Opening Pandora’s box


If you thought we had reached the Promised Land of equal pay for men and women, think again. Employers should be acting now to smooth the path to equality before reviews highlight pay discrepancies among employees.

Last year, the Equal Opportunities Commission (EOC) revealed that almost 30 years after the Equal Pay Act took effect, a pay gap of 18 per cent still exists between women and men working full-time – with women taking home on average £2.88 less per hour. That Promised Land still looks a long way off, on a winding and rocky road.

This simple statistic highlights the potential extent of employers’ exposure to equal pay claims. These are becoming easier to bring and a series of high-profile cases have hit the headlines recently.

What could your organisation do to smooth the path of progress towards equality and potentially reduce its exposure to claims? The current buzzword is Equal Pay Review (or audit) (EPR). The EOC describes an EPR as: comparing the pay of women and men doing equal work, investigating the causes of any gender pay gaps and closing any gaps that cannot be satisfactorily explained on grounds other than sex.

You don’t have to conduct one – there is no legal obligation on an employer to carry out such a review. But an EPR could be beneficial for several reasons:

– The influence of public policy, publicity, and trade union pressure, and the desire to be seen as a good practice employer or employer of choice, are key reasons given by organisations that have conducted one.

– An EPR may help to reduce a company’s potential exposure to equal pay claims. It will enable the company to pre-empt possible claims by identifying and rectifying pay discrepancies and to defend any claims actually brought.

Companies have, however, been reluctant to jump onto the bandwagon. The EOC found that most larger organisations still have no plans to carry out an EPR.

Why? The simple answer is that from a legal and commercial perspective, an EPR could actually provide employees with concrete evidence of pay disparities. Conduct one without being prepared to meet any liability it may highlight and you risk opening Pandora’s box.

– Documents created by the company in the course of carrying out an EPR would be disclosable in tribunal/court proceedings and could provide applicants with clear evidence of unequal pay. With the introduction of equal pay questionnaires, the workforce is likely to become more inquisitive and make assumptions that there is scope for equal pay complaints.

Conducting an EPR may mean that you unwittingly create and gift-wrap the evidence an employee needs to bring a successful claim.

– A company must be committed to rectifying any gender pay inequalities that the EPR reveals before conducting one. The EPR must have the involvement and support of management, who have the authority and the budget to deliver necessary changes.

In practical terms, what can you do to assess your company’s potential liability before raising that tricky question of an EPR with the managing director?

– A sensible halfway house is to conduct a preliminary (paperless) survey of payroll records to see whether any glaring inequalities leap out. This will give you a feel for whether there are major equal pay problems. You can then assess the need for and cost of an EPR, enabling the risk of conducting one to be better estimated.

Are there any other steps the company can take to protect itself going forward?

– As it is almost inevitable that you will identify gender pay gaps between specific individuals, you need to be able to justify those gaps to defend claims. Accurate performance evaluations and appraisals will be key evidence.

– Up-to-date personnel files in relation to pay and well-documented consideration of applications for promotion will also be important. Consistency in the approach to pay is crucial.

– The introduction of the equal pay questionnaire marks a clear movement towards transparency, something that the courts have focussed on in recent decisions. It is essential that your company monitors the data it is creating and is as comprehensive as possible in the documents it produces to ensure that adverse inferences could not be drawn in a tribunal.

Whatever its risks, the EPR is here to stay. The EOC was aiming for 50 per cent of employers with 500 or more employees having conducted an EPR by the end of 2003, and 25 per cent of other employers having done so by 2005. It also launched an equal pay campaign – It’s time to get even…- on 14 January this year to tackle the pay gap.

Employers can access information, including online resources, advice, guidance and free goodies, at www.eoc.org.uk/timetogeteven

The Promised Land is still just that – promised. However, the road-builders have moved in, and a new route there may be coming your way soon.

Chris Bracebridge is an associate at Allen & Overy. Stefan Martin, partner at Allen & Overy, also contributed to this article

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