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16 March 2018

Handling an equal pay claim

Employment law associate, Hannah King advises what employers should do to minimise the risk of equal pay claims, otherwise reputations and profits could be seriously damaged.

There are several reasons why there could be a surge in equal pay claims over the coming months.  Firstly, there is huge awareness about the issue, since the media reported on how female employees were claiming back pay after the BBC was accused of not paying men and women equally for doing the same job.

Secondly, people mistakenly believe that the gender pay gap and unequal pay is the same issue. However, the Gender Pay gap is reflective of how women have traditionally held different roles to men in the workplace, with the latter dominating more senior roles, and as such the average pay for men is greater than women’s.  Despite the discrepancy, employees may be compelled to make an equal pay claim.

Finally, the Equality Act prohibits employers from preventing its employees discussing their salaries internally with colleagues. This could make it a lot easier for employees to discover if there are discrepancies in their salary, basic pay or benefits and raise an equal pay grievance.

Definition of equal pay

Employees are entitled to have a salary that is as favourable as those of a “comparator” of the opposite sex, if they carry out work that is “of equal value,” “broadly similar” or “rated as equivalent.” The “comparator” has to be an actual former or current employee, not a hypothetical one, from the same, or a different organisation.

If an equal pay grievance is raised by an employee - which could be during employment or after the employee has left, with a tribunal claim being able to be brought up to six months after they’ve left the organisation - the employer will need to follow their own internal procedures that must adhere to the ACAS code. 

If there are differences in pay between employees doing the same job, the employer will need to be able to justify the discrepancy. This should include a record of the rationale behind why there is a larger salary for one employee and not another and a reasoning for pay rises. A written pay policy could be created by employers, so pay decisions are more likely to be made by reference to objective criteria, which may help to avoid creating pay discrepancies that cannot be justified later.

If the employee is found to have a potentially valid claim, the employer should consider increasing the salary of that person to bring closure to the issue. It would also be prudent to ask the employee to sign a settlement agreement to avoid further claims.

However, employees can also seek to compare two different job roles as being of equal value and to take their claim to an Employment Tribunal (ET) on this basis.  If they do, the ET will assess if one job is of equal value to another, by appointing an expert to compare the roles against a very wide range of factors.

In dealing with a tribunal claim, the employers can have a defence in the form of a ‘material factor defence’ as to why there’s a difference in pay for a job role that is identical.  This means that an employer can show the variation is not to with any discriminatory factors, but rather the pay discrepancy is down to experience or the geographical location of its employees.

If the employee wins, the ET can then order the employer to pay the claimant up to six years of back pay (plus interest), as well as require it to carry out an equal pay audit across a particular job level or area of work.

As such it’s best to have pay policy in place from the outset, to avoid future grievances which could cause morale to take a nosedive, highly-skilled people to leave, and there could be huge cost to the company – in time, money and reputation.

For further advice, please contact Hannah King on 01753 889995 or email employmentlaw@bpcollins.co.uk.

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