Paying employees differently for the same or like jobs may be unlawful under the Equality Act 2010 if the disparity in pay is due to a protected characteristic, such as gender. However, pay differences may be lawful if they are based on factors like experience or performance. Employers can potentially defend equal pay claims by proving that the difference is due to a “material factor” other than gender.
If a claim for equal pay succeeds, the female’s contract (as is the case here) is treated as if it had always contained the same pay as the males, and she can claim up to six years’ worth of compensation, going back from the date when her claim was issued. For Next plc, the total back-pay due is estimated to be above £30 million.
The Tribunal’s Judgment against Next plc could make it difficult for Asda Stores Limited to defend the equal pay claims it faces from 60,000 of its female shop workers (the Final Hearing is due to take place in November 2024). As with Next plc, the claims against Asda Stores Limited arose because female shop workers were paid almost £4 an hour less than their male warehouse colleagues. It is estimated that, unless Asda Stores Limited successfully argues that the discrepancy was not based on gender, the compensation payable could total £1.2 billion.
What does this mean for employers?
To avoid legal challenges and reputational damage, employers should ensure they document pay decisions and the reasoning behind them. Carrying out equal pay audits, maintaining transparent pay policies and providing relevant training to HR and managers may also help prevent discriminatory pay practices. This is especially relevant for employers with 250 or more employees who under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, are required to report annually on the gender pay gap in their organisation.
The cases of Next plc and Asda Stores Limited highlights the importance for employers of achieving pay equality. Not only is fair pay fundamental to employee engagement and talent retention, but the readiness of employees to challenge unfair pay is seen in the 30% rise in equal pay claims reaching the Tribunal since 2020. Therefore, whilst employers may need to invest time and resources to achieve pay equality within their organisation, it is clear that the costs of not doing so – financially and in terms of reputation – are far greater.
This article was written for our quarterly Employment law newsletter, IN CASE. Click here to be added to the mailing list, or click here to read the Summer 2024 issue.
