Act now to avoid penalties
Employers must address pay inequalities before audit law is passed
Equal pay provisions were first introduced by the 1970 Equal Pay Act to ensure women were not paid less than their male counterparts because of their gender. More than 40 years later, UK employees are still experiencing significant disparity in male and female remuneration for performing work of equal value.
In response to this ongoing concern, the government has proposed that employment tribunals will be obliged to impose pay audits on employers that have been found guilty of sex discrimination in
contractual, or non-contractual, pay matters where it considers that discrimination may continue.
Change is required
The measures are detailed in the Government Equalities Office’s response to the 2011 modern workplaces consultation published in June. The response states: ‘We are determined to put an end to unfair differences in the way women and men are paid… by providing strong sanctions for those very few employers who do not see that pay discrimination has no place in British business.’
The government noted that, although other factors may affect pay gaps, it intends to focus on gender alone due to the specific legal right to equal pay.
Under the government’s proposals, the tribunal will be able to impose such an audit unless:
- an audit has been completed in the past three years;
- the employer can demonstrate transparent pay practices;
- it can show a good reason why it would not be useful.
The response does consider the impact of a pay audit on smaller employers, and the government has confirmed that it does not intend to apply the pay audit requirements to micro employers or new start-up businesses at first. It will revaluate this point once the proposals have been tested in practice.
The sting in the tail is that the government intends to impose a civil financial penalty for non-compliance with a tribunal order to conduct a pay audit. It does, however, currently stress the need for the sanctions for non-compliance to be persuasive. Therefore, the current proposal states that where a tribunal makes an audit order, and in addition to any financial compensation the claimant has been awarded, it will be unable to apply a civil penalty as well unless the employer fails to comply with the audit.
The government will consult for a second time later this year on the exact particulars of the pay audits and requirements to publish the results before legislation is brought into force. It does, however, appear to be clear that legislation will be passed in this area so watch this space. In the meanwhile organisations that have concerns should seriously consider being pro-active by carrying out their own internal audit and address any pay inequities they discover. Prevention is always better than cure.