18 September marks the celebration of International Equal Pay Day, established by the United Nations in a bid to increase global awareness of pay disparity between sexes. There is still not a single country in the world in which equal pay – meaning, equal pay for work of equal value – has been achieved. In the UK, the right to equal pay is enshrined in law through the Equality Act 2010. However, there is still some way to go in ensuring that equal pay is always provided. This blog post will look at what equal pay is, the consequences of failing to provide equal pay, how to avoid an equal pay claim, and the benefits of reducing pay inequality.
What is equal pay?
The Equality Act 2010 sets out that men and women in the same role, performing equal work, must receive the same pay. Differences in pay are allowed, but only if the difference is nothing to do with the sex of the employee. So, equal pay cannot really be defined without first establishing what equal work is. There are three kinds of equal work:
- Like work. This is when the work done is largely the same. It does not need to be identical, but the differences will be minimal.
- Work rated as equivalent. This means that the job has been assessed under a job evaluation scheme as being equivalent in terms of the skill, responsibility and/or effort required.
- Work of equal value. This is when the work done differs significantly, but is still of equal value in terms of the skill, responsibility, effort and/or decision making required. An example might be an IT director and an HR director.
Unlike certain statutory employment rights, all employees have a right to equal pay, as do workers, apprentices, agency workers, and self-employed people who are hired to do a job. Equal pay also applies to more than just basic salary. It includes equal entitlement to pensions, working hours, annual leave allowance, sick pay, benefits, and all other contractual terms and conditions.
Are differences in pay ever justified?
There may be legitimate reasons as to why employees doing the same or equivalent work are paid differently. However, these reasons must be genuine and completely removed from the individuals’ sex. For example, an employee who lives in London may legitimately need a higher salary due to living costs. If someone is paid more because they have particular qualifications or skills, the employer must be able to show that these skills are essential to the role.
What happens if equal pay is not provided?
If equal pay is not provided, the affected employee can raise a grievance and, depending on the outcome, could bring a claim to the employment tribunal. Where there has been systematic unequal pay, the effect of a claim can be staggering. On 5 September 2023, Birmingham City Council effectively declared itself bankrupt, meaning all non-essential spending must be halted. This is as a result of the landmark equal pay case brought against the Council in 2012, which found that 174 employees (170 women and 4 men) had historically missed out on bonuses and other benefits that were paid to workers of the opposite sex, in roles rated as equivalent. Despite the Council having already paid out £1.1bn in settlement of these claims over the last ten years, its equal pay liability remains at £650m to £760m.
This highlights that failing to ensure equal pay in the workplace can have drastic consequences and should always be addressed sooner rather than later.
Preventing equal pay claims
Employers must have an awareness of the ways that unequal pay can be perpetuated, as it extends beyond basic salary. It is important to have transparent and effective policies in place that all employees can access. Job descriptions should be updated and accurate, and pay systems should be clear. Contractual bonuses should be paid to those on sick leave or maternity leave, where that bonus is based on company performance only. Men and women doing the same role should not have different job titles, as this can give the impression that one role is more senior than the other, and deserving of more pay. Equal pay is a complex issue, and employers may wish to carry out an audit of the workplace to ensure that pay practices are up to date.
Equal pay and the gender pay gap
While the gender pay gap and equal pay are closely related, they are not the same thing. The gender pay gap is the difference between the average pay of men and women across all jobs in the UK. It does not measure the disparity in pay between men and women doing the same job. However, the lack of equal pay in the UK is a significant contributor to the gender pay gap (of which there are many). We discuss the gender pay gap in more detail in our blog post here.
Reducing pay disparity is a crucial step in fighting gender inequality. International Equal Pay Day is a way of raising awareness and is an opportunity for employers to take stock and consider whether their pay practices are fair. The benefits of equal pay go beyond the individual – employers will benefit from increased morale, productivity, a positive reputation and a more diverse and inclusive workplace.
At Thorntons, we have extensive experience of advising on equal pay policies and claims. If you would like to speak to one of our experts, please contact the Employment Team on 03330 430350.