Equality Act: Closing the gender pay gap

The Equality Act contains a number of provisions designed to address the stubborn gender pay gap – some 40 years after the Equal Pay Act was introduced. Daniel Thomas reports.

Perhaps the most controversial provision in the Equality Act surrounds the thorny issue of gender pay audits. The Act, as it currently stands, will make it possible for the government to require all employers with more than 250 staff to report their gender pay gap from 2013, if sufficient progress on reporting has not already been made voluntarily.

The Equality and Human Rights Commission (EHRC) will develop a set of metrics for gender pay reports in consultation with business, unions and others over the summer, and the commission will then monitor the progress of reporting within the private sector annually.

Public bodies with more than 150 employees will also be required to report on gender pay as well as other equality data, including the number of black, Asian and minority ethnic workers, by April 2011.

Massive headache for HR

Linda Scott, HR director at British Transport Police (BTP), says addressing equal pay will be a “massive headache for HR”, but stresses it is something employers should be tackling. “In BTP, we are embarking on an implementation plan to ensure all our police staff are on fair contracts and are fairly rewarded according to the weight of the role they undertake,” she says. “Forward-thinking employers will need to consider not only gender, in my view.”

But Nicola Walker, senior policy adviser at the CBI, insists requirements on gender pay reporting are “unnecessary and unhelpful”.

“The gender pay gap can be misinterpreted,” she says. “It does not compare men and women doing the same job – it reflects the fact fewer women have higher-paid jobs across the labour market as a whole. The way to address this is not by comparing misleading average pay gap statistics, but by improving opportunities for women via better childcare, flexible working and careers advice.”

While the Conservatives have always been publicly opposed to gender pay gap reporting measures, the approach they advocated when the Act was going through parliament also rings alarm bells, according to Philip Titchmarsh, partner at law firm Pinsent Masons.

“Requiring any employer that loses an equal pay claim in an employment tribunal to carry out an equal pay audit may not be much more palatable to employers,” he says.

If employees want to go digging for more information, they can use the equal pay questionnaire procedure to extract information from their employer, and this could lead to more tribunal claims, Titchmarsh adds.

Hypothetical comparators

The Equality Act will, for the first time, allow employees to rely on hypothetical comparators to prove sex discrimination (the Equal Pay Act requires claimants to use a real ‘flesh and blood’ comparator of the opposite sex).

Titchmarsh says the drafting on this provision is “complex”, but confirms that hypothetical comparators will now be allowed if there is some evidence of direct sex discrimination in pay.

“This will bring equal pay law in line with wider sex discrimination law, but is not welcome news for employers in an area which is already fraught with technicality and uncertainty, and where the stakes with multiple claims can be very high indeed,” he says.

Khurram Shamsee, employment partner at law firm Beachcroft, agrees the changes will shift the balance in favour of employees. “The net result of this tinkering with the equal pay protection, when combined with the broader focus on gender pay, is that the number of equal pay claims will rise following the introduction of the Equality Act, and arguably it will become easier for employees to succeed with these claims,” he says.

Provision to watch: Enhanced tribunal powers

The powers being granted to the Employment Tribunal under the Equality Act mark a significant change for employers, as organisations themselves can now be ordered to make sweeping changes to their practices. Previously, the remedies available were directed only to the individual claimant, and all too often they would end up leaving the company. Therefore there would be little impact on the actual working practices that led to the claim in the first place. Recommendations that may be made include matters such as recommending a respondent introduces an equal opportunities policy, retrains its staff, and ensures its policies pertaining to matters within the Equality Act are effectively implemented (ie, harassment policies). The exact scope of the recommendations made by the tribunals for the benefit of other individuals will not become clear until the Equality Act comes into force, but the suggestion is they could be wide-ranging.

The Equality Act also seeks to clamp down on secrecy clauses in employment contracts, so women can challenge unfair pay. A difficulty for employers here, according to Shamsee, is that the so-called gagging clauses will only be banned in circumstances where an employee is seeking the disclosure of salary or bonus data in the context of an actual or potential discrimination complaint.

“It would be unusual for an employee to expressly mention the issue of discrimination when asking a colleague about their pay or bonus, so it is difficult to see how an employer can safely distinguish between the circumstances when these provisions might apply and when enforcement action might otherwise be appropriate,” he says.

Doubts over enforcement

However – as is the case with the positive action provisions in the Equality Act (Employers’ Law, June 2010) – there are doubts over whether the equal pay measures will be enforced by the coalition government.

Although the outgoing Labour government rushed the Act on to the statute book before the election, the coalition is currently reviewing it with a view to ensuring the Act is “implemented in an effective and proportionate way”.

What this actually means is unclear. Before the election, the Conservatives said they would drop the Act’s equal pay measures altogether, but the Liberal Democrats said they would introduce compulsory ‘fair pay audits’ for all but the smallest employers.

Although the Government Equalities Office is saying that it continues to work on the basis the Act’s core provisions will come into force in October this year, the future for the equal pay measures is far from certain.

“Requiring any employer that loses an equal pay claim in an employment tribunal to carry out an equal pay audit may not be much more palatable to employers”