Find out what fair pay can mean, what pay information UK employers must disclose by law and the opportunities pay narratives bring.
The key legislation covering equal pay is the Equality Act 2010.
The principle of ‘equal pay for equal work’ gained momentum in the 1960s leading to the Equal Pay Act 1970 which prohibited less favourable treatment between men and women in terms of pay and conditions.
Although the original Act was repealed, its core provisions were replicated in the Equality Act 2010. Equal pay legislation has historically been very complex, and the Equality Act has not simplified equal pay issues to any significant extent. Data from the UK government’s gender pay gap service for employers with 250 or more employees shows that on average in 2018, men were paid 11.8% more than women.
The Equality and Human Rights Commission has published a comprehensive Equal pay: Statutory Code of Practice for England, Scotland and Wales (NI has its own provisions) which:
- provides detailed explanations of the equal pay provisions in the Equality Act
- applies the legal concepts to everyday situations
- does not impose legal obligations, or give an authoritative statement of the law, but can be used in evidence in equal pay claims.
These Q&As should be read in conjunction with Case law on equal pay.
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Equal pay claims
Equal pay claims
In order to bring an equal pay claim, an individual must choose a person of the opposite sex as their comparator. The individual must then show that the comparator is engaged in:
- 'like work', or
- 'work rated as equivalent' under an analytical job evaluation study, or
- work of 'equal value'.
The procedure followed in an employment tribunal will differ depending on the nature of the comparator's work.
If the claim is for 'like work', the work will be of the same type or broadly similar in nature. Any differences in the work must be of little practical importance in relation to the terms and conditions of employment. The fact that a comparator may be required to perform additional duties is not enough; it is necessary to look how often the employee performs these duties in practice.
Some useful examples of ‘like work’ where any differences were not found to be of practical importance in relation to pay include male and female drivers, where the men were more likely to work at weekends (Hatch v Wadham Stringer Commercials (Ashford) Ltd, 1977), and a female cook preparing lunches for directors and a male cook catering for other employees (see Capper Pass Ltd v Lawton, 1976).
Work related as equivalent
In relation to a claim for work 'rated as equivalent', it is necessary under the Equality Act 2010 for a formal job evaluation exercise to be conducted. Job evaluation experts can systematically assess the relative value of different jobs. The five main methods of job evaluation according to case law are:
- points assessment
- factor comparison
- job ranking
- paired comparison
- job classification.
For example, staff nurses working in a hospital may be assessed as undertaking work rated as equivalent to that of maintenance craftsmen or technicians also working in the hospital.
Job evaluation exercises may themselves be subject to challenge if they have not been conducted objectively or are inherently discriminatory in some respect.
For ‘equal value’ pay claims, the worker has to show that their chosen comparator is employed on work of equal value. This type of equal pay claim can be the most complex.
A woman will have to show that her work is of equal value with a man's in terms of the demands made on her. In such cases, as with work rated as equivalent, the jobs done by the woman and her male comparator are different, but have equal worth, taking into account the work performed, training, skills, the conditions of work and the decision-making aspects of the role.
Examples of claims using comparators doing different jobs which have been found to have been of equal value include:
- Female supermarket staff and male distribution centre workers.
- Canteen workers and cleaners and clerical workers.
- Nursing home sewing room assistant and plumber.
- Primary school classroom assistant and library service driver.
In a claim for work 'of equal value', an expert's report will have to be obtained on the comparative worth of both jobs. This is often a lengthy and complicated process, although specialist employment tribunals have powers to determine the question of equal value.
There have been a number of recent cases involving supermarkets which are the most important, complex and financially significant equal pay claims ever pursued in the private sector. The cases may have ramifications for the retail sector generally.
In 2018 and 2019, workers at a number of supermarkets, including Morrison’s, Tesco, Sainsbury’s and Asda, brought equal pay claims. The core of the workers’ case is that shop floor staff, who are predominantly female, are paid less than the overwhelmingly male workers in distribution centres.
Supermarket check-out staff and shelf-stackers are mostly women and the warehouse staff are mostly male and the men get paid more. The equal value argument is that the jobs are pretty much the same. In the warehouse food gets taken off the shelves and put on a lorry. In the supermarket the food is put on the shelves. The supermarket cases depend on determining whether supermarket shop floor jobs are of equal value to the higher-paid jobs in the male-dominated distribution centres. So far, the courts have indicated that the roles are of equal value so the claims may proceed.
(See Equal pay case law for Asda Stores Ltd v Brierley and others, Supreme Court, 26 March 2021.)
The most significant numbers of equal pay cases have generally been brought against public sector organisations.
In Redcar and Cleveland Borough Council v Bainbridge and Surtees v Middlesbrough Borough Council (2008) (heard together), the Court of Appeal held that claims based on work rated as equivalent and equal value claims are both very different in their approach to back pay. A worker employed on work of equal value may be able to claim they had been employed in equal value work previously if the job has remained the same. By contrast, until a job evaluation study has been undertaken from a particular date it is hard to claim a job is rated as equivalent before that date.
The most expensive case law example in recent times was Wilson v North Cumbria Acute NHS Trust. This case started in 1997 and settled in 2005. The settlement terms involved the NHS having to pay some £300 million to about 1,500 female employees who were working (or who had worked) at Cumberland Infirmary and at West Cumbria Hospital. The women were awarded between £35,000 and £200,000 each. The equal value claims involved 14 different working categories, using five different male comparators. The women ranged from catering assistants to telephonists. They compared their pay with for example, joiners, building labourers, wall washers, and maintenance assistants. The pay rates, hours of work, pensions, weekend working rates and sick pay were all included in the comparisons which showed historic pay discrimination in the health service against women.
One of the earlier key cases in this area is Hayward v Cammell Laird Shipbuilders Ltd (1988) where a female cook claimed work of equal value and consequently parity of terms and conditions with men working as painters, insulation engineers, and joiners. An individual can therefore choose a class of employees as his or her comparator if necessary. In Enderby v Frenchay Health Authority (1994) senior speech therapists chose senior pharmacists and clinical psychologists as their comparators.
How the equal pay provisions work in practice
How the equal pay provisions work in practice
The equal pay provisions apply to both men and women, and are designed to achieve equality between men and women in pay and other terms of employment where the work of an employee and a comparator are equal.
There is no upper or lower age limit on the right to claim equal pay, nor is there a qualifying period of service for bringing a complaint. The provisions apply to employees, office-holders and members of the armed forces, where one person’s work is equal or equivalent to the work of another. Some apparently self-employed persons may be covered.
The Equality Act 2010 provides for a sex equality clause to be read into every employee’s contract of employment. A similar sex equality clause is implied into the terms of pension schemes. It is if all employment contracts contain an ‘invisible’ clause which effectively varies the employee’s contract to increase the complainant’s terms, not to downgrade the comparator’s terms.
The provisions address sex discrimination occurring when women (or men) are paid less than the opposite sex for doing the same job, usually in the same employment , or where they are engaged in ‘like work’, ‘work of equal value’ or ‘work rated as equivalent’ by a job evaluation scheme.
Gender related differences
There must be a gender-related reason for the discrepancy for the equal pay provisions to apply. For example, a female cook working 40 hours a week preparing meals for an organisation's directors and their guests is paid less than two male cooks who prepare meals for the rest of the staff (see Capper Pass Ltd v Lawton, 1997). The female cook claimed that she was doing like work to that done by the two male cooks and that, therefore, under the terms of the sex equality clause implied into her contract of employment, she would be entitled to the same rate of pay, as long as there were no material practical differences sufficient to warrant the differences in the terms and conditions. The only reason why the female cook's rate of pay was different from the others was because she was a woman and they were men.
Unequal pay for a non-gender related reason is not covered (but in such circumstances, an employer may be vulnerable to a claim based on breach of the implied term of trust and confidence which is implied into all employment contracts.)
Like for like comparisons
When terms are compared, each provision must be compared like with like – it is not a comparison of the total package. For example, if men receive more basic pay but female employees get more holiday, the equal pay clause operates to give both the female employee the same rate of basic pay and the male employee increased holiday. This is because the comparison looks at each term and not the contract as a whole (see St Helens & Knowsley Hospitals NHS Trust v Brownbill, 2011).
However, if one gender does not receive a benefit, for example a bonus, but the comparator of the other gender does, then it may be possible to aggregate the pay for the purposes of the comparison. For example, in Degnan v Redcar and Cleveland Borough Council (2005), it was held that bonus payments and attendance allowances paid to male employees (including drivers and gardeners) in addition to their basic pay could be aggregated with their basic pay for the purposes of comparison in an equal pay claim. The aggregated pay was compared to the female employees’ basic pay. The female employees included cleaners and home helps who did not get bonuses or attendance allowances. This case, and the Capper Pass above, were decided under the old legislation, but the principles are the same.
The Equality Act 2010 also requires that a woman’s contract must be read as including a maternity equality clause, designed to ensure that any pay increase a woman receives or should have received is taken into account in the calculation of her maternity-related pay. In addition, the maternity equality clause deals with the payment of bonuses and pay on return to work following maternity leave. No comparator is required in such cases.
Making an equal pay claim
If an individual believes that they are receiving less pay or benefits for like work, their first course of action should be to raise a grievance in accordance with the employer's grievance procedure. It is not necessary for the woman to name her male comparator at the grievance stage although she may do so if she wishes.
The grievance procedure should at least comply with the Acas Code of practice on disciplinary and grievance procedures. If matters are not resolved then equal pay claims can be brought by lodging a claim form in the employment tribunal at any time during employment or up to six months after the termination of employment.
Before commencing proceedings, employers and employees may consider alternative forms of dispute resolution such as conciliation (which is offered by Acas amongst others) or mediation. Any employee who wants to make an employment tribunal claim now has to notify Acas by completing an early conciliation form before issuing a claim.
Employers will need to take legal advice at an early stage as equal pay claims are complex. An early assessment will need to be made to decide if the woman and her comparator are indeed doing equal work, and how any difference in pay or benefits can be objectively justified.
With equal value claims the employment tribunal can choose to determine the question of equal value itself rather than appoint an independent expert to prepare a report.
For more information on discipline and grievance procedures see our Discipline and grievance procedures Q&As.
For more information on Acas early conciliation see our Tribunal claims, compromise and settlement Q&As.
How comparators are used in equal pay claims
A comparator in an equal pay claim usually has to be a real person and not a hypothetical one (see below), and generally has to be an employee of the opposite sex 'in the same employment' as the claimant. The same employment can include someone employed by:
- the same employer
- any associated employer at the same establishment
- an associated employer at a different establishment or workplace, provided that common terms and conditions apply, either generally between employees or as between the employee and the comparator.
There is no limit on the number of comparators an individual can select in an equal pay claim. It is not necessary to choose a single comparator and, in practice, claimants will often choose several comparators, or groups of comparators, in order to improve their chance of success.
Same establishment/single source
An equal pay claimant must show that the comparator is either employed in the same establishment by the same or any associated employer, or employed at a different establishment on common terms and conditions. The definition of establishment is not restricted to a single place.
The legislation covers different organisations that are either directly or indirectly controlled by the same third party, such as a government department. For example, a woman may claim equal pay with a man doing equal work employed by the same local authority, but working in a different geographical location. In each case, the facts and circumstances have to be evaluated (see City of Edinburgh Council v Wilkinson, 2011).
If an equal pay claimant seeks to use a comparator employed at a different place, there does not have to be a real possibility of the comparator ever working at the claimant’s place of work. It may not be feasible that the comparators would ever work at the same establishment, but this does not prevent the terms needing to be equalised. In North v Dumfries and Galloway Council (2013), the Supreme Court decided that female employees based at schools and male council employees based at other locations were in ‘the same employment’ for the purpose of a pay comparison. It was sufficient that, if they had been employed in the same place they would have broadly similar terms and conditions. The principle involved is that difference in treatment can be attributed to a ‘single source’ capable of rectifying the pay inequality.
The following case law examples, although mostly decided under pre-Equality Act 2010 legislation, also show the way comparators are used:
- South Ayrshire Council v Morton (2002) confirmed that an equal pay claim could be brought by a group of head teachers whose comparators worked for a different education authority, because the comparators were paid by reference to the same nationally negotiated pay scales which had been set by a 'single source', the statutory body.
- Armstrong v Newcastle upon Tyne NHS Hospital Trust (2005) the EAT found that women workers in an NHS hospital could not use male workers in another NHS hospital as comparators for equal pay, as there is no 'single source' responsible for setting pay.
- In Dolphin v Hartlepool Borough Council (2005), the governing bodies of different local authority schools were not a single source responsible for the inequalities in pay, but the employees and their chosen male comparators who worked for other local authority departments were held to be employed on 'common terms and conditions' because the terms applied in the same way to other local authority establishments.
- In Glasgow City Council v Unison (2014) the Scottish Court of Session held that a limited liability partnerships (LLP) which the local authority maintained close control over after a Tupe transfer was an 'associated employer'. Women had been previously employed by the council to provide services (including care, cleaning, catering and parking enforcement) and were then transferred to the LLP. The court ruled that they could compare their pay with men who remained employed by Glasgow City Council because it could restore equal treatment between the claimants and their comparators. Pay was therefore attributable to a single source.
Organisations, such as local authorities, that outsource need to be diligent to avoid inadvertently assuming large financial liability for equal pay claims where there is a single source responsible.
A woman can, therefore, compare herself to a man who is not in the same employment where the difference in pay is attributable to ‘a single source’ which has the power to rectify the difference. Cross-employer comparisons are, therefore, prone to arise mostly in the public sector and need to show:
- the discrimination is attributable to a single source
- the body responsible for the inequality could restore equal treatment (in other words, the organisation that gave the (usually female) employee less pay has the power to rectify that situation).
The Equality Act 2010 says that if there is no actual comparator then the sex equality clause cannot operate. Hypothetical comparators cannot therefore be used in equal pay claims, but sex discrimination claims may use hypothetical comparators (see the FAQ, Can a predecessor or successor be a comparator and what if there is no comparator?).
Any employees transferring to a new employer under TUPE can choose employees of the transferor as comparators who did like work, but did not transfer as comparators.
This means that the new employer (transferee) could be liable for up to six years of unequal pay claims, so it's important that warranties and indemnities should be included in transfer agreements to cover potential equal pay claims transferring across to the transferee employer (see Gutridge v Sodexho, 2009).
Obtaining employer information in equal pay cases
In equal pay cases, organisations are likely to be asked to deal with specific questions from employees on pay and contractual terms and conditions.
Historically employees who thought they had not received equal pay could use a set questionnaire to obtain this information from their employer. Although those questions can still be asked, the procedure for asking is them is less formal.
Choosing the right comparators
When making an equal pay claim, employees must specify who is receiving better terms and conditions for ‘like work’, ‘equivalent work’ or ‘work of equal value’. This comparator will usually be working for the same employer but may be working for an associated one. The employee can ask other employees about pay and benefits to identify whether they themselves are being paid unfairly. However, other employees do not have to discuss this issue if they do not wish to.
The employee will need to explain why the comparator is doing equal work to the employee's job. This may be because the job is the same as theirs or has been rated as equivalent under a recent job evaluation; or perhaps because both jobs require similar skills.
Employers should not try to prevent employees finding out this information as any attempted prevention might be unlawful under the Equality Act 2010.
The employee can also ask questions on how pay is determined by the employer and what is in the comparator’s job description that could explain any difference in pay.
The employer should then reply in a reasonable time, either:
- agreeing that there is pay discrimination and taking steps to put this right, or
- challenging the selection of the comparator or providing some material reason or justification of why the questioner’s pay and benefits are different.
Acas guidance Asking and responding to questions of discrimination in the workplace gives the example that, in some circumstances, organisations may justify a difference in pay or other terms because of:
- different geographical locations
- the operation of market forces, such as the need to recruit skills for particular roles or the need to retain employees.
In equal pay cases, the employer must show the reason for the difference in pay is a legitimate business reason and must be able to justify its actions by showing the treatment was a proportionate means of achieving that legitimate business aim. Establishing genuine objective justification is a high hurdle for an employer to meet.
Time limits for bringing an equal pay claim
Employment tribunal claims
For equal pay claims in the tribunal the normal period is six months after the employment ended. In some cases where the six month time limit applies this may be measured from the date on which the less favourable treatment was, or should have been, discovered as well as from the end of employment.
The time limits are different from sex discrimination claims which have a normal time limit of three months from the last act of discrimination.
Special rules apply if the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply. In some cases relating to employment with the previous employer (transferor) the equal pay claim must be lodged against the new employer (transferee) within six months of the transfer. In other cases where there is a separate claim against the transferee in respect of a breach, the six-month time limit may not start to run until the end of employment with the transferee.
If a pay inequality has deliberately been concealed by the employer, the time starts to run from the date when the employee discovered or could reasonably have discovered the inequality.
Equal pay claims in the courts
Employment tribunals often deal with equal pay claims. However, unusually for statutory employment claims some equal pay claims can also be heard in the civil courts as breach of contract claims. This means that if the six-month time limit has expired, some employees may bring such a claim in the courts within the normal breach of contract time limit which is much longer, namely six years. (Based on decision in Birmingham City Council v Abdulla and others (2012, SC)
The significant impact of this decision is that equal pay claims can now be raised in the civil courts by former employees up to six years after their employment ends (five years in Scotland). The Supreme Court confirmed that in most cases equal pay claims would be more conveniently disposed of by a Tribunal. However, if the claim was out of time in the Tribunal then it may proceed in the normal courts. This will increase the number of claims especially against public sector employers. However, bringing claims in the civil courts instead of the tribunal involves greater financial risk, as the losing party usually has to meet the winning party’s costs.
Obviously prudent and well advised employees will bring their claim within the tribunal six month time limit. Employers can argue that the claim should have been brought in the tribunal within that time. For an equal pay claim to be brought in a civil court the employee will have to explain why the claim was not brought in time before an employment tribunal.
Remedies for successful claims
The remedy most commonly awarded by a tribunal is a monetary award. This will consist of:
- future pay and benefits at the same level as the complainant's comparator (if he or she is still in the same job) and
- back pay (with interest) representing the difference in pay for a period of up to six years (five years in Scotland) before the date on which proceedings are commenced.
The tribunal can also make a declaration in respect of the employer's actions, but cannot make an award for injury to feelings for breach of an equality clause.
Arrears of pay are recoverable for a maximum of 20 years in cases where an employer has concealed information necessary for the commencement of proceedings.
As employees are usually entitled to six years’ back pay, an employer taking on employees in a TUPE situation could be liable for six years’ losses which arose with the previous employer.
In Gutridge and others v Sodexho (2009) the Court of Appeal confirmed that women who are subject to a TUPE transfer:
- can claim for equal pay losses which have accumulated during employment up to the date of transfer of the undertaking to the new employer
- claims must be brought against the employer within six months of the date of the transfer (and will otherwise be barred by limitation rules)
- claims for losses after the date of the transfer can be for up to six years' losses
- claims must be pursued within six months of the termination of that employment.
Employers that win new public sector service contracts remain liable for equal pay claims long after the transfer has taken place, whilst the transferred employees remain employed. The claims can be based on the earnings of comparators employed by the public authority before the transfer occurred.
Defending equal pay claims
Defending equal pay claims
There are three main ways organisations can defend an equal pay claim. They can show:
- the woman and her comparator are not doing equal work
- the chosen comparator is not legally valid (for example, he is not in the same employment)
- the difference in pay is due to a material factor.
Comparator not doing equal work
The first task for any employer in defending equal pay claims is to show that the claimant is not engaged on 'like work', 'work rated as equivalent' or 'work of an equal value'. In other words, the employer must show that there are valid differences between the claimant's and comparator's jobs. If these differences are proved, the difference in pay will be irrelevant - even if the comparator is paid more than the difference in work justifies.
In cases of 'like work', the claimant’s job only needs to be broadly similar the comparator’s job. Tribunals adopt a broad brush approach, and will not get bogged down in the intricate details of each job (see Capper Pass Ltd v Lawton, 1977). The comparison, however, must involve the whole job and not just part of the job. As a result the claimant cannot cherry pick those of the comparator's duties which he or she claims are the same.
Any difference between the two roles must be of practical importance. Such differences can include:
- additional or different duties
- the time at which work is carried out
- greater responsibility or seniority
- greater skills
In each case a tribunal will consider the nature and extent of such differences and the frequency with which they occur.
In cases of 'work rated as equivalent' the employer must show that the claimant's job has been rated differently as part of a job evaluation study (JES). Provided the JES is conducted in accordance with the Equality Act 2010 and has not incorporated any discriminatory values or assumptions, its findings will be difficult to challenge.
In cases of 'work of equal value' the tribunal will usually refer the matter to an independent expert, so that a report can be prepared on whether the jobs are truly of equal value.
Employers will often attempt to argue that there are men doing the same job who are treated in the same way. However, this argument will not always circumvent an equal pay claim. A certain type of employment may equally comprise men and women who are treated in exactly the same way, but if there is another group of workers doing work rated as equivalent who are predominantly male and receive better terms then there may still be a claim.
For example, see Home Office v Bailey (2005). This extensive litigation involved nearly 2,000 female staff in administrative, executive and support grades in the Prison Service. One aspect of the case held that two women employed on the higher executive officer grade could pursue their claim for equal pay with male comparators who were employed on governor grades. It was accepted by both parties that the claimants and comparators were employed on work rated as equivalent by a valid job evaluation scheme.
An argument by the Home Office that the higher executive officer grade was almost equal men and women (with just over 50 per cent being women) did not succeed. The women higher executive officers were entitled to choose the governors (who were predominantly male and appeared to receive better pay) as their comparators.
Employers are therefore required to objectively justify pay differences, even though women are not more adversely affected than men within the disadvantaged group.
Comparator not legally valid
See the section above ‘How comparators are used in equal pay claims’.
Material factor defence
Even if the individual bringing an equal pay claim can show that their work is 'like work', 'work rated as equivalent' or 'work of an equal value', the employer may still be able to avoid liability if it can show that the less favourable treatment is due to a genuine material factor other than sex. The difference in pay (or other contractual terms) must be due to a material factor which does not discriminate either directly or indirectly because of sex.
The employer must identify the factor(s) and prove they are:
- the real reason for the difference in pay
- not a sham or pretence
- the cause of the difference in pay between the woman and her comparator
- material (that is significant and relevant)
- not the result of direct or indirect sex discrimination.
This defence will often be considered by an employment tribunal at a preliminary stage to see if there are any merits in proceeding with the case. For example, if the comparator is on a higher rate of pay because of extra skills and qualifications which are relevant to his role, they will amount to a genuine factor.
So what factors are capable of amounting to a material factor? The following is a list of factors which may avoid liability:
- market forces
- some forms of pay protection or red circling (where an employee is downgraded but allowed to keep their rate of pay)
- paying the comparator more because of a skills shortage
- geographical differences, for example London weighting
- experience, qualifications and seniority
- unsocial hours and rotating shifts
- night work payments.
The employer will need actual evidence of the difficulties. For example, the problems of recruiting and retaining people to do the job being done by the higher-paid man.
Preventing equal pay claims
Preventing equal pay claims
To prevent equal pay claims employers should consider following the Equality and Human Rights Commission (EHRC) advice on good equal pay practice, equal pay audits, and equal pay checklists. Gender pay reporting (see section below) also has a role to play in encouraging more equal pay practices.
Equal pay audits
The EHRC has recommended that, to prevent equal pay claims, all employers should carry out equal pay audits or reviews to elicit comprehensive information on how their pay and benefit systems operate and the effect such systems have on people of a particular sex. These reviews can also operate as a risk management tool to highlight areas such as race, religion, disability or age discrimination.
Employers with 250 or more employees must publish information about their gender pay gap on a mandatory basis (see section on ‘Gender pay gap reporting’ below). However, even employers that are not affected by these measures should be comfortable with information about pay and grading arrangements, job evaluation schemes etc. In particular employers should:
- Carry out a job evaluation scheme, or determine which groups of employees are doing 'equal work' in their workplace.
- Identify the causes of any gaps in the average pay between male and female employees. Are there any non-discriminatory reasons behind them, for example, London weighting, performance pay, pay progression, pay protection etc?
- Produce a plan to remove any gender based pay gaps. Increasing the pay of underpaid employees is expensive but reducing the pay of overpaid employees may be breach of contract leading to resignations and constructive unfair dismissal claims.
The EHRC has a Code of Practice on equal pay including a whole section on good practice and a model for carrying out an equal pay audit. The Code not only provides guidance for employers, but is admissible in evidence in an employment tribunal. Employers may also include an analytical job evaluation scheme to make pay practices even more transparent.
Data coming from an audit, review or report does not achieve change, but if any patterns of pay inequalities are discovered, organisations should take all reasonable steps to remove them. Pay systems should be as transparent as possible. If employees understand the basis for salaries and other benefits and can see them applied fairly in practice, they will be less likely to bring claims against their employer.
Compulsory equal pay audits
Employment tribunals can order equal pay audits. Employers that lose a tribunal claim relating to gender based issues with terms or pay are at risk of having to conduct an equal pay audit. Some employers may simply settle one equal pay case to avoid an audit. These audits are different from gender pay reporting.
An audit has to:
- include the relevant gender pay information relating to the persons specified by the tribunal
- identify any differences in pay between the sexes and the reasons for those differences
- include the reasons for any potential equal pay breach identified by the audit
- include the employer’s plan to avoid breaches occurring or continuing.
An audit is not required if:
- an audit has been carried out in the past three years
- it is clear without an audit whether action is required to avoid equal pay breaches occurring or continuing
- there is no reason to think there may be other equal pay breaches
- the disadvantages of an audit would outweigh the benefits.
Once the tribunal has made an order to an employer to carry out an audit the tribunal will specify the details that must be covered and the relevant dates. An audit must include the reason for the equal pay breach identified by the audit, and the employer’s plan to avoid breaches occurring or continuing.
The employer then submits its report to the tribunal. If the tribunal is satisfied with the audit it will make a final order stating that the audit complies with the necessary requirements. The employer must then publish the equal pay audit on its website, if it has one, or in a format accessible to all affected staff. The report must be published within 28 days of the tribunal’s final order and remain on the website for three years.
Tribunals will also have the power to impose a financial penalty of up to £5,000 on an employer who does not comply with an equal pay audit order with further repeated penalties of up to £5,000 until the order is complied with.
Gender pay gap reporting
Gender pay gap reporting requires an organisation to review the overall gap in pay between men and women working for it and publish a detailed breakdown. The aim is to increase transparency on pay equality.
Publishing information about the differences in pay between men and women is mandatory for all UK private and voluntary sector companies (although it does not yet apply in Northern Ireland), and most public sector organisations, with 250 employees or more. Other employers can publish the information on a voluntary basis.
The regulations use ‘snapshot’ dates for each round of gender pay gap reporting. The relevant date is the 5 April each year for private companies and charities, and 31 March for public sector organisations.
Private sector employers must then publish their gender pay gap figures on their website – in a publicly assessible manner – and on the government’s website by 4 April the following year. For example, a private company collects its data as at 5 April 2018, and its submission deadline is then 4 April 2019. Public sector organisations must publish their results by 30 March each year.
Gender pay gap reports can be submitted any time after the snapshot date, up to and including the deadline date.
The first round of reporting was in 2018. Around 6% of organisations were late submitting their reports, doing so after the April 2018 deadline, but there was 100% compliance by August 2018.
- Report on an annual basis
- Include a signed statement with the figures that the information is accurate
- Upload their results to the government’s gender pay gap reporting website, and their own website (each report must be kept on the employer's website for three years).
The regulations do not require any ‘contextual narrative’ to explain the reasons behind a gender pay gap, but employers are encouraged to do this on a voluntary basis.
The calculations to be reported are:
- The mean gender pay gap between men and women.
- The median gender pay gap.
- The mean and median gender pay gap in bonuses.
- The proportion of men and women who receive bonuses.
Employers must also calculate their gender pay breakdown split between each quartile of their pay bands (see below). This will enable organisations to compare their gender pay gap statistics with national and international statistics.
The overall mean and median gender pay gaps will be based on gross hourly pay for men and women, expressed as a percentage.
A payroll system may be able to calculate this data automatically.
- The regulations apply where there are at least 250 'relevant employees', which means an individual who ordinarily works in England, Scotland or Wales under a contract of employment.
- The Equality Act 2010 wider definition of ‘employee’ appears to apply. Employers should probably include some types of worker who are not employees, such as self-employed contractors, LLP members, apprentices and those on zero hours contracts.
- The numbers of employees across group companies are not aggregated to establish if there are 250 relevant employees; each company stands alone for these purposes.
- A director, partner or equivalent should personally sign off the data.
- The government gender pay gap service publishes the reported data so it is possible to rank different employment sectors by pay gap and see how they compare.
- The government league tables enable people to search for individual employers, and the results of organisations reporting voluntarily are also available.
- The published data and any supporting narratives should be in an accessible place on an organisation’s website as well as on the government’s website.
- 'Pay' includes basic pay, paid leave, maternity pay, sick pay, allowances, shift premiums and bonus pay and commission, including any deferred incentive award schemes.
- 'Pay' excludes expenses, benefits in kind, overtime and the value of any salary sacrifice benefits.
- The regulations include employees ordinarily working in England, Scotland or Wales under a contract of employment which is governed by UK legislation, so some international employers will be caught by them if, for example, the contract of employment has a clause which says that UK law will apply to the contract.
Accurate reporting – quartiles
Organisations must publish details not only of their overall pay gap, but also details of how many women and men are employed in each quartile of their pay distribution.
There has been some confusion about what is meant by quartile in this context. A quartile could mean equal numbers of employees in each quartile, or just splitting the pay range into four equal segments, or it can mean separating off the lowest and highest 25% and looking at the difference between the two.
An employer should look at the overall range of hourly rates paid to employees and create four equal pay bands. Each band will consist of one quarter of the difference between the lowest and highest hourly rates. Large employers must, therefore, publish the numbers of male and female employees employed in all four pay bands.
Using this method, employers can examine not only their overall pay gap, but the representation of women in each pay quartile and how that changes over time. Obviously if either gender is under-represented in any quartile, that will need investigating and taking into account when setting pay.
Public sector equality duty
There have been some general and specific duties on employers in the public sector since 2011. These duties relate to reporting on the diversity of the workforce in a variety of respects, not just gender, and may include data on gender pay differences in the information published. The specific duties require publication of:
- equality information
- equality objectives.
The requirement to publish information about employees applies to public authorities with over 150 employees. So, for example, public authorities in this category have been required to publish annual details of matters such as their gender pay gap and ethnic minority and disability employment rates for some time.
Under the duty to publish equality information, a public authority must publish information relating to persons who share a relevant protected characteristic including employees and other persons affected by its policies and practices.
Public sector bodies with 250 or more employees need to go further with respect to male and female pay and must produce more detailed reports on gender pay gaps.
The annual date for collection of this pay information is 31 March for public sector employers, which then have 12 months to publish the pay information on the public authority’s and the government’s website.
The gender pay gap regulations cover organisations such as local authorities, NHS trusts, schools and colleges, regulatory and advisory bodies such as Acas and the Equality and Human Rights Commission (EHRC) and the BBC and Channel 4.
Although many public bodies publish gender-based information under the existing public sector regulations, the mandatory gender pay requirement ensures that larger public sector employers publish specific data on their mean and median gender pay gap, mean and median bonus pay gap, and information on the proportions of male and female employees in each salary quartile.
The Public Sector Equality Duty Amendment Regulations 2016 changed the position in Scotland. The regulations require listed public authorities to:
- publish the gender composition of their boards
- produce succession plans to increase board diversity
- publish information on their gender pay gap and equal pay statements if they have more than 20 employees.
The existing requirement in the specific duties regulations applying to public authorities with 150 or more employees will remain, so that they will still report on the diversity of their workforce in all respects, not just gender, and may include data on gender pay differences in the information that they publish.
The Equality and Human Rights Commission (EHRC) can apply to the courts for a compliance order if a public sector body fails to report its gender pay gap.
Private sector employers are not yet faced with enforcement provisions to compel compliance. The requirement to publish public reports is seen as sufficient enforcement. Any failures to report will be visible to the public, employees and shareholders. The EHRC may inquire into the reasons for non-compliance and any non-compliance may be used as evidence of pay discrimination. The original proposals for fines have not been implemented although employers with large pay gaps may risk reputational damage depending on the data revealed on the government’s website.
Fines may be introduced subsequently, following the review of new legislation which will take place to assess the first few years of its implementation.
Gender pay reporting and equal pay claims
Employers will obviously be concerned about the risks of retrospective employee claims for equal pay potentially going back over six years, and negative publicity, as a result of gender pay gap reporting.
Employers should keep all current pay practices and differentials between men and women's pay under review. Gender pay gaps in incentive and bonus payments are a particular equality issue and these should be examined carefully as part of an on-going review.
Pro-active organisations that analyse the data promptly may be able to improve any gaps before disclosure is required which assists recruitment, retention, and reputation.
Some employers with 250 or more employees will now be publishing specific figures about their gender pay gap on a mandatory basis for the second time. Previous reports can increase pressure on employers to demonstrate progress in closing the gap.
Employers may consider including more detailed narratives to explain any negative or disappointing results and future plans and transparency. Narratives are currently optional and approximately one third of employers published a narrative in 2018. However, the Equality and Human Rights Committee (EHRC) highlighted the importance of narratives in their December 2018 report.
For example, employers may explain that a large gender pay gap is not a sign of a wider equal pay issue, but a result of having more men at senior levels although that may be a problem too. Certain sectors, such as the tech sector, have a shortage of women. If a sector focuses on attracting women at entry level this may inflate the employer’s gender pay gap in the short term but may help close the gap in the long term.
The Government Equalities Office report Actions to close the gender pay gap lists the following potential actions including:
- Including women in shortlists for recruitment and promotions.
- Skill-based assessment tasks in recruitment.
- Structured interviews in recruitment and promotions.
- Encouragement of salary negotiation by showing salary ranges.
- Transparency around promotion, pay and reward processes.
- Diversity managers and task forces.
The government Gender Pay Gap Service and Acas produce guidance on the gender pay reporting legislation, including how to calculate the data. The Gender Pay Gap Service also enables companies to search for the previous reporting results of competitors.
Employers who do not fall within the mandatory gender pay gap reporting can still undertake their own analysis of gender pay equality in their organisation, take action (if appropriate) to address any issues, and report publicly if they choose. Voluntary gender pay equality reporting does not provide a defence against an equal pay claim, nor constitute an equal pay audit.
Can a comparator be hypothetical?
Both EU and UK legislation appear to require an actual comparator in equal pay cases, not a hypothetical one (see Walton Centre for Neurology and Neurosurgery NHS Trust v Bewley, 2008).
The Equality Act 2010 confirmed that if there is no actual comparator, then the sex equality clause cannot operate. Therefore, the woman can use a hypothetical comparator doing equal work, but this will be a sex discrimination claim not an equal pay one.
Take, for example, a female assistant sales manager selling clothing in an outdoor clothing store for both men and women. There are no male employees. The woman overhears her manager saying if he could get a male assistant manager, he would pay him more. This claim cannot be dealt with under the equality clause provisions as there is no male comparator but the woman can bring a claim of direct sex discrimination as the less favourable treatment she has received is clearly based on her sex.
An employee cannot usually claim both sex discrimination and breach of the sex equality clause relating to a pay discrepancy. The Equality Act 2010 says that the sole remedy in respect of claims made about sex discrimination in contractual pay matters should be under the equal pay provisions.
But claims under other legislation may arise, for example, if an organisation pays a lower hourly rate to a part-time female employee than to a full-time male employee, simply because she works part-time. The employer is likely to be acting in breach of the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 if the difference in pay is based on part-time working (see Part-time workers Q&As).
Can a comparator be a predecessor or successor?
Comparisons can be made with a predecessors but not successors in an equal pay claim.
The Equality Act 2010 specifically confirms that a comparator need not be someone who is employed at the same time as the person making a claim, but could be a predecessor in the job.
The European Court of Justice ruled in Macarthys Ltd v Smith (1980) that an individual can go as far back in time as they want in order to find a comparator. However, the ability to prove one's case will obviously be more difficult if it is based on historical information and evidence.
In Reading Borough Council v James (2018) the EAT held that an equality clause remained in place even when the comparator was promoted to a higher role, so a group of the local authority’s female employees could seek to equalise pay on the claim their work was of equal value to a male employee, who worked as a highways operative. The fact that the employee had been promoted and ceased to be a valid comparator did not undermine their claim.
However, the EAT has held that a female employee’s successor cannot be used as a comparator in an equal pay claim as it would be too hypothetical. This approach is different to the concepts of comparators used in discrimination cases.
Do confidentiality (gagging) clauses prevent employees discussing their pay?
Employment contracts sometimes try to stop employees from discussing their pay terms with others, especially in sectors where bonuses are common such as financial services.
The Equality Act 2010 says that any contractual provisions which attempt to restrict employees from discussing their pay are unenforceable where the discussions are aimed at establishing the existence of discrimination. This includes:
- asking a colleague to provide information about his or her pay and benefits
- providing information to a trade union representative about pay and benefits
- receiving information from a colleague about pay and benefits.
This provision is intended to stop employment contracts stating that employees must not discuss their salaries and benefits with colleagues in any circumstances.
Employers can put such pay secrecy clauses in contracts, but the clauses will be unenforceable if they are used to prevent employees trying to find out if they are being discriminated against. Many employers will choose not to include such clauses at all, while others will still include the clauses whilst appreciating that the clause may be unenforceable.
Strictly speaking the clauses only restrict 'relevant pay disclosures'. These are discussions to find out if there is a connection between pay and having a protected characteristic - such as the differences between male and female pay or the amounts paid to white and ethnic minority employees. Employers can still require employees to keep pay rates confidential from people outside the workplace, for example, a competitor organisation.
For example, discussions between a woman and a man, for the purpose of establishing whether the man is being paid more than the woman, is likely to be permissible, as is a discussion between two women, one of whom is from an ethnic minority, for the purpose of establishing whether the white woman is being paid more than the ethnic minority woman.
By contrast two female colleagues simply comparing their respective salaries may be a breach of a pay secrecy clause, unless they are investigating pay disparities which may be linked to age, disability or another protected characteristic.
Employers should consider whether secrecy obligations are genuinely required. It is unusual to find employers attempting to enforce such clauses in disciplinary proceedings anyway. If an employer treats an employee differently for making a relevant pay disclosure, that employee may claim victimisation.
What should an employer do if faced with a ‘piggy back’ equal pay claim from male employees?
The area of contingent or ‘piggy back’ equal pay claims is complex. If faced with such claims inevitably the employer should seek expert legal advice.
Essentially 'piggy back' or contingent claims involve three groups of employees:
- women being paid less than the male comparators for doing different jobs which constitute like work
- male comparators who earn more than the women for doing like work
- another group of men earning the same as the women, for doing the same or a very similar job.
The female employees bring equal pay claims and show that their work is of equal value to the men working in the different jobs. Once those women are successful in their claim, then the second group of men would then end up being paid less for doing the same work.
This situation arose in McAvoy v South Tyneside Borough Council (2009), where the Employment Appeal Tribunal ruled that male employees doing like work as female employees who bring equal pay claims are entitled to bring contingent piggyback claims and do not have to wait until a final decision is made on the female employees' claims. If the women’s claims succeed, the men will also be entitled to the improved contractual terms and any arrears of pay.
Extending pay gap reporting
Employers with 250 or more employees must publish pay information that reveals any differences in the pay of male and female employees. Release of this annual information about gender pay gaps has been mandatory from 2018 onwards. For more information see Gender pay gap reporting above.
Smaller organisations, with fewer than 250 employees may voluntarily report their gender pay gap. In 2018, the parliamentary Business, Energy and Industry Strategy (BEIS) committee proposed that mandatory gender pay gap reporting should include all companies with more than 50 employees. The government chose not to do this. The key points from the government response to the BEIS report are:
- There are no current plans to extend the gender pay gap reporting obligations to organisations with 50 or more employees.
- There are no plans to introduce a mandatory requirement for all employers to produce annual action plans, although employers will be encouraged to voluntarily produce an action plan that is relevant to their situation.
- The guidance will not be altered to include partners’ pay in the gender pay gap calculation but the government is to evaluate introducing voluntary reporting for partners in the future.
- A framework is planned for voluntary reporting on pay gaps associated with mental ill health and disability for large employers but there are no plans to make this reporting mandatory at present.
A further government consultation ended in January 2019 and recommendations included mandatory reporting of ethnicity pay gaps for organisations with 50 or more employees to help to address pay disparity.
There are therefore no definite plans to implement any further recommendations although they remain a potential future development. There will be a statutory review within five years of the introduction of gender pay gap reporting and any major changes are more likely to be made once this has been completed.
The number of equal pay cases brought annually remains significant. This volume of case law is often generated by claims against public sector organisations such as local authorities and the NHS, and larger private sector employers such as supermarkets. These cases will continue to produce some interesting decisions.
Significant pay inequalities have included those within various local authorities for example Barnsley, Birmingham, Dorset, Hull, Newcastle, and Glasgow. To settle such claims over the years the government authorised the authorities to raise over a billion pounds for equal pay back pay. This was mostly for women on low pay who were paid less for doing equally valued jobs. The local authorities can settle their equal pay claims by borrowing against or selling their assets.
The largest local authority involved in a claim, Birmingham City Council, paid out more than a £1.25 billion over a decade to settle equal pay claims brought mainly by female staff, including home care workers and school cooks who were paid less than men for work of equal value (such as binmen and street cleaners) and missed out on bonuses. The local authority sold the National Exhibition Centre and other assets to help fund the settlement.
Glasgow City Council similarly had to sell (and then lease back) key assets, including the Emirates Arena, to pay out over £540 million for lost equal pay claims.
Such local authority cases are likely to be a further source of future developments.
There have been a number of cases involving supermarkets which are the most important, complex and financially significant equal pay claims ever pursued in the private sector (see Recent case law). These cases may have ramifications for the retail sector generally.
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