SMEs are advised to undertake an equal pay review

SMEs are advised to undertake an equal pay review

In what could become the UK’s largest ever equal pay claim, Tesco is facing a demand for up to £4 billion in back pay from thousands of female store workers. It has been reported that this could cost the supermarket chain up to £20,000 per worker over at least six years.

According to the claim, Tesco distribution staff (apparently mainly male) earn from about £8.50 an hour to more than £11 an hour, while store staff (mainly female) earn about £8 an hour in basic pay. This disparity could mean a full-time distribution worker earning over £5,000 a year more than store-based staff.

The case follows similar actions against Asda and Sainsbury’s which are both working their way through the employment tribunal process; and unequal pay has also become a big battleground in the public sector, too. Birmingham city council recently agreed to pay more than £1 billion to settle the claims of tens of thousands of women.

Smaller employers can also benefit from looking at their workplace culture and practices.

Equal pay for equal work

Although the most recent cases of equal pay disputes have focused on large employers, all employers in the UK are obliged to adhere to the principles of equal pay for equal work.

Recent research has shown that the gender pay gap among small business-dominated industries is falling at twice the rate as that of all companies across the UK. Current wage inequalities in sectors with a greater number of SME employees have fallen to 13 per cent – compared to a national average of 17 per cent. It is however vital that all SME employers ensure that their pay systems are fair and transparent. Pay arrangements are frequently complicated and the features that can give rise to sex discrimination are not always obvious.

Equal pay is not simply about paying men the same as women. Equality in pay needs also to be considered on the value of the work which is undertaken by the sexes. Where work can be said to be of comparable value, even if different in nature, may still give rise to a requirement for equal pay. A major factor in the Tesco litigation will be whether ‘store’ work is equal to ‘distribution’ work. Alternative or additional claims may also arise such as sex discrimination or constructive dismissal. It is likely that all employment tribunal claims, including equal pay claims, will increase given the recent judgement making the fee regime for employment tribunal claims unlawful.

We would advise all SMEs to undertake an equal pay review, also known as an equal pay audit, to ensure that their pay systems are fair and transparent. This involves three key steps:

  • Comparing the pay of men and women doing equal work. Employers need to check for like work; work rated as equivalent; work of equal value
  • Identifying any pay gaps
  • Eliminating the gaps that cannot satisfactorily be explained on grounds other than sex

Standard cases for arrears of pay can go back up to six years before the date the claim was brought and all employees in a class can bring a claim; the financial implications of being found liable for an equal pay claim can be devastating, particularly for SMEs.

Taking the above actions and showing that you are committed to closing the gender pay gap in your organisation will assist you in retaining existing talent, attracting new employees, increase your profile and reputation as a good employer to work for. What’s more, businesses that treat their employees fairly are more innovative, more productive, and more profitable.

So take steps to undertake a pay review today. Without one, you could have an awful lot to lose.

Russell Brown is head of employment at Glaisyers Solicitors LLP. 

Further reading on equal pay

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