Firms should voluntarily carry out equal pay audits

As of 1 October 2014,
the Equality Act 2010 (Equal Pay Audits) Regulations 2014 came
into force as part of the government’s strategy to
close gender pay gaps in the workplace. These regulations have been found necessary to help ensure that women achieve equal pay where an employer has been found to discriminate in this way.

The new regulations provide employment tribunals with the power to order employers to carry out an equal pay audit after a finding that they have breached equal pay law or discriminated on the grounds
of sex in relation to non-contractual benefits (such as a discretionary bonus).

The regulations provide that the tribunal’s order must specify the persons about whom information should be sought, the period of time to which the audit must relate and date by which the audit should be received by the tribunal.
An audit is defined in the regulations as ‘designed to identify action to be taken to avoid equal pay breaches occurring or continuing’.

Justifying differences

The contents of said audit must include the relevant gender
pay information, identify any differences in pay between the descriptions of men and women and list the reasons for those differences. It should also clearly record the reasons for any potential equal pay breach identified by the audit and the employer’s proposals to avoid those breaches from occurring or continuing.

There are four exceptions to the regulations in that a tribunal must not order such an audit if:

n the employer has completed their own audit in the previous three years which satisfies the requirements of an equal pay audit;

• corrective action is clear without the need for an audit;
• there is no reason to believe there may be further breaches; or
• the audit would be detrimental to the employer (disadvantages would outweigh the benefits).

There is a further exemption for new businesses and micro-businesses for a period of ten years from the commencement date of the regulations (the exemption period).

Where an audit has been ordered, a copy must be provided to the tribunal by a specified date for it to assess the employer’s/audit’s compliance. If the audit is found to be compliant the employer must clearly publish it on their website for three years; it is hoped that this will improve transparency in these cases, which should enable judgments to be used to challenge systematic unfairness in pay. The tribunal has a further power to impose a penalty of up to £5,000 where employers unreasonably fail to conduct an audit having been ordered to do so.

Undiscovered breaches

While most employers have an equality and diversity policy in force, the new regulations will no doubt lead to further work.
In relation to any equal pay disputes received by employers after 1 October 2014, they will need to prepare not only to defend the claim itself but also to prepare their own case as to why the tribunal should not order an equal pay audit in the event the claim is lost. This
may also lead to further costs
for employers; claims that
may previously have been settled would now lead to company-wide audits which may in turn lead to further awards being paid out for further equal pay law breaches.

We have seen a rise in equal pay claims following the extensive media coverage of the Birmingham Council employees’ case where 4,000 female council workers won the right to be paid the same as male colleagues, which could lead to payouts worth in the region of £200m.

We have recently been successful with a number
of equal pay claims from traditionally female-dominated roles against smaller councils on the behalf of cleaning and catering staff.

These regulations came into force from 1 October 2014 and it is therefore crucial that all employers (to include businesses, charities and voluntary bodies) consider their pay structures and whether there is any inequality. I would advise employers to consider conducting voluntary equal pay audits to ensure they are compliant with the law and avoid penalty costs down
the line. SJ

Crystal Bolton is an employment solicitor at Michael Lewin Solicitors