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Equal pay: how can employers ensure they don’t get caught out?

Equal pay between men and women continues to be a significant problem in the UK. Reports have shown that women are still being paid less than men at four out of five companies in the UK. Several high-profile equal pay cases have shown that employers’ historical pay practices have led to female staff being paid less for doing the same or similar work to their male colleagues.

What is equal pay?

The Equality Act 2010 states that men and women in the same employment performing equal work must receive equal pay. Equal pay applies to all contractual terms, not just pay. This includes non-discretionary bonuses, overtime rates and allowances, pension benefits, redundancy payments, sick pay, travel allowances and benefits in kind such as a company car.

Where an employer can show that the variation in pay is due to a material factor which is not directly or indirectly discriminatory, the difference in pay would be considered justified and the employer would have a ‘material factor’ defence.

Why are employers getting it wrong?

Many employers are unaware that their normal practices can lead to risks with equal pay. Common examples include:

What are the consequences of getting it wrong?

Employers that fail to comply with equal pay legislation are at risk of expensive employment tribunal litigation, reputational damage, low staff morale and loss of productivity and key employees. It is therefore crucial that employers understand their legal obligations to implement a fair pay system and mitigate the risks.

The consequences of getting it wrong was recently highlighted when a local authority council was held liable for equal pay claims in the region of £650m and £760m, having already paid out £1.1bn in compensation for equal pay claims brought over a decade ago. This led to a requirement to file a section 114 notice, resulting in bankruptcy with all but essential spending being stopped.

The council had failed to take action to change its practices leading to thousands of female workers claiming they are still not paid equally to their male counterparts. The case demonstrates the serious consequences for organisations who get it wrong, and the risks involved where an organisation fails to take proactive steps to change its pay practices and procedures where an equal pay issue has already been identified.

How can we help?

Our experienced team of employment lawyers and equality, diversity and inclusion specialists can work with you to identify risk areas, transform your workplace culture, and mitigate the risks. This includes:

If you are an employer and you would like support with an equal pay legal audit or any of the areas mentioned above, please contact our people advisory team.