Equal Pay

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Introduction
The Equality Act 2010 gives women and men a right to equal pay for equal work. The Act replaces the Equal Pay Act 1970, the Sex Discrimination Act 1975 and the equality provisions contained within the Pensions Act 1995. The equal pay for equal work parts of the Act applies to all employers, regardless of their size. The only exception to this is the obligation to report on the pay gap within an organisation annually and publicly - this only applies to organisations with more than 250 employees.

 

The Commission
The Equality and Human Rights Commission was created under the Equality Act 2006. It has powers to undertake inquiries into the pay gap across sectors of employment. Importantly, the Commission also has the power to investigate individual organisations. The Commission has also produced the Equal Pay Statutory Code of Practice to help employers comply with the Act - and avoid litigation.

 

Pay
Pay is defined broadly under EU law. Article 4 of the Equal Treatment Directive states:

"For the same work or for work to which equal value is attributed, direct and indirect discrimination on the grounds of sex with regards to all aspects and conditions of remuneration shall be eliminated."

"Pay" includes all contractual terms, for example, holiday entitlement and pensions. Under the Act, these are defined as "equality of terms".

Sex Equality Clause
A woman doing equal work with a man in the same employment is entitled to equality in pay and other contractual terms unless the employer can show that there is a material reason for the difference - which does not discriminate based on her sex.

Where there is equal work, the Equality Act 2010 implies a sex equality clause automatically into the woman's employment contract or terms. This modifies her terms of employment (pay and other contractual terms) to ensure it is no less favourable than the man's.

As stated this applies not just to pay and pensions, but all other contractual terms, for example - company car provision, no-discretionary bonuses, holiday pay, sick pay, overtime, shift payments, occupational pension benefits. It also applies to non-monetary terms, such as leave entitlements, access to sports facilities, (for example golf clubs) and other perks.

Where a woman does not receive equal treatment in relation to a discretionary element of her work, she can bring a claim under existing sex discrimination laws, not equal pay legislation. Examples of discretionary items can include - discretionary bonuses, promotions, transfers, training and appointments.

 

The Comparator
A woman can make an equal pay claim by comparing herself to a man or men in the same employment. It is for her as the claimant to select the man or men with whom she wishes to be compared. Alternatively, under EU law she can rely upon the notion of a single source of pay, please see below.

Same Employment
A woman can compare herself with a man employed:

- by the same or associated employer, at the same workplace, or

- employed by the same or associated employer at a different workplace, but under the same common terms & conditions, either generally or directly between her and the male comparator.

Also, a woman can compare herself with a comparator working at a different workplace, if she can show that, had he been employed at the same workplace, he would have been working under the same common terms and conditions as those he is currently working under.

Single Source
Under EU law, the woman can also compare herself to a man or men, not in the same employment, but where they both share the same source of pay. For example, this can be where pay has been set by national negotiation, such as teachers' pay and so can be corrected at a national level.

 

More on Choosing a Comparator
As stated, it is for the woman to choose the comparator; this can be an individual or a group. If an individual, they do not have to be named. Also, more than one comparator can be chosen. The comparator also does not have to be currently working at that job. This is an interesting practical point - it is not unusual for a woman to replace a man in a job and then to be paid less than her predecessor. This is a common and obvious mistake made by many employers. It not only easily allows a woman to compare herself to the man, but the payment history, (including discretionary elements, such as bonuses) of the man in the role is easily accessed. 

Equal Work
A woman can make a claim for equal pay and other contractual terms when compared to a male comparator doing work that is:

- the same or broadly similar, without material differences - known as "like work"

- different work, but rated under the same job evaluation scheme as being work of equal value - "work rated as equivalent"

- different work, but rated equal in terms of factors such as skill, effort & decision-making - "work of equal value"

 

Like Work
To determine like work, there is a two-stage test:

1. Is the woman and her male comparator employed in work that is the same or broadly similar. This looks at the level of knowledge and skill needed to do the job.

2. If it is similar - are there any differences between her work and his that are of practical importance - how frequently these differences occur in everyday work, and the nature and extent of those differences.

For an employer defending a claim, they would need to show practical differences in the work carried out. This can include additional responsibilities, qualifications, skills and training. It can also include the time of day the work is carried out, for example, more pay for night-shift work. 

Work Rated As Equivalent
A woman's work can be rated as equivalent to a man's if the employer's job evaluation study gives an equal value to their work - in terms of what is required - effort, skill and decision-making etc. Job evaluation is a systematic points-based assessment of the relative value of different jobs. The evaluation looks at the factors in a job, not the actual job itself. This means that jobs that appear (and are) different can score the same number of points - and so can be rated as equivalent.

Work Of Equal Value
A woman can claim equal pay with a man if she can show that her work is of equal value compared to his - in terms of the demands of the job. So a woman and a man can do different jobs, but they can be regarded as having equal worth when taking into account the training & skills required, the conditions and decision-making involved.

A woman bringing an equal pay claim can use one or all three of these methods to make a claim. For example, using a different method to compare her to three different male comparators.

 

Equal Pay & Occupational Pension Schemes
It is important to remember that where a man is paid more than a woman, and this inequality persists it has a significant impact on the pensions both will receive once they retire. Pay inequality exacerbates and magnifies pension & benefits inequality, particularly as those on higher pay receive higher pension contributions from their employers. Over a lifetime of work, the difference can be tens or hundreds of thousands of pounds.

Occupational pension schemes are subject to the equal pay for equal work principle. The sex equality rule operates to ensure comparable men and women are treated equally and that both have equal access to pensions and pension benefits. 

Furthermore, the exclusion of part-time workers to pensions and benefits, or parts of them is indirect discrimination - as more women, than men work part-time.

Where discretion can be exercised in terms of pensions & benefits, it must be exercised equally, and not in a way that is less favourable to a woman when compared to her male comparator. 

The trustees of a pension do have a defence if they can show the unequal treatment is due to a material factor, which is not based on sex.

All aspects of the pension & benefits are covered - when a person can join, contribution percentages, when a pension can be drawn and whether it is a final salary pension scheme or a group pension plan. 

The sex equality rule also applies to any dependants of pension members; for example, a female dependant must receive the same pension terms and benefits as a male dependant.

Where people in a pension scheme are treated differently according to their family, marital or civil partnership status a woman claiming equality must select a man of the same status as her.

Access
Where a claim for access to a pension scheme is successful, retrospective access can be granted back to 8th April 1976.

Benefits
Where a claim for access to pension benefits within a scheme is successful retrospective access can only be granted back to 17th May 1990.

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