Equal pay – are we nearly there?

The eighteenth of September each year marks International Equal Pay Day. The day has been specifically chosen as International Equal Pay Day because it represents the day from which women, on average, stop being paid for the rest of the year as a result of the gender pay gap.

Equality Act 2010

Under the Equality Act 2010, men and women are entitled to receive equal pay for equal work. “Equal work” can be ‘like work’, wherein the roles undertaken by men and women involve the same skills, tasks and knowledge, or it can be roles where the work carried out is considered to be equivalent to that of the opposite gender, with both roles involving work of equal value having regard to skills, effort and decision-making.

In other words, employees can bring an equal pay claim if they are able to show that they were paid less favourably than an employee of the opposite sex for comparable work.

 In Scotland, if successful, employees are able to backdate their equal pay claim for a period of 5 years, meaning the cost for employers can be significant.

Where the work is deemed by the Tribunal to constitute “like work”, employers can avoid liability but only if they have a valid ‘material factor’ defence, in terms of which they must demonstrate that the difference in pay is not due to the employee’s gender but instead is a (non-discriminatory) means of achieving a legitimate business aim.

Introduction of Gender Pay Gap Reporting

In 2017, via the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, the Government went a step further in promoting and pushing for equal pay, by introducing mandatory gender pay-gap reporting for organisations with more than 250 employees. Under this regime, employers are required to publish gender pay reports on an annual basis. At least in theory, the introduction of gender pay reporting means thatlarger employers are more accountable for gender pay bias in the workplace.

Thandi & Ors v Next Retail Limited

Last year saw the publication of a landmark equal pay claim judgment – Ms M Thandi and Others v Next Retail Ltd and Next Distribution Ltd: 1302019/2018 and Others – resulting from an equal pay claim brought by over 3,500 female retail workers. The claimants argued that they were being paid less than their male warehouse employee colleagues. In other words, the female shop workers undertook work of equal value to their male counterparts and accordingly should attract equivalent pay.

The Respondents, Next Retail Limited and Next Distribution Ltd, sought to rely on the ‘material factor’ defence, namely that the difference in salaries was intended, firstly, to incentivise warehouse workers to achieve higher productivity levels and, secondly, to assist with the recruitment and retention of warehouse workers both in general, and during periods of high demand. They argued that the higher pay for warehouse workers was down to the needs of the business.

The Tribunal rejected these arguments and held that the needs of the business did not constitute a sufficient justification to overcome the discriminatory impact of the differing salaries.

The decision serves as a strong reminder to employers of the high bar that needs to be met in order to avoid liability in equal pay claims.

Persistent Challenges

Despite the positive impact that the Equality Act and related legislation has undoubtedly had, there is still a substantial amount of work to be done to change mindsets and reduce gender inequality in the workplace. Given that about 99.8% of UK privately owned businesses have fewer than 250 employees (source here), it is not difficult to see that gender pay gap reporting in itself is not going to move the dial on gender pay bias at work. Even where employers are caught by the reporting requirements, there is a distinct lack of real consequences for those that fail to abide by the reporting requirement, meaning that the majority of employers are not being held accountable for non-reporting let alone unequal remuneration practices.

What can employers do to address gender pay bias in the workplace?

There is no doubt that many employers actively promote equality in the workplace, including equal pay and benefits. Unequal pay practices happen for a variety of reasons and can occur over time so that sometimes it’s necessary to take a step back before any pattern can be seen. What can employers do to avoid it happening in the first place and, where it has already happened, address the issue? The following are some suggestions to move your business towards a more level gender pay playing field:

• Adopt unbiased recruitment and promotion practices: For example, using job adverts that use gender-neutral language, anonymising gender information before carrying out a sifting process or using structured interviews to avoid unintended bias creeping into decision making. By ensuring that the processes of hiring and promoting employees are free from gender-based bias, focusing instead solely on merit and the quality of the employee’s work, will help employers approach the issue of equal pay in the same unbiased manner.
• Undertake pay audits on a regular basis: Whether or not your business requires to provide gender pay gap information, conducting regular comparison of the mean and median pay and bonuses of male and female employees in your business will allow you to quickly identify problem areas in your remuneration between the genders. Early identification of the issues will allow employers to take early remedial action.
• Encourage salary transparency: While most employers will recoil at the prospect, having salary transparency can be beneficial. By encouraging openness in respect of pay and benefits at all levels within the business, employers can bolster employee confidence in them and promote fairness, leading to greater employee engagement and a more productive workforce.

What’s next?

Despite the 2017 Regulations, there have been calls for the gender pay gap reporting requirements to be strengthened. Some commentators are of the view that by extending this regime to smaller businesses and introducing financial penalties for failures to comply significant inroads can be made into the gender pay gap.

Given the current legislative timetable, however, don’t expect to see any developments in this area in the near future.

This update contains general information only and does not constitute legal or other professional advice. For further information and advice on this topic, please contact a member of our Employment team.

Dawn Robertson, Partner: dro@bto.co.uk / 0131 222 3242