What is the business case for equal pay?

Advice and Guidance

Which countries is it relevant to?

    • Great Britain

      Great Britain

The business benefits

Employers in both the private and public sectors benefit by providing equal pay.

Organisations that treat staff fairly may find an increase in productivity that comes from higher morale and employee commitment. They’ll also find it easier to recruit and retain a skilled workforce as well as sustaining or improving their reputation. 

A transparent pay structure gives employees confidence that their pay is fair and non-discriminatory.

Reducing the risk of an equal pay claim

Providing equal pay for all employees will reduce the risks of facing an equal pay claim.

Defending an equal pay claim is costly, complex and time-consuming exercise involving:

Expensive legal fees: 

Defending an equal pay claim could cost thousands of pounds. Costs can escalate depending on claim circumstances, legal fees, number of claims and complexity.

Lost productivity:

Defending equal pay claims is time-consuming as HR and line managers have to gather evidence, communicate with legal representatives and attend tribunal hearings.

Damaged employee relations and low staff morale:

Facing an equal pay claim could lead to further claims being made if staff perceive that there is pay discrimination in the organisation. Low staff morale leads to loss of business productivity.

Cost of tribunal decision:

Even if an employer wins their case, they normally have to pay their own legal fees. If they lose, they will have to pay their legal fees and a financial award (as decided by the tribunal), which could include up to six years’ back pay.  Employers may also have to pay the successful employees’ tribunal fees, and, in limited circumstances, for example where they have acted unreasonably in dealing with the claim, the employees’ legal fees too.

Loss of reputation:

Equal pay claims are likely to have a negative impact on the employer’s reputation with customers and shareholders, and adversely affects its ability to attract and retain the best employees.

Possible further audits:

If an equal pay claim against an employer is successful, they are likely to be ordered, by the tribunal, to undertake an equal pay audit.

The courts have made it clear that organisations are responsible for ensuring their pay systems are free of sex discrimination. Furthermore, there is an expectation that employers should not wait until a claim is made against them before taking action to achieve equal pay for equal work.

How Transport for London (TfL) benefits from equal pay

To ensure visible and more rapid progress towards salary equality, TfL undertakes an equal pay audit every two years. This compares the pay of staff doing the same work and looks at sex, ethnicity and whether employees are full or part-time. It also considers performance-related pay and rewards for senior managers. On a collective basis there are no apparent issues regarding equal pay. When drilling down to a more granular level, however, much of the analysis demonstrates that pay differentials are driven largely by the organisation’s overall demographics and the under-representation of both women and ethnic minority people in the workforce. If there are any potential pay discrimination issues, the employing manager and TfL’s reward and recruitment teams are expected to work together to identify and resolve them. These conversations include reviewing existing internal pay rates for similar roles, as well as external market rates of pay.

The model for carrying out an equal pay audit

TfL follows the Equality and Human Rights Commission’s model for carrying out an equal pay audit. 

Mandatory gender pay gap reporting

The expected, new requirement to publish gender pay gap information for employers with more than 250 employees will have an impact on the way TfL approaches its equal pay audits in the future. For example, the 2015 audit is the first to include information on bonuses.

Impact

TfL has found that proactively striving to provide fair pay has brought significant benefits to the organisation: employees feel more valued, trust the organisation and in return are more engaged with their work. Having regular pay audits has also ensured that TfL has not needed to spend excessive amounts of time and resources rectifying  pay discrimination through litigation. Equal pay is embedded into the business culture as a core value and business function. It is considered part of a manager’s ‘toolkit’ and is given due weight and consideration when line managers are recruiting new staff, setting salaries and giving promotions.

Where the business benefits begin

The best way for any organisation, regardless of its size, to ensure a fair and transparent pay system is to carry out an equal pay audit. You can find more information on equal pay audits and help with how to introduce a non-discriminatory pay system in the How to implement equal pay section of this site.

Last updated: 02 Aug 2018

Contact Acas for further information

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