13. Benefits and equal pay

Equal pay in practice checklist 13

What do we mean by benefits?

The term 'benefits' refers to components of the remuneration package other than salary, such as occupational pensions, holidays, company cars, or childcare allowances. Benefits will usually be contractual but some may be provided by an employer on a discretionary basis.

Discretionary benefits are not covered by the equal pay (‘equality of terms’) provisions in the Equality Act 2010 but are covered by its sex discrimination provisions.  It may be discriminatory not to apply discretionary or non-contractual benefits equally across the whole workforce, if this results in a lower proportion of one sex  not receiving the benefit (for example, only offering childcare assistance to women).

Contractual benefits may, for example, include: car and other allowances, contractual bonuses, shift payments, overtime, service pay, mortgage facilities, redundancy and severance pay, sick and maternity pay, holiday entitlements and the employer's contributions to a pension scheme. Each element of the pay package must be treated separately so, as part of the process of checking that you are providing equal pay, you must examine each benefit separately.

It's also important to remember that, because each element of the pay package has to be considered separately, you will not be able to defend an equal pay claim by arguing that the total pay packages are equal. For example, a woman can claim equal pay with a male comparator who earns a higher rate of basic pay than she does, even if other elements of her pay package are more favourable than his.

Differences in contractual or discretionary benefits on the basis of race, disability, age or part-time status are covered by the employment discrimination provisions of Equality Act 2010 and the Part Time Workers Regulations (see the Statutory Code of Practice on Employment).

Differences in payments may be lawful even if they disadvantage people with a protected characteristic,, provided that they can be objectively justified. For example, a bonus scheme limiting payment of a shift premium to employees who worked night shifts was held not to be unlawful although the scheme disadvantaged women who were less likely to be able to work at night. Night shift premiums were held in that situation to be justified as a proportionate means of achieving a legitimate aim, which was to encourage and reward '24/7 working'. The necessary cover could not be achieved if those who did not work night-shifts were also paid the same amount.

How do you find out if there is a problem?

You need to find out who is receiving benefits, what benefits they are receiving, and why the benefit is being provided (for example, a company car could be provided because the work requires it, or as an incentive to people with scarce skills to join the company, or in recognition of the status of the job).

You then need to consider – where employees are doing equal work:

  • Do the proportions of people –men and women, people from different minority ethnic groups etc. - receiving each benefit reflect your workforce composition?
  • Is their average payment/benefit equal?
  • Can the benefit still be objectively justified?
  • For certain benefits you also need to check whether all categories of staff have equal access. Unequal access might indicate discrimination. Examples would be childcare allowances or occupational pensions.

You should look at other aspects of equality besides gender, such as race, disability, age and whether employees are full-time or part-time.

An example

Jenny and Joe are both IT professionals who started work on the same day on the same salary. Both get a company car. Their job is to support IT on various sites.

Jenny then has a baby. On her return to work, she becomes office based on the same salary but loses her car. Jenny claims sex discrimination as men who are office based in equivalent jobs get a car.

When the Human Resource Manager investigates Jenny's claim he finds that the IT Manager had introduced company cars as a means of recruiting and retaining people with scarce skills. Although the use of cars as a recruitment and retention tool had been an appropriate method at the time, it was no longer appropriate. Jenny gets her car back. In future cars are assigned by using clear and fair criteria based upon the needs of the post.

If cars had been awarded only to those whose work required travel between sites (assuming public transport was not a viable alternative), then the removal of Jenny’s car once she became office-based may have been justified.

What lies behind the differences?

The answers to the following questions can help you find out what lies behind the differences in take up of benefits.

  • Who has access to the benefits offered? Status is often a factor in determining access to benefits such as company cars and share options. Providing different levels of benefits to different categories of staff needs careful monitoring.
  • How are benefits allocated? Does it depend on what the employee asks for? Or on what their manager thinks they deserve? What safeguards are there against the inappropriate use of managerial discretion?
  • Are there variations in the levels of benefits provided? What determines these variations? The take up of the differing values of benefits also needs to be monitored.
  • Is length of service used to determine access to benefits? If, for example, women are less likely to be able to comply with the service requirement than men, then indirect discrimination may occur.
  • Are market comparisons used to determine access to benefits?  Using market comparisons runs the risk of importing discrimination from outside of the organisation. Make sure that the market information is free from bias, or treat market comparisons as a short-term measure.

What else do you need to be aware of?

Benefits are a useful means of attracting and retaining employees, but as with any other aspect of the pay system, they need to be kept under review.

Issues of particular concern include:

  • Unequal access – for example, the exclusion of part-timers from a benefit where the majority of employees are women. By law, part-timers must have equal access to an occupational pension scheme.
  • Providing different levels of benefit to different categories of employees, where those groups tend to be dominated either by men or by women or by people from a particular ethnic minority.
  • Providing different levels of benefit according to length of service
  • If you provide a flexible benefit package for all your employees you will need to monitor the value of the benefits in order to ensure fair treatment.


Analyse the take up of the benefits you provide.

Benefit packages need to be compared, and the value of each individual benefit calculated and monitored. Access and take up of each benefit needs to be analysed by gender, race, disability, age and contractual status. Is the benefit meeting the objectives it was originally designed for? Do the employees still want the benefit? Would short-term incentives be preferable? If you consider it necessary to pay extra benefits to recruit and retain staff then a non-consolidated one-off welcome payment may be more appropriate than a continuing benefit like the company car. Regularly reviewing benefits both in terms of usefulness and cost can be a positive step for both employers and employees.

Consider whether your pay system is contributing to the problem.

Do people understand the level of benefit they receive? Is the system clear and rules available to all employees? Are the benefits available to all employees, including those who work part-time? If there are exclusions, have you checked to ensure that you are not discriminating on the grounds of sex or any other diversity strand? For example, if there is a workplace nursery then this should be open to men as well as women, and staff on other sites should get equivalent support e.g. childcare vouchers. You need to take particular care not to discriminate in respect of part-time employees.

Check for equal pay for work of equal value.

If you operate a benefit scheme that is not available to all employees, you should check that everyone doing equal work (that is work that is the same or broadly similar, work rated as equivalent or work of equal value) is treated equally. For example, if private health insurance cover is available to one group of workers, then anyone else in the organisation whose job is similar or of equal value should also be able to benefit. Although the equal pay rules themselves apply only to women and men, the discrimination provisions apply to make less favourable treatment of people with other protected characteristics (eg race, disability) unlawful.

Check what happens to women on maternity leave.

A woman’s terms and conditions with the exception of her normal pay (i.e. wages and salary) continue to apply during her maternity leave period. Employers need to continue to provide the same benefits during Additional Maternity Leave that are available during Ordinary Maternity Leave, such as company cars, gym membership and health insurance. In addition, contractual annual leave continues to accrue and to apply or for assessing seniority or financial non-contractual benefits based on length of service during both OML and AML. However this is a complex legal area and, if in doubt as to the continuation of bonuses, occupational pension rights or other benefits, specific legal advice will be needed.

Make sure that decisions on the allocation of benefits are properly documented.

It makes good business sense for employees to understand why they receive benefits, but if you should ever be challenged in an employment tribunal, documentation will be essential. Properly documented decisions will enable you to explain your reasoning.

Transparency is a key feature of tackling equal pay problems.

A transparent pay system is one where employees understand not only their rate of pay but also the components of their individual pay packets, including the allocation of benefits. A transparent pay system avoids uncertainty and perceptions of unfairness and reduces the possibility of individual claims.

Whilst every effort has been made to ensure that the information given here is accurate, only the courts or tribunals can give authoritative interpretations of the law. There is further information on both equal pay law and good practice, including on how to conduct an equal pay audit, in the Statutory Code of Practice on Equal Pay.

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