New sanction for employers who flout equal pay rules

From 1 October 2014, and unless one of the exceptions apply, employers who are found guilty by an Employment Tribunal of an equal pay breach under the Equality Act 2010 will have to conduct an EPA, and then publish the results on its external website within 28 days.

What is an equal pay audit? An EPA is a comparison of the pay between the sexes who do the same or equal work. An EPA should identify pay inequalities and the reasons for the differences. Employers should take action to deal with any unlawful pay inequalities that are uncovered. EPAs, are by their nature, often time consuming and costly.

Exceptions? Tribunals cannot order an EPA where:

• the employer has already completed an appropriate  EPA within the last three years;
• it is clear, without an EPA, that action is required to prevent equal pay breaches occurring or continuing;
• the breach gives the tribunal no reason to suspect that there may be other equal pay issues; or
• the disadvantages of an audit outweigh its benefits.

There are also some exceptions for businesses which have been operating for less than 12 months and for micro businesses.

Consequences for failing to comply

An Employment Tribunal can fine an employer up to £5,000 for failing to carry out an EPA, and up to £5,000 each time it subsequently fails to comply with its order.

The draft (Equal Pay Audits) Regulations 2014 have come under attack because they only provide limited detail of what an audit must comprise. In practice, the tribunals will have broad discretion in relation to the scope and time frame of the audit, and regarding whether an employer satisfies an exception. Nevertheless the ramifications for an employer which fails to comply with its equal pay obligations in future are likely to be considerable. The associated issues of an EPA being ordered in gender pay discrimination cases are likely to become a key strategic consideration for employers facing equal pay claims.

Is there a pay difference between men and women in your workforce? Could your company fall foul of the equal pay provisions? For more information on EPAs and how to minimise the risk of an equal pay breach, please contact our specialist Employment & HR team.