An Employment Tribunal is now obliged to order an employer to carry out an equal pay audit where the employer is found to have committed an equal pay breach in a claim presented on or after 1 October 2014. Article by Lorraine Heard, Legal Director at Bond Dickinson LLP.
The intention is that employers who lose an equal pay claim, or are found to be guilty of sex discrimination in relation to pay, are forced to identify required action to avoid equal pay breaches occurring or continuing.
Audit requirements
An audit must:
– include pay information relating to specified male and female staff;
– identify differences in pay and the reasons for them;
– explain any potential equal pay breach identified by the audit; and
– include a plan to avoid equal pay breaches occurring or continuing.
Publication
Publication of the audit on the employer’s website is required for a minimum of 3 years and all persons the audit relates to are to be informed about where they can obtain a copy.
Exceptions and Exemptions
There is a 10 year exemption for start-ups and micro businesses (with fewer than 10 employees) and an audit must not be ordered if:-
– Relevant information is established to be already available from an audit completed in the previous three years;
– The action required to avoid equal pay breaches occurring or continuing is clear without an audit;
– The breach gives no reason to think there may be other breaches; or
– The disadvantages of an audit would outweigh its benefits, for example where the employer is in financial difficulty.
In addition there is scope for the employer to adapt the audit before publication, or not publish the audit at all, if satisfied that to do so would breach a legal obligation. Confidentiality, data protection and human rights violations are the obvious considerations.
Implications
The Employment Tribunal has power to make further orders if a compliant audit is not produced and apply a penalty of up to £5,000 for each instance of non-compliance with an order.There is, however, no financial penalty for failure to publish the audit or failure to implement the required plan to avoid equal pay breaches occurring or continuing, although there is also no limit to the number of occasions an employer may be required to attend a hearing and explain its actions if it fails to comply with the publication obligation.
It should be noted that the possibility that publication may give the employer’s competitors a commercial advantage does not provide justification for refusing to publish.
Comment
Equal pay audits can of course be conducted voluntarily and any issues that are identified addressed. However it can be difficult and costly to establish a suitable means of evaluating the relative ‘value’ of staff, as there is no ‘one size fits all’ solution. In addition employers can find that an attempt to resolve an equal pay problem actually increases the risk of claims arising, whilst the risk of a claim in the private sector is otherwise low.Some employees may claim as a means of securing an equal pay audit, and/or use the audit option as a tactical consideration in the resolution of a pay claim, making such claims more likely, with employers more likely to consider settlement as a means of avoiding the audit publication possibility.
Employers can take suitable steps to understand their gender pay position, including the extent to which male and female staff are engaged in work of ‘equal value’ and whether they could defend a claim. An increase in high profile claims, such as those against Asda, and the continued increase in the gender pay gap, currently 19.7 percent, could prompt the Government to take further action, possibly by invoking the power contained in the Equality Act 2010 to force employers with 250 or more employees to publish gender pay related information. Further developments seem inevitable in the continuing drive towards greater public accountability in the field of equal pay.
