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Equal pay – the basics

07 October 2010
Equal pay – the basics

There is still a significant gap in earnings between men and women, despite the Equal Pay Act being introduced 40 years ago. Solicitor Ann Munro outlines employers' legal obligations in respect of equal pay.

THE PROBLEM

Despite the Equal Pay Act being introduced 40 years ago, there is still a significant gap in earnings between the two genders. To assist in closing that gap, the Equality and Human Rights Commission and the British Chambers of Commerce published guidance at the start of September for small and medium-sized businesses in relation to equal pay - http://www.equalityhumanrights.com" target="_blank" rel="noreferrer">www.equalityhumanrights.com.

So what are the obligations on an employer in respect of equal pay and what should employers be doing about it?


THE LAW

It is a fundamental principle of EU law that men and women should receive equal pay for equal work. The obligation to provide equal pay applies to all employers, irrespective of size, and claims can be established by either sex (although for the purposes of this article, it assumes the claimant is a woman). The only exception is where there is a "genuine and material reason" for the gap that is not linked to sex - for example, if a man is better qualified or there are difficulties in recruiting to his position. However, this exception is narrowly construed and will need to be supported by evidence.

To bring a successful claim, it is necessary for a woman to establish the discrepancy by reference to a comparator. The comparator must be of the opposite sex and doing "like work", "work rated as equivalent" or "work of equal value". It is not necessary to use exactly the same role but rather to look at the actual work undertaken and the demands placed on the person.

Generally, the comparator will be someone within the workforce, although since the coming into force of the Equality Act 2010 on 1 October 2010, it is now also possible to use a hypothetical comparator (in the context of direct discrimination claims only). It should be noted that there are special provisions for women on maternity leave.

The right to equal pay extends to all aspects of pay and benefits (including basic pay, bonuses, company cars, travel allowances and pensions). It also extends beyond the traditional concept of employee and worker to anyone providing "personal service".

There are two avenues available to individuals: to claim under equal pay legislation or discrimination legislation. As a very general rule, disputes in relation to contractual entitlements should be brought under equal pay legislation, whereas non-contractual elements (such as a discretionary bonus) would normally be brought under discrimination legislation.

Legal advice is generally required to determine the correct avenue to pursue, particularly as the Equality Act is likely to make claims under the discrimination legislation more commonplace. Both types of claims should be brought in the employment tribunal.


EXPERT ADVICE

The best way for an employer to evaluate pay and ensure there are no gaps is to perform an equal pay review. The British Chambers of Commerce guidance provides step-by-step information as to how a review can be conducted. A review will not only mitigate against the risk of claims but should also have a positive effect on the motivation of your workforce (if handled correctly).

The review should establish whether men and women are doing equal work (as defined above) and whether there are any gaps in respect of payment for equal jobs. If pay gaps are established, you should consider whether the difference can be objectively justified and, if not, rectify the gaps as soon as possible.

It is recommended best practice to extend any such review to ethnicity and disability as well.


CHECKLIST

â- Perform an equal pay review as set out in the guidance
â- If any issues are identified as a result of the review, seek to rectify them promptly
â- Consider the scope of the review and whether it is appropriate to extend it to disability and ethnicity
â- Put in place an effective equal pay policy


BEWARE!

If an equal pay claim is successful, the remedies are a declaration by the tribunal of the individual's rights, a permanent change to the individual's contract, payment in arrears (which can date back to six years in standard cases and even longer in more complex cases) and finally, interest on any arrears may also be awarded. This obviously does not take into consideration the legal costs and potential bad press associated with defending such a claim (even if the matter does not reach a full hearing in the tribunal).


CONTACT

Ann Munrois a solicitor at Charles Russell LLP

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