Our guidance refers to anyone who is covered by equal pay law as an ‘employee’.
While both men and women can claim equal pay, we refer to a woman claiming equal pay for simplicity and to reflect the fact that most claimants are women.
What equal pay means
As set out in the Equality Act 2010, men and women in the same employment performing equal work must receive equal pay, unless any difference in pay can be justified.
It is the law and employers must follow it. You are at risk of an expensive employment tribunal case and reputational damage if you do not provide equal pay.
Equal pay applies to all contractual terms, not just pay. This includes:
- basic pay
- non-discretionary bonuses
- overtime rates and allowances
- performance-related benefits
- severance and redundancy pay
- access to pension schemes
- benefits under pension schemes
- hours of work
- company cars
- sick pay
- fringe benefits such as travel allowances
- benefits in kind
The right to equal pay applies to many different work arrangements, including:
- employees with a verbal or written contract of employment
- workers who agree to do work personally
- personal and public office-holders
It does not matter how long they have been employed or whether they have a full time, part time, fixed term, zero hours or casual contract.
Defining equal work
There are three kinds of equal work:
- like work is the same or broadly similar. It involves similar tasks which require similar knowledge and skills, and any differences in the work are not of practical importance.
- work rated as equivalent has been rated under a valid job evaluation scheme as being of equal value in terms of how demanding it is.
- work of equal value is not similar and has not been rated as equivalent, but is of equal value in terms of demands such as effort, skill and decision-making.
Learn more about equal work and see examples
Justifying pay differences
If a woman proves that she is doing equal work to a man, there is a legal presumption that any difference in their pay is because of their sex, unless the employer can show that a ‘material factor’ explains the difference.
A material factor must:
- be a genuine reason for the difference in pay
- cause the difference in pay
- be significant and relevant
- explain the pay difference with ‘particularity’ - this means the employer must be able to show how each factor was assessed and how it applied in the woman’s specific case
- not be tainted by direct or indirect sex discrimination
How to provide equal pay
Check if you have a problem
You might assume that you are providing equal pay, however many common practices can lead to risks with equal pay, such as:
- lack of transparency in your pay and grading system
- discretionary pay systems
- out of date job evaluations
- non-payment of contractual bonuses during maternity leave
- different non-basic pay terms and conditions for different groups of employees (for example bonuses or overtime)
- more than one grading and pay system within an organisation
- long pay scales
- overlapping pay scales and broad-banded structures
- managerial discretion over starting salaries
- market-based pay systems not underpinned by job evaluation
- indefinite or lengthy pay protection policies
An audit is the easiest and most effective way of checking if you have a problem with equal pay.
Our guide for small organisations with 50 or fewer employees shows how to carry out an equal pay review in three steps.
Our guide for large organisations with more than 50 employees shows how to carry out an equal pay audit in five steps.
Take action if you find a problem
Create an action plan to address any issues around equal pay. Effective action plans detail how you will fix the issues with clear timescales and reasons why this is the soonest it can be done.
Achieving and maintaining equal pay requires a fair, transparent and up-to-date pay system. To do this:
- everyone should understand the pay and benefits system
- pay systems should be as simple as possible and therefore easier to manage and understand
The core elements of a fair pay system include:
- Producing an equal pay policy
- Creating clear and transparent job descriptions and titles
- Undertaking a job evaluation scheme
- Looking at your grading structures and systems
Other things you should consider for a fair pay system include:
- Checking starting salaries
- Ensuring equality in competence pay
- Dealing with any problems in performance related pay
- Making sure there is equality in bonus payments
- Eliminating gender bias from ‘working time’ payments
- Limiting managerial discretion over all elements of the pay package
- Considering market forces
- Carrying out an equality impact assessment
Monitor your progress
Documenting your decisions helps measure their impact and show that you have considered equal pay.
Once you have committed to providing fair and equal pay systems, make sure that your efforts are in the best interests of your business.
Reviewing how your systems work in practice will give you confidence that you are acting lawfully.
Good practice organisations often review their systems annually, paying specific attention to:
- The impact of new pay policies
- What starting salaries look like on entry to the organisation
- Whether men and women are progressing equally within the organisation
- If performance-related reward is linked to a defined level of performance
If your organisation is a public body in Wales or Scotland, an equality impact assessment of your policies and practices is likely to be needed to comply with your public sector equality duties.
If your organisation is a public body in England or is in the private sector, an equality impact assessment, or equality analysis is an effective way to assess the risk of the proposed changes (and in the case of a public body will help ensure you comply with the public sector equality duty).
Why equal pay is important
It is important to provide equal pay in order to comply with the law by identifying, explaining and eliminating unjustifiable pay gaps, and to and to contribute to a fairer society in which everyone has equal opportunities.
If you do not act lawfully, you are at risk of:
- Expensive legal fees
- Lost productivity
- Damaged employee relations and low staff morale
- Cost of tribunal decision
- Loss of reputation
Last updated: 21 Aug 2020