For many years the private sector has looked on, as public sector bodies have been dragged through Tribunals by a range of equal pay claims which have taken many years to resolve. HR Teams have, no doubt, breathed a collective sigh of relief that they have not been forced to contemplate selling the “family silver” in a manner reminiscent of Birmingham City Council who to date have, according to press reports, paid out more than £1.1 billion in equal pay claim compensation.

Equal pay claims in the private sector

In recent months however we have seen the divisive effect caused at the BBC by inequality of pay amongst their on-air staff. Now we see the onset of equal pay claims in the private sector, most notably the ongoing equal pay claim against Tesco, which is said to be worth up to an eye-watering £4 billion.

If it was not before, equality of pay should now be firmly on the agenda for every HR leader and team.

Gender pay gap in the private sector

Later this year (4 April) private sector employers with more than 250 employees must publish their gender pay gap information. This will inevitably lead to further scrutiny of differences in pay. Differences in gender pay do not inevitably mean that there is a breach of equal pay laws but it will illuminate what might otherwise have remained unseen.

Equal pay is not just about gender

Equal pay is not simply a question of paying men and women the same for the same work. It is a much more complex and nuanced issue, involving three different concepts: (i) Like work; (ii) Work rated as equivalent, and (iii) Work of equal value.

The first category is easy to identify, men and women doing the same job but being paid at different rates without justification. The second category requires there to have been a completed Job Evaluation Survey which rated work as equivalent. The third category is more difficult. The women and men may be doing completely different jobs but taking a range of factors into account the jobs are found to be of equal value. So, as is questioned in the Tesco equal pay claim, is shop work of equal value to working in the warehouse? These are clearly two very different roles. In determining whether work is of equal value, factors that may be taken into account include:

  • the effort involved (physically/mentally);
  • the training or skills necessary to do the job ;
  • the extent to which decision-making is part of the role;
  • autonomy within the role; and
  • impact of the role on the organisation

Even if an employee can demonstrate a breach of the Equality Act, the employer can mount a defence that there is a material factor which explains the difference in pay and does not involve either direct or indirect discrimination under the Act.

What can employers do now?

The starting point must be to review current levels of pay to identify any immediately apparent anomalies.

  • Implement transparent and systematic pay structures. These should be based on objective criteria and the demands of a role.
  • Maintain pay structures by reviewing periodically and keeping up-to-date.
  • Document decisions about pay.
  • Monitor pay – across all equality groups. This means that risk areas can be identified at an earlier stage. Gender pay gap reporting, shortly coming into force, may help with this (note: this is not to be confused with equal pay but may help inform organisations of pay inequalities).
  • If risks are suspected, it may be sensible to carry out a job evaluation scheme, to assess the value of roles within an organisation. Job evaluations are a method of systematically scoring different roles to assess their value and will usually require involvement of an expert. Their value to an employer is that they can identify anomalies and allow them to be addressed.

Who is most at risk of equal pay claims?

Larger employers are more likely to be at risk than smaller employers because pay systems will be more complex and the larger the number of potential claimants, the more lucrative a claim might be for claimant legal advisers. Given the reputational issues faced by the likes of the BBC, all employers should take steps to ensure that they have addressed issues of equal pay.