Incremental pay schemes rewarding length of service may breach equal pay law unless the additional experience gained genuinely equates to improved performance.
Service-related pay discriminates against women as they are less likely than men to attain long service. Such pay schemes are deemed to be justified (because as a general rule experience improves performance) and therefore lawful, unless an employee can provide evidence raising serious doubts that the scheme is appropriate for a particular job. Only then will an employer have to objectively justify its particular scheme.
The EAT has now ruled that the serious doubts can relate not only to whether experience does improve performance in the particular job concerned, but also whether the performance continues to improve throughout the period of time over which pay increases.
Employers using service-related pay schemes should ensure that pay is not increased for additional service where that does not deliver improved performance in the particular job. (Wilson v Health & Safety Executive, EAT)
There is a more employer-friendly test when considering age discrimination. Schemes with pay increases for service up to five years only are automatically lawful. A scheme with pay increases above five years' service will be lawful if the employer reasonably considers that the scheme fulfils a business need such as rewarding experience.