Employers need to strive for pay equality to avoid falling foul of the law
From 1 October 2014 employment tribunals will have the power to order any employer that loses an equal pay case to carry out an equal pay audit.
The new legislation forms part of the government’s strategy for closing the gender pay gap in the workplace. But, given that the government’s voluntary approach to achieving equal pay seems not to be working, and that there has been a dramatic fall in the number of tribunal claims, will this new power have any real impact? And what are the practical implications for employers?
Tribunals
A new provision in the Equality Act 2010 (Section 139A) gives employment tribunals the power to order employers to carry out equal pay audits where they have been found to have breached equal pay law or to have discriminated because of sex in non-contractual pay, such as discretionary bonuses.
The Equality Act 2010 (Equal Pay Audits) Regulations 2014 put the ‘flesh on the bones’ by setting out how the new law will operate in practice. Importantly, from an employer’s perspective a tribunal must not order an audit if:
- an audit has already been completed in the previous three years which meets the requirements of the regulations
- it is clear that action is required to avoid equal pay breaches occurring or continuing, without an audit
- the breach gives no reason to think there may be other breaches
- the disadvantages of an audit would outweigh its benefits.
Where an audit has been ordered, the key elements are:
- the audit must be sent to the tribunal by the specified date so that it can assess compliance
- if the audit is compliant, it must be published on the employer’s website and be left there for three years
- if an employer unreasonably fails to conduct an audit, the tribunal can impose a penalty of up to £5,000.
Voluntary approach
There is a provision in the Equality Act giving the government the power to require employers with at least 250 employees to publish information about gender pay differences. But the government decided not to implement it. Instead, it adopted a voluntary approach - the ‘Think, Act, Report’ scheme. So far, 200 organisations have signed up but only four firms have published their gender pay gap data. So the introduction of compulsory equal pay audits appears to indicate a slight change in strategy – but, of course, an audit can only be ordered where an employer has lost a tribunal case. With figures showing a dramatic drop in tribunal claims, following the introduction of tribunal fees, it remains to be seen whether the new law will have any significant impact in changing the pay equality landscape.
Reducing the risk
Although tribunal claims have decreased, employers should nevertheless be alert to the new rules, particularly as the latest Acas figures show that 17,000 people have used Acas' new Early Conciliation service in its first three months of operation. Where an equal pay dispute arises, employers should be prepared not only to defend the claim, but also to mount arguments as to why a tribunal must not order an audit, should the case be lost. In addition, while settling a claim might seem a cost-effective option, there may well be more widespread inequalities in the pay structure and so all employers should consider conducting a voluntary equal pay audit.
Most employers see equality and diversity policies as ‘must haves’ these days, so it is hard to understand why equal pay audits would not be conducted. Ensuring that people are paid the same money for doing the same job is just as an important component of equality and diversity as preventing discrimination and harassment.
The Equality and Human Rights Commission’s statutory code of practice on equal pay can be taken into account by tribunals, and employers are advised to ensure that all its principles are being followed, including how to carry out a compliant equal pay audit in-house (see pages 47 to 57). This provides an opportunity to examine pay structures, rectify any pay inequalities where they are found, and put in place an action plan that ensures that present and future employees are awarded equal pay, in order to avoid future claims.
Makbool Javaid is a partner and head of employment law at Simons Muirhead and Burton
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