Mind the gap - Equal Pay Audits to be imposed on employers who “break the law”

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The Government has decided to press ahead with its proposals to introduce compulsory equal pay audits in limited circumstances.

Background

Measures designed to tackle the UK’s gender pay gap have been on the cards for many years now. All the major political parties want to see employers doing more to close the gap.

The previous Labour Government wanted to see employers publishing details of any gender pay disparity within their workforce, and drafted the controversial section 78 of the Equality Act 2010 to achieve this. However, the Coalition Government came to power before this section was brought into force, and it has never been enacted.

Instead, the Coalition Government had a different proposal, which was to give Employment Tribunals the power to impose an equal pay audit upon any employer who lost an equal pay claim. The Government consulted over this proposal last year as part of its Modern Workplaces consultation (see our HR Briefing: Government announces family friendly reforms for the modern workplace – 16/5/11). The Government has now decided to bring this proposal into force. According to its publication last week, “the Government is convinced that greater transparency is required where employers have been found to have breached the law”.

When audits will be imposed

If an employer loses an equal pay claim in an Employment Tribunal then the Tribunal will be obliged to order the employer to conduct an equal pay audit:

  • where it considers that there may be continuing or likely discrimination,
  • unless either:
    • an audit has been completed in the last three years,
    • the employer has transparent pay practices, or
    • the employer can show a good reason why it would not be useful

Employers will then be required to disclose the results of the equal pay audit to its workforce and possibly to a wider audience.

Micro businesses (with fewer than 10 employees) will initially be exempt from the proposals.

The Government intends to carry out a further consultation to establish views on the exact contents of pay audits, the scope of the tribunal orders and publication requirements. We think that legislation is unlikely to be in force until 2013 at the earliest.

Impact on your business

In our view, the introduction of pay audits is likely to prompt employers into settling more equal pay claims. The costs of a pay audit, which might typically include a process of evaluating job roles, pay benchmarking and handling individual appeals, can be very substantial. For many employers, these costs will significantly outweigh any potential compensation to an individual claimant. Commercially, it might be less expensive to settle claims than to risk the costs of an audit.

In 2011, the “Think, Act, Report” initiative on gender pay was launched – see (Think, Act, Report: A new initiative on gender equality – 16/9/11) to encourage employers to begin analysing different types of equality data within their workforce with a view towards eliminating gender disparity over time. The initiative is voluntary and companies do not need to participate. However, companies who do choose to participate may find themselves able to spot and rectify any potential pay discrimination issues before the issue results in litigation, and may stand a higher chance of persuading an Employment Tribunal not to impose an equal pay audit in the event that they do ultimately lose a claim.

If you are interested in helping EEF respond to the next consultation on equal pay audits, please contact Tim Thomas, Head of Employment Policy.

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