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New Penalties for Employers Who Fail to Pay Fairly

By Practice Group Leader, Employment

From 1 October 2014 Employment Tribunals have had the power to order employers who lose an equal pay or pay-related sex discrimination claim to undertake an equal pay audit, and to publish the results to parts of the workforce, including on its website.

This is a powerful weapon for employees and a concern for employers who will often want to resist publishing sensitive salary information.

An audit would involve the publication of relevant gender pay information, identify the reasons for the differences between men and women’s pay and set out the employer's plan to avoid breaches occurring. An employer that fails to carry out an audit when required to do so might have to pay a fine of up to £5,000. However, if an employer has carried out an audit in the last three years satisfying certain conditions (which does not have to be published) it may avoid this obligation.

Such a power is long-awaited. Despite the equal pay legislation first coming into force in 1970, recent data published by the Chartered Management Institute (CMI) identified a 23% pay gap between men and women of all ages. Yet, the gap is far worse for women aged 40-plus, where the problem is two-fold. Not only does the salary gap increase with age and seniority to 35%, but there is also a persistent ‘bonus pay gap’. The disparity also relates to bonuses - on average female Directors took home £11,054 less in bonus payments.

It's interesting that the new power is not limited to equal pay cases. Sexual discrimination at work cases can be brought in respect of non-contractual pay such as discretionary bonuses and given the disparity in bonus payments, we may see more of these claims in the future. Sex discrimination cases are often less complex and costly for employees to bring than equal pay cases.

Employers may well be wary about the new powers and there may be an increased impetus to settle cases, where there are concerns of audits being required by an Employment Tribunal. It remains to be seen whether other employers will choose to actively address gender pay disparity by way of voluntary audits, or will be more transparent in their practices, to avoid equal pay issues arising in the first place.

Deborah Casale is an Employment Solicitor in Slater and Gordon Lawyers in London.

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Employment Law