Compulsory pay audits required for firms that lose equal pay claims

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Businesses that lose an employment tribunal on equal pay grounds will be required to carry out compulsory pay audits under plans unveiled by the Government.

In the Government’s response to the Modern Workplaces consultation, Parliamentary Under Secretary of State for Equalities and Criminal Information Lynne Featherstone said: “This will mean that an employment tribunal which finds that an employer has discriminated on grounds of sex in contractual or non-contractual pay will be obliged to order the employer to conduct a pay audit in cases where continuing discrimination is likely.

“An audit would not be ordered if an audit has been completed in the last three years, the employer has transparent pay practices or the employer can show a good reason why it would not be useful.”

According to the Government’s response, micro-businesses would initially be exempt from pay audits. The response also outlined the Government’s intention to launch a consultation later this year on how the audits will operate and what publication requirements will apply.

The introduction of the compulsory audits is intended to encourage employers to settle cases before they go to tribunal, as they would be deterred from proceeding to a situation where losing might result in them facing a pay audit.

XpertHR senior employment law editor Stephen Simpson said: “This would be an entirely new remedy for employment tribunals, and comes at a time when the Government is planning to cut back tribunals’ powers to make recommendations.

“It sounds like a more stringent approach will be applied than with tribunal recommendations, which are rarely used and entirely voluntary for the employer. Employment tribunals would be obliged to order an equal pay audit unless the employer can show that there is a good reason not to. The threat of being required to carry out an equal pay audit if the case is lost may make employers more likely to settle cases.”

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