Equal Pay Audits – The impact on Employers

On the 1st October 2014 new regulations came into force making it compulsory for employment tribunals to order equal pay audits against employers facing claims against equal pay. The new regime follows 45 years of slow progress made in tackling pay discrimination and gender equality and hopes that the new power given to tribunals will force employers of all sectors to rethink their pay structure.

The new regulation hopes to bridge the gap between gender and equal pay and lower the amount of case claims made against employers. The regulation also aims to increase employee awareness of their rights which is hoped will lead to faster settlement by employers in hope of reducing the cost and reputation damage of carrying out audits ordered by tribunals. The type of claim to which the new regime applies includes all forms of gender pay issue such as contractual pay and those based on discretionary pay.

Not only will employment tribunals have the power to order firms to carry out such pay audits but they will legally be entitled to publish the results to the public online within 28 days and leave it available for a minimum of 3 years. Obviously this can impact a business by giving it a bad image where it fails to pass the audits requirements and likewise by having to publish an audit in the first place (showing cases had been made against them). The audits themselves must contain specific details including the following:

·         Information on the gender and pay of certain types of employee;
·         Differences between pay for men and women and the reasons for these differences;
·         Reasons for any potential equal pay breach identified by the audit;
·         The employer’s plans to avoid breaches occurring or continuing.

 Employers are allowed up to 3 months to complete the audit before it is determined by the tribunal as to whether it has met the requirements of the regulations. Whatever decision is made by the tribunal the employer must inform its employees of the results and where they can find a copy.

 In summary the introduction of the new regulation should be viewed by employers as a new potential risk to their business and managers should take it as an opportunity to reduce the risk of equal pay claims being made in the first place. This can be done by carrying out an informal review of pay practices within the organisation. Due to high costs and time consuming complexities of going to a tribunal, it may be beneficial for an employer to accept an equal pay claim and settle it themselves at the early stage to avoid these problems. Likewise as a pre-emptive action it may be preferable for an employer to carry out such an audit before a case goes to the tribunal to mitigate any further risks that may be incurred.

 Where an employer fails to carry out an audit after obligation by the tribunal a fine of £5,000 payable to secretary of state could be faced. This fine will be imposed each time a hearing takes place on the matter. This should serve further importance for employers to be pro-active in ensuring they comply with regulations regarding equal pay and gender issues, cases of which in this modern day really shouldn’t continue to play part in any industry sector.

 In some circumstances employers may be exempt from having to carry out an audit depending on a number of factors considered by the tribunal such as where disadvantages outweigh the advantages of an audit; a firm is less than 12 months old, has fewer than 10 employees as well considerations.

 For more information on how the new regulation may affect you or if you have any questions relating to equal pay, gender discrimination or any other employment related concerns then please talk to our employment expert Umberto Vietri.
Umberto Vietri
Employment, company & commercial
Tel: 01535 613 674