Ensuring equal pay in the workplace - as published in economia

From 1 October 2014 employment tribunals have been given a significant new power. They will order employers who are found to be breaching pay discrimination laws to carry out and publish an equal pay audit

UK laws which deal with inequality in the workplace are found in the Equality Act 2010. The law protects employees from discrimination at work and ensures that men and women are entitled to equal employment terms.

In particular, the Equality Act ensures that men and women are entitled to equal pay for equal work. Therefore it is unlawful to pay someone less money because of their gender when they are doing the same work, work which has been rated as equivalent under a job evaluation scheme or work which is of equal value to that being done by someone of the opposite gender.

The changes which came into force on 01 October 2014 ensure that employers will have to carry out and publish equal pay audits if they lose an equal pay claim or a pay discrimination claim. However, this will only happen in respect of employment tribunal claims issued on or after 1 October.

In addition, there are some exceptions to this rule, so an employment tribunal will not be able to order an employer to carry out an equal pay audit where:

• the employer has already carried out an audit within the equal pay audit regulations in the three years preceding the tribunal’s judgment;
• it is clear, without an audit, whether any action is required to avoid equal pay breaches from occurring or continuing; 
• the breach found by the tribunal gives no reason to think that there might be other breaches; or
• the disadvantages of an audit would outweigh the benefits.

There are also two types of businesses which are exempt and cannot be required to carry out an equal pay audit. Existing micro-businesses (those which have fewer than 10 employees) are exempt, as are new businesses which started up during the 12 month period immediately preceding the date on which the equal pay complaint was made.

What will the equal pay audit have to include?

An equal pay audit is not merely an information gathering exercise, but rather an opportunity for an employer to put right any unjustified pay inequalities. It is the most effective way to establish whether your organisation complies with equal pay laws and to establish whether your employees are being remunerated in a non-discriminatory way.

The equal pay audit must:

• include relevant gender pay information which is related to the description of employees which has been specified by the tribunal;
• identify any differences in pay between men and women and the reasons for those differences; 
• include the reasons for any potential equal pay breach which is identified by the audit; and
• set out the employer’s plan to avoid breaches occurring or continuing in the future. 

Once all the relevant information is compiled, the employer will have to send it to the tribunal by the date specified (this cannot be earlier than three months after the audit was ordered). The tribunal will then pass a judgment on whether the audit is compliant – if so, then the employer must publish the audit on their website where it must remain for three years. It must also inform all employees about whom gender pay information was included in the audit where they can obtain a copy of the audit.

If an employer does not produce a satisfactory audit, then the tribunal can order the employer to pay a fine not exceeding £5,000 and to redo the audit. A new date will be set for the new audit to be provided. If the employer still does not comply then they will be ordered to pay another penalty.

The risks involved in publishing equal pay audit results?

Having to publish an equal pay audit is a concern for employers because of the increased risk of reputational damage. It will be far easier for people both inside and outside the organisation to find out that there has been pay discrimination. Clients may choose to take their business elsewhere and potential clients may choose not to deal with a business which has been found to have operated discriminatory pay practices, even if steps are being taken to rectify this. Likewise, businesses may find themselves unable to attract and retain the best talent.

As a result, there is now more of an incentive than ever before for employers to ensure that men and women are paid equally.

This article, written by Jessica Corsi, was originally published in economia at http://economia.icaew.com/business/october-2014/ensuring-equal-pay-in-the-workplace