This summer, 30 female managers, backed by the Transport Salaried Staff Association, launched an equal pay claim against Network Rail. The managers allege that they are being paid between £3,000 and £4,000 less a year than male colleagues doing the same job. The TSSA claims that if these 30 claimants are successful, 3,000 female employees of Network Rail could be eligible for pay rises, costing Network Rail in excess of £10 million per year.

This claim highlights that the gender pay gap, although narrowing, is still very much present in 2014. This is particularly evident looking at recent figures released by the House of Commons Library which show that in 1997 the pay gap between men and women was 27.5 per cent, over the following years it narrowed steadily, but in 2013 it rose slightly from 19.6 per cent to 19.7 per cent.

Legislating for Change – Equality Act 2010

Publication of Pay Information

Some commentators argue that Section 78 of the Equality Act 2010 could be part of the solution.

Section 78 (which is not yet in force) enables the government to issue regulations requiring employers who have 250 or more employees to publish information about the difference in pay between female and male employees.

If the section is brought into force, the regulations made under it will be able to specify what information is to be supplied about the employer and employee, as well as the form and timing of any publication. Additionally, an employer may be required to publish this information annually (but no more frequently). If an employer does not comply with the publication requirements, they could face civil enforcement procedures or be liable for a criminal offence, punishable by a fine of up to £5,000.

The Explanatory Note to Section 78 says the government wants large private and voluntary sector employers to voluntarily publish information about the difference between pay for men and women as opposed to being required to provide information by regulation. In order to facilitate this, and to encourage employers to improve gender equality by means of greater transparency, the government developed 'Think, Act, Report' which provides employers with a framework to help identify issues in relation to pay, to address inequalities and to share their findings with other companies.

In order to allow time for voluntary participation to gain momentum, the government decided that it would not create regulations under this section before April 2013, and then only if sufficient progress on voluntary reporting had not been made.

However, despite the current voluntary reporting scheme in place, Section 78 continues to gain increasing media interest due to the on-going gender pay gap issue. For example, Grazia is petitioning for Section 78 of the Equality Act 2010 to be enacted as it feels that the gap is still not being addressed effectively. The petition is being championed by Grazia’s editor-in-chief Jane Bruton, who states that the fact that women essentially earn 80p for every pound that men receive is an issue that needs to be redressed, and swiftly.

Equal Pay Audit

Alongside this, the Equality Act 2010 (Equal Pay Audits) Regulations 2014 came into force on 1 October 2014. These regulations state that employers who lose a claim for equal pay or sex discrimination in relation to pay will be required to carry out an equal pay audit, unless a specific exemption applies (for example, the disadvantages of an audit would outweigh its benefits, or the employer is a “new business”).

The Employment Tribunal will decide the scope of the audit (which may include the entire workforce) and the minimum requirements for an audit will be as follows:

  • The audit must include information relating to the pay of the affected individuals.
  • The audit should identify any differences in pay and the reasons for those differences, including the reasons for any potential equal pay breach that is identified.
  • The audit should include the employer’s plan to prevent equal pay breaches occurring or continuing.

Employers will be required to publish the audit on their website within 28 days of completion and notify employees (other than in exceptional circumstances). The audit must then remain on the website for a minimum of three years after initial publication. Evidence of publication must be provided to the Employment Tribunal within 28 days; a failure to do so may be considered contempt of court.

If the Employment Tribunal finds that an employer has failed to meet the requirements of the audit, or the employer fails to provide evidence of the audit, the Employment Tribunal may fine the employer up to £5000.

Practical Points for Employers

  • The Equality Act 2010 has put the spotlight on the gender pay gap, and therefore employers must not ignore equal pay issues.
  • If it is not existing practice, it is advisable to conduct a voluntary audit of current remuneration practices and identify any potential issues before they arise.
  • Voluntary audits need not be published or distributed to employees, and are considered good business practice. Note, however, that they may be disclosable in any subsequent litgiation.
  • Employers should be aware that being ordered to carry out an audit may have adverse consequences in addition to the administrative cost, such as further equal pay claims due to increased employee awareness.
  • Employers may also wish to join the voluntary publication of information scheme to demonstrate their transparency and align themselves with best practice in the market.