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Employers threatened by “ticking time-bomb” of pay claims

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The Equal Pay Act was introduced in the UK more than half a century ago, and yet many organisations still fail to pay male and female staff equally. Birmingham City Council, for one, is being forced to make a monumental payout due to historic pay iniquities, and there are many other employers in the ring line. Lauren Weymouth reports

On 7 June 1968, 187 sewing machinists at Ford’s manufacturing plant in Dagenham, east London, walked out of the motor company’s doors, staging a historical strike that acted as a catalyst for the 1970 Equal Pay Act, a landmark moment for the equal rights of women and men across the UK.

But over half a century later, around four out of five companies in the UK still pay their male employees more than female equivalents.

According to government statistics, the median pay gap stands at 8.3%.


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While many organisations have successfully plugged the gap – British Heart Foundation (BHF) successfully closed its gap by 2022, down from 1.0% in 2021, in favour of female colleagues – others have been hit by hefty back payments and legal fees in relation to equal pay claims.

In the headlines recently, Birmingham City Council faces equal pay liabilities worth millions of pounds, a bill made worse by the £46.5 million it needs to fix issues with the implementation of its Oracle HR system, affecting payments, data management and background checks.

The council reportedly owes up to £760 million to claimants who said the council failed to provide them with the same benefits and payments as employees of the opposite sex who did the equivalent work.

In a statement, the council said it has already paid out a total of £1.1 billion in relation to settlement of equal pay claims over the past decade: “This is one of the biggest challenges this council has ever faced […] it means there will be significantly fewer resources available in the future compared to previous years and we will need to reprioritise where we spend taxpayers’ money.”

But the council is not the only employer to encounter such escalating issues.

“Equal pay claims had historically, particularly around 2007-2010, focused mainly on the public sector with thousands of claims being brought before tribunals by teachers, council workers and NHS staff,” Kimberley Barrett-St Vall, partner at employment law firm AfterAthena, explains, “but most of the claims we have seen recently have been within the private sector.”

“Employers should not be surprised if they receive informal or formal grievances on this issue”

Among the catalysts for this are cases against major retailers, such as Next, which could be made to millions of pounds in backdated pay to female employees after more than 2,000 Next store staff launched legal action.

The employees – current and former sales consultants – argued their roles were of equal value to the work of Next’s warehouse operatives and thus, should be paid at the same rate.

Several other similar claims are being brought against other retail organisations, including supermarket chains Sainsbury’s, Tesco, Morrisons and Asda.

“Equal pay claims are somewhat of a ticking time-bomb, and given the high level of press coverage employers should not be surprised if they receive informal or formal grievances on this issue,” says Tina Chander, head of employment law at Wright Hassall.

“If an employer is concerned that it may have breached equal pay laws, then the worst thing they can do is sit back and wait for other judgements to be released in the press, or a notification from Acas or a tribunal that your employee intends to bring a claim.”

But to understand equal pay, it’s firstly important to know what it means in law and how it applies.

Quite simply, men and women must be paid equally for equal work.

“The best approach if unsure is to conduct an equal pay review,” Chander adds. “If an employer finds it has not paid men and women correctly, then their action is to rectify any pay discrimination and keep a paper trail of their efforts to address and compensate unequal pay.”

Lawyers suggest that as well as conducting an equal pay review, other ‘high risk areas’ to look out for include male-dominated warehouse roles that are paid at a higher rate than female-dominated office or store-based roles, as is the case for retail giant Next.

“Employers should also have a clear rationale for any pay discrepancies between male and female employees, both for new recruits and when giving pay rises,” explains Bryony Goldspink, partner at law firm Gordons. “It is vital to ensure these are well documented.

“Discrepancies may be due to differing experience, skills, location, market forces, performance or difficulty recruiting for certain roles. These can be a defence to equal pay claims.

“Often employers struggle in defending claims where the rationale for historic differences in pay is not known or documented.”

Taking the necessary measures now will ensure companies are one step ahead with regards to mitigating any potential losses.

Perhaps more than that, though, Tim Pointer, chief people officer, points out: “This visible commitment to fairness and equality not only retains talented colleagues but also attracts a diverse pool of talent with this evidence that they will be valued and respected.”

The BHF echoes this sentiment and argues that promoting greater flexibility has helped the charity to close its gender pay gap.

Its chief people officer, Kerry Smith, says: “At the BHF, we’re proud that we don’t have a median gender pay gap. A better flexible working offer means we can attract talent from a wider pool, which could be an important factor in reducing the gender pay gap.”

So, what’s next for the likes of Birmingham City Council?

The organisation claims “enhanced governance will be put in place to monitor the situation” and senior leads have begun work to develop a budget recovery plan, but it could be argued that this is too little too late for an employer of this scale, which simply does not have the funds to match the extraordinary level of debt.

When sewing machinists walked out of Ford Dagenham in 1968, the strikes brought the factory to a halt – it was impossible to sell cars without any seat covers – and the company suffered huge losses.

This wasn’t enough to warn employers of potential future damages, but the most recent cases such as Birmingham City Council should be a resounding call for action.

“Equal pay issues can arise in any size and type of organisation in both the public and private sectors,” Rob McKellar, director of legal services at Peninsula concludes. “Don’t assume that because no one has raised an issue, that it isn’t a problem.”

 

This article was first published in the July/August 2023 issue of HR magazine. Subscribe today to have all our latest articles delivered right to your desk.

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