New practices for equal pay will help employers

Employers will ignore the recommendations put forward in the new code of
practice at their peril, as it could lead to costly internal grievances and pay
claims

The Equal Opportunities Commission’s new Code of Practice on Equal Pay came
into force on 1 December 2003. If they haven’t already done so, employers
should start considering their own practices and procedures in relation to pay
in light of its content, as the code will be admissible in evidence in an
employment tribunal claim.

The code is broken into three main sections; the first of which provides a
useful summary of equal pay legislation. This is a notoriously complex area of
employment law, and the code breaks it down into easily digestible pieces using
examples to illustrate the differing aspects of the equal pay definitions.

It goes on to provide guidance on dealing with the relatively new right to
serve Equal Pay Questionnaires (effective from 6 April 2003), and requests from
staff for information about other colleagues’ pay. While the law requires pay
systems to be transparent, the code advises this does not mean that employees
have an automatic right to know what their colleagues earn.

Employers will need to take confidentiality and data protection requirements
into account before releasing any such information. However, the code does
recommend that employers should retain records detailing pay decisions so they
can respond with certainty to potential questions from staff.

The second section of the code provides guidance on good equal pay practice,
and is perhaps the most important factor for employers to consider. It advises
employers to carry out an equal pay review, which compares the salaries of male
and female staff undertaking equal work, identifies any pay gaps and looks to
eliminate any such gaps that cannot be explained on grounds other than sex.

This three-step process is recommended for all employers, irrespective of
the size of the organisation or the number of staff. Practical guidance is also
given on how to undertake the review, including how to determine whether men
and women are doing equal work, how to collect relevant data and how to assess
the reasons for any significant gaps in pay.

After undertaking the equal pay review, employers are advised by the code to
develop an equal pay action plan and introduce an equal pay policy, if one is
not already in place. The third section of the code provides a useful model
policy.

Given the steps advised by the code, this could amount to a significant
piece of work for employers and, more particularly, the HR department.

While it would be tempting to place the code’s recommended actions at the
bottom of the HR agenda, in light of the amount of other recent legislation,
employers ignore the code at their peril.

If an equal pay claim is lodged or even an internal grievance, it can be
extremely time consuming and potentially costly to deal with. Employment
tribunals can now also make awards of back pay for up to six years from the
date of the claim. If employers take the recommended actions in the code, they
are more likely to avoid equal pay claims, be in a good position to defend such
claims, and also avoid criticism from the tribunal.

www.eoc.org.uk

By Hilary Larter, Partner, Beachcroft Wansbroughs

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