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Equal Pay Act (A Guide for Employers!)

The Equality Act 2010 enshrines in law the employers’ responsibility to pay employees equally for equal work, regardless of gender. Detail on how employers should approach employee pay to ensure equality is set out in the statutory Code of Practice in Equal Pay.

The basic principle of the Act requires employers to pay men and women the same wage when they are doing work of equal value. This equality of payment includes benefits such as company cars, paid holiday, bonuses etc.

The gender pay gap has received a lot of attention in recent years, however the pay gap between female and male employees still stands at 9.1% in 2017 (Office of National Statistics 2018 report). Although the pay gap has reduced from 10.5% in 2011, the continuing disparity demonstrates that many businesses are failing to meet their legal requirements.

The 2010 Equality Act is the core legislation protecting employees from discrimination due to personal characteristics such as gender, race, disability or age.

Under the act, which replaces previous legislation concerning equal pay and equal treatment, it is illegal to discriminate against an individual on the basis of personal characteristics. Discrimination can come in many forms, including failing to pay employees equally for roles of similar value without good reason.

The Equality Act 2010 is specifically concerned with equal pay between men and women. However, employees have also failed to meet equal pay standards on the basis of other personal characteristics like race, age, disability etc. Although not directly covered by the act, additional legislation such as the Companies Act 2006 mean that paying an employee less for any personal characteristic can still result in employment tribunals and penalisation of the business.

Failure to comply with the Equality Act 2010 expectations regarding equal pay can lead to tribunals and the need for equal pay audits. In addition, new regulations requiring businesses to report on the pay of their employees, known as Gender Pay Gap Reporting, came into place in April 2018 and could lead to a higher rate of cases concerning breach of equal pay law.

It is therefore essential that employers understand their responsibilities and how to avoid common pitfalls. To ensure your company complies with equal pay legislation, seeking legal advice as early as possible is strongly suggested.

Equal pay – Employer Duties and Employee Rights:

To ensure that a company is complying with the Equality Act legislation employers need to address pay between male and female employees in a number of ways:

  • When hiring, employers should make sure they do not discriminate during the employment process and aim for a balance between male and female employees at the 4 pay quartiles of the company
  • If a company is in a sector where employees with protected characteristics, such as their gender, or under represents employees with a protected characteristic internally, the company can choose to positively discriminate when hiring in cases where multiple candidates are of equal quality and suitability
  • When giving out bonuses, employers must ensure that additional benefits, such as company cars and pay bonuses, are evenly and fairly distributed
  • Employers must ensure that male and female employees carrying out work of similar value receive the same pay
  • Ensure a fair and equal promotion system that does not favour employees because of their gender. This is to ensure that there is not a restriction on, for example female employees, to reach more senior and better paid positions within the company

Regulations regarding the Equality Act require all employers of 250 or more staff to report on the pay equality of their employees. Known as Gender Pay Gap Reporting, employers must report on both ordinary pay, and bonus pay, of their employees via 6 metrics:

  • Comparison between the mean hourly pay rate for full-pay male and female employees
  • Comparison between the median hourly pay rate for full-pay male and female employees
  • Comparison between the mean bonus pay of relevant male and female employees
  • Comparison between the median bonus pay of relevant male and female employees
  • The proportions of male and female employees in the four different pay quartiles
  • The proportions of male and female employees receiving bonus payments

Employers must collect this information, calculating pay gap metrics based on the “snapshot date” of either April 5th for charities and private businesses or March 31st for public sector organisations. Bonus pay gap metrics should be calculated to take into account the whole year up to the “snapshot” date.

When collated, employers must publish the businesses pay gap report on both the official website and a website belonging to the company which can be accessed by employees as well as the public.

Repercussions of failing to meet equal pay requirements:

Employers are directly responsible for discrimination within the company unless they are able to prove all reasonable actions to prevent or address the inequality have been taken.

Employees who feel they may be experiencing unequal payment in comparison to fellow employees of similar value on the basis of their gender, have the right to submit an official grievance or take the company to an employment tribunal. Although wage discussion contract clauses prevent employees from discussing wages with competitor companies and other employees in some instances, the (update in regulation) means that employees may discuss wages among themselves if they feel they may be being discriminated against due to their gender or another protected personal characteristic. In addition, with the new regulations on reporting, employees are more likely to discover instances of less pay than their colleagues.

The Statutory Code of Practice on Equal pay will provide the methodology to identify and rectify gender pay gap issues.

Employees who feel they are not receiving equal pay can ask their employee for information to help them compare their wage with employees currently or historically undertaking a role of equal value in the same company who differ in a protected characteristic. For example, a female employee may ask for information regarding the pay of a male employee or employees. Employees can now also utilise the gender pay gap information released in April 2018.

If an employee believes they are not receiving equal pay they should first try to resolve the issue informally by writing to their employer and naming a comparator (such as a male employee or employees doing an equally valuable role) and set out why they believe there is a pay disparity, as well as what they expect to be done to resolve it.

Employees who are members of a trade union should contact their union representative who would advise them as to how to proceed. Trade union representatives are able to represent the employee in any subsequent equal pay dispute negotiations or legal processes.

Should an informal resolution fail, the employee or, if applicable, a trade union representative, can officially file a work grievance using the company’s grievance procedure. If the issue not resolved formerly, employees can take their case to an Employment Tribunal either while under the companies employ or up to 6 months after leaving the related position.

Employers should take both informal and formal complaints regarding equal pay very seriously. The employer has a legal responsibility to pay employees equally for equal work and if they are found to be in breach of the law repercussion are severe. It is best to try and resolve equal pay disputes at the informal stage.

In disputes over unequal pay, if an employee is able to evidence that they have not received equal pay for equal work, they can make a claim for monetary compensation for the breach of their equal pay rights. Should the employee make a claim through an employment tribunal, they could be awarded the equivalent of 6 years of lost earnings.

In addition, if found in breach of equal pay law, businesses will be required to provide an equal pay audit, except for companies which are less than 12 months old or have less than 10 staff which are exempt.

There only other exceptions are:

  • Cases where the employer undertook an audit meeting the regulatory specifications less than 3 years from the tribunals’’ discovery of the equal pay law breach
  • Cases where the tribunal believes the disadvantages of carrying out the audit outweigh the benefits
  • Cases where the tribunal is convinced that the breach of equal pay law was a one off, and further action is not required in order to avoid future breaches
  • Cases where the tribunal is convinced that other breaches of equal pay law are not being committed by the employer

Why legal advice:

Equal pay law is an increasingly high-profile aspect of business regulation, with greater measure both in monitoring and punishment of companies who do not, or cannot, comply. As both the legislative framework and public scrutiny continues to grow, businesses need to ensure they are meeting equal pay requirements in order to protect themselves not just from legal ramifications but also from negative public reputations. Given the complexity of the law and the high cost of breaching the law, legal advice regarding meeting equal pay requirements should be sought as early as possible.

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