Compulsory Equal Pay Audits: Latest Developments

The Government has issued its response to its consultation on equal pay audits and published draft Regulations.

From I October 2014, employment tribunals will be obliged to order employers found to be in breach of equal pay laws to carry out and publish an equal pay audit unless:

• The employer has carried out an audit within the meaning of the 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 its benefits. 

Existing micro-businesses (those with fewer than 10 employees, calculated on the basis of full-time equivalent employees contracted to work 37.5 hours per week) are exempt, as are new businesses – those started up during the 12 month period preceding the date the equal pay complaint was made. 

An equal pay audit will have to:

• Include relevant gender pay information related to the descriptions of employees 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 identified by the audit; and
• Set out the employer's plan to avoid breaches occurring or continuing.

The employer will have to send its audit to the tribunal by a specified date, not earlier than three months after the audit was ordered. The tribunal will then decide if the audit is compliant. If it is, the employer will have to publish the audit on its website (subject to making any revisions to comply with data protection laws) where it must remain for three years. The employer will also have to inform all those about whom gender pay information was included in the audit where they can obtain a copy.

Where an employer without reasonable excuse fails to conduct a satisfactory audit, the tribunal can order it to pay a penalty not exceeding £5,000 and specify a new date by which it must be provided with an audit. Failure to comply may result in a further penalty of up to £5,000. 

The Government does not propose to publish any guidance on the requirements for audits as guidance is already available from the Equality and Human Rights Commission.