, making it clear that companies cannot rely on the fact that workers are in two different locations to avoid the protections afforded under the Equality Act. Although it’s yet to be seen whether on remit back to the employment tribunal the work can be said to be of equal value, this decision could have huge ramifications for other equal pay cases in the retail sector. The view of the Supreme Court also marks the willingness of the judiciary to eliminate unacceptable pay practices.

 

Need assistance?

DavidsonMorris’ employment lawyers are experienced in advising employers on equal pay matters, including compliance with meeting legal duties and pay reporting and dealing with equal pay complaints and claims. Working closely with our HR colleagues, we provide a holistic advisory service for employers to support workplace pay equality. For advice, contact us.

 

Equal Pay Act FAQs

What are the main points of the Equality Act 2010?

Under the Equality Act 2010 men and women are entitled to equal pay for equal work. This refers to the right to get the same pay and contractual benefits for doing comparable work, unless any difference can be objectively justified.

Can I be paid less for doing the same job?

You can be paid less for doing the same job, provided your employer can show a material factor that explains the reason for doing this unrelated to your sex, or they’re able to objectively justify any indirect discriminatory effect.

What is the Equal Pay Act UK?

The Equal Pay Act 1970 was initially introduced to reduce the gender pay gap between men and women. This has since been replaced with the provisions of the Equality Act 2010 which applies to both male and female workers.

Is it legal to pay employees different wages for the same job?

Under the Equality Act 2010, it’s legal to pay employees different wages for the same or similar job, or work of equal value, but only if there are non-discriminatory material factors which explain the reason for the difference.

Last updated: 15 May 2021

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