An equal pay claim brought by over 3,500 Next retail staff has resulted in victory for the claimants and a possible £30m compensation bill for the retail giant. With claims against several major supermarkets still working their way through the Employment Tribunals, what can retailers do to mitigate their risks?
Work of equal value
Employers often fall foul of equal pay law by failing to appreciate its reach. The principle of paying men and women equally for the same work is generally well-understood, but that's not the only scenario where equal pay law applies. It also provides that women must be paid the same as men for work rated as equivalent in a job evaluation study, and also for work of equal value. This third category is what the Employment Tribunal considered in the Next case and also forms the cornerstone of the ongoing claims against Tesco and Asda. This applies where the demands of the claimant's role are equal to those of her more highly-paid male comparator in terms of factors such as effort, skill and decision-making. In this case, (predominantly female) retail sales staff compared their pay with that of more highly-paid warehouse staff (of whom the majority were male).
The key issue considered by the Tribunal was whether Next could justify the difference in basic pay by relying on market forces - i.e. the fact that the market rate for warehouse staff was higher than that for retail sales staff. Having found that the market rate differential disadvantaged women, the Tribunal had to consider whether the business need to keep costs down meant that this disadvantage was justified. The Tribunal ruled that it was not justified in relation to basic pay, but that other elements of the pay differential (e.g. productivity bonuses) were justified by specific business needs which went beyond costs alone, such as the need to retain particular staff during key periods.
Managing risks
The case highlights the potential risks of relying on pay benchmarking which reflects historical pay disparities between male-dominated and female-dominated roles. A general policy of paying as little as the market will allow (subject to minimum wage laws) leaves businesses vulnerable to equal pay claims - particularly with the publicity this and the supermarket claims have received and the increasing popularity of crowdfunding, group litigation and conditional fee arrangements to help fund the (substantial) costs of such claims. Employers should review their pay structures carefully (under legal privilege where appropriate) to identify pay disparities between male and female-dominated roles. Where there are such disparities, they need to identify the cause of the disparity and consider whether there are wider business reasons (going beyond mere cost) to justify their approach to setting pay. Equal pay is one of the most complex areas of discrimination law and cases can last for years, with hefty legal fees and compensation awards: remedying pay structures now may save substantial costs further down the line.
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