How to Protect Your Business from Equal Pay Claims

The on-going case between Asda and its staff highlights that simply paying men and women the same rate for doing the same job is not enough.  If an employee can show that the work they are undertaking is of equal value to that of someone of the opposite sex in a comparative role elsewhere in your company, then they could bring a claim for discrimination if their terms and conditions are less favourable.  In certain circumstances they may also be able to draw comparisons with staff who are no longer employed in the company.

Why are Asda facing legal action?

In the case of Asda, shop floor workers (who are predominately women) have taken the supermarket to court as they are paid less than those who work in Asda’s depots (where the staff are predominantly male).  The case is still on-going, but the workers have won the first round in their battle by proving in court that the work undertaken by those on the shop floor is comparable to that undertaken in the depots.

In order to win their claim the staff will still have to prove 3 further stages:

1. that the work of both groups is of equal value
2. that their terms and conditions are less favourable
3. that there is no valid reason for the discrepancy in pay

The implications of the case are huge, with estimates that if successful this and similar court action could cost the 4 big supermarkets over £10billion.

What does this case mean for other businesses?

So what does this mean for other companies and how can you avoid falling in into a similar trap?  In the light of the publicity around the Asda case, companies need to take clear action now to avoid the risk of similar claims.

Start by analysing your workforce

Look and see if there are roles in your workforce where the pay and benefits are different, but the work might be seen as comparable and of equal value.  Under the Equality Act 2010 there are 3 ways that this can be measured:

1. If both roles are doing “like work” - i.e. the roles are broadly comparable
2. If the work has been rated as “equivalent” under a formal job evaluation scheme
3. If the work is of “equal value” in that it requires the same level of skills, decision making or physical / emotional effort

Don’t just look at pay, as you need to take account of other benefits such as sick pay, annual leave entitlements, pensions and any other benefits that you give to your staff.  If you find any issues then address them as a matter of urgency.

Justifiable reasons for differences in pay

If you do find that differences exist in your pay structure, do you have a justifiable reason for why this is?  Simply stating that it is down to “market forces” won’t do, particularly in the market itself is tainted by gender bias.  Any reason must be “significant and relevant” to be accepted by a court.  This could include things like geographical factors, different skills or qualification requirements or possibly “red circled” roles.  These are roles where there are historical reasons for the higher rate, such as a transfer into the company, but where the rates have been frozen until others catch up.

You’ll need solid evidence of any reasons given, such as an independent, professionally produced pay survey, as the courts will not accept simple anecdotal reasons.  You’ll also need to make sure your evidence goes back 6 years, as this is the maximum time that a claim can cover.

So how do you make sure your pay system is fit for purpose?

Make sure you have a low risk pay system

The Equality and Human Rights Commission have set out guidelines on how you can make sure your pay structure is free from gender bias.  They recommend that pay structures are:

1. Transparent – have a pay structure that everyone can understand.  Staff shouldn’t be victimised if they seek to find out what others earn as pay secrecy clauses in contracts are no longer enforceable.  The more open your pay structure is the less chance there is that it will be challenged.
2. Inclusive – having one pay structure to cover your whole workforce is far better than having lots of different agreements in place.
3. Systematic and well managed – having a logical structure to your pay and benefits will reduce the risk of gender bias creeping in.  Keeping clear records of any changes agreed will reduce the likelihood of decisions being challenged.
4. Recognise the demands of the job – once you have audited your workforce to review how roles compare, make sure your pay structure is adjusted to address any areas where you are at risk of an equal pay claim.
5. Regularly review – things can change over time so make sure you regularly review your pay structure to make sure it is still fit for purpose.

If you do find yourself in a tribunal having to defend an equal pay claim the court may require you to undertake a mandatory equal pay audit.  Therefore it makes sense to undertake your own audit now to help to ensure that you avoid finding yourself in a tribunal in the first place.

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