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Reminder of the importance of equal pay

The stark financial crisis surrounding Birmingham City Council is a timely reminder of why it’s so crucial to get equal pay right the first time.

Many equal pay claims were made against Birmingham City Council starting from the early 2000s, but the public body tried to minimise its responsibilities – until 2012, when the UK Supreme Court ruled in favour of workers receiving financial compensation.

However, the mounting equal pay compensation bill over the decade since contributed to Birmingham City Council having to file for bankruptcy in September 2023.

On top of struggling to repay hundreds of millions of pounds a month, the council was still failing to address its discriminatory practices around equal pay, having to deal with multiple trade unions to address the ongoing problem.

With other councils across the country facing similar claims and compensation bills worth billions of pounds, overlooking equal pay rules is certainly a costly mistake.

Equal pay for equal work

All employers should already know that workers must legally receive equal pay for performing equal work, regardless of gender – but while this is initially a basic principle, there are some complications that can catch employers out.

For example, it also applies for associated employers, where one organisation has overall control or sets the pay rates and benefits for multiple entities. It also extends to holiday, overtime, sickness, and redundancy payments.

Pension funding, work-related benefits like company cars, performance-related pay rises or bonuses, and pension funding must also be provided on an equal basis.

Not just salaries, but all elements of an employment package should be equal – such as equivalent working hours and annual leave allowances. This includes part-time workers, apprentices, and agency workers as well as full-time employees.

The concept of ‘equal work’ is where things got tricky for Birmingham City Council, where the 2012 discrimination dispute arose over male-dominated roles receiving bonuses that female workers in assistant or hospitality roles didn’t receive.

Equal work doesn’t actually need to be exactly like-for-like – it counts if the work is of equal value or if the same level of skills, responsibilities, and effort is required, even if the roles seem very different (e.g. a warehouse worker vs a clerical worker).

Avoiding disputes over differences in pay

Differences in the terms and conditions of pay are allowed in some situations – such as one worker being more qualified than another, or employed in a different area with a difficult recruitment market – but this must not have anything to do with gender.

The best way for employers to prevent equal pay disputes from arising is to be as transparent as possible about their pay systems, for example, by:

  • Taking employee requests for information about equal pay seriously and replying to questions as soon as possible.
  • Limiting the number of different pay grading scales within the same organisation for consistency and transparency.
  • Being open about pay grading systems and staying accountable to them to prevent discrepancies that could be grounds for a claim.
  • Describing work accurately in job descriptions and using consistent titles for roles so they provide objective metrics.
  • Clearly defining fair and achievable criteria with quantifiable targets for performance-related pay and competence pay.
  • Avoiding over-secrecy about starting salaries, especially during organisational restructuring, to avoid divergence in equal pay.
  • Carrying out equality impact assessments and periodic pay audits to ensure all policies and practices treat all genders equally.

In addition to the risk of owing significant back pay or damages following an equal pay claim, there is also the potential for significant reputational damage to the business – so the consequences of equal pay disputes can be far-reaching.

Bookkeeping for employers

More detailed guidance on equal pay is available to employers on the ACAS (Advisory, Conciliation and Arbitration Service) website.

In addition to ensuring that your business is paying employees appropriately in terms of minimum wage entitlement, it’s also crucial to pay employees fairly without enabling gender-based discrimination.

If you need assistance updating your pay systems, you should speak to gbac about our bookkeeping and payroll services. Get in touch to discuss streamlining your accounting systems with our accountants in Barnsley.