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Risk in Context

Recent Claims Highlight Equal Pay and Gender Pay Gap Risks

Posted by Eleni Petros 01 March 2018

A high-profile supermarket chain has been in the press recently because of a dispute over equal pay after female shop assistants filed legal action against the organisation, claiming to earn as much as £3 per hour less than male warehouse workers who have the same roles.  The claims could costs the supermarket chain up to £4 billion.

Equal pay means that men and women in the same employment performing equal work must receive equal pay, as set out in the Equality Act 2010. The courts have made it clear that organisations are responsible for ensuring their pay systems are free from sex discrimination. If it is found that the organisation did not pay its male and female employees equally for carrying out the same work, it could face prosecution for breaching the Equality Act 2010. 

Defending an equal-pay claim is a costly, complex, and time-consuming exercise because of the evidentiary burden placed on the parties to establish their position.  If the employer is unsuccessful, the court must order that it undertake an equal pay audit – yet another costly exercise.  Even if an employer wins its case, it usually has to pay its own legal fees. 

Gender pay gap reporting will further heighten awareness of equal pay issues. The statistics are likely to be used by employees to question whether they are being paid equally, and whether their bonus payments are tainted by sex discrimination, among other issues.

Gender Pay Gap Reporting

While both equal pay and the gender gap are intended to deal with the disparity of pay women receive in the workplace, they are two different issues. While equal pay focuses on the actual amount women and men get paid for doing the same role, the gender pay gap is a measure of the difference between men’s and women’s average earnings across an organisation or the labour market. It is expressed as a percentage of men’s earnings.

Organisations with 250 or more workers must publish their figures by April, and so far only a little more than half have done so.

Government departments, retailers, banks, and energy firms are among the employers to reveal pay differences in mean hourly pay, while museums and the armed forces have reported low or no gender pay gaps. 

Reporting a gender pay gap is likely to have a negative impact on an organisation’s reputation with customers and shareholders, and to adversely affect its ability to attract talent. It is also likely to attract scrutiny of its remuneration practices, particularly around whether it has breached the law – whether deliberately or inadvertently – in relation to equal pay, and could open the floodgates to claims by disgruntled employees.  

Companies need to be preparing now for what the reporting reveals about them. You should carefully review what the results of the reporting figures illustrate about your organisation, and plan communications to deliver the right message that reflects the true position of the organisation.

Eleni Petros