The concept of equal pay for equal work is well established, having been introduced into law by the Equal Pay Act 1970. The governing statute is now the Equality Act 2010.

There are three kinds of equal work, namely:

1. Like work – the same or broadly similar work that involves similar tasks which require similar knowledge and skills, and any differences in the work are not of practical importance.
2. Work rated as equivalent – work that has been rated under a valid job evaluation scheme as being of equal value in terms of how demanding it is.
3. Work of equal value – work that 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.

Equal pay is a day one right afforded to employees, workers, apprentices and personal and public office holders, whether they have a full time, part time, fixed term, zero hours or casual contract. It applies to all contractual terms which include 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 and benefits in kind.

What is an equal pay audit?

Conducting an equal pay audit allows you to systematically review your organisation’s pay data to assess whether employees are being compensated fairly or if certain groups are being treated more favourably than others.

During an audit, employers can analyse various factors that may contribute to pay disparities, such as start dates, contracted hours, regional allowances, and other material factors, and then taking positive steps to eliminate instances of unjustifiable unequal pay. It’s important to note that any differences in pay must be justified by legitimate reasons unrelated to sex.

The benefits of an equal pay audit

Conducting an equal pay audit is a valuable investment of time, offering several important benefits for organisations which include:

• Identifying key risk areas and developing an action plan to rectify disparities
• Minimising expensive legal risks and expenses should a claim be brought, and succeed
• Improving employee satisfaction and, in turn, productivity 
• Attracting corporate stakeholders who place a higher emphasis on corporate social responsibility and ethical business practices
• Enhancing the reputation of your business and, in turn, improving staff and client retention and attraction.

Gender pay gap reporting

The Government has made it mandatory for private sector employers, including schools, with over 250 full-time equivalent employees, to report gender pay gaps within their organisations. Whilst there are no specific penalties, non-compliance may amount to an “unlawful act”, enabling the Equality and Human Rights Commission to enforce any failure to comply. 

As the data is publicly available, organisations should consider the reputational damage that could result from the failure to comply, as well as potential implications for recruitment.  

Mandatory reporting has highlighted a wider and serious issue of equal pay structures. Even if pay gaps are narrow, the risks, when applied across large groups over the last six years (the claim limit), can be significant.