A Guide to Equal Pay Audits

April 9, 2017

A Guide to Equal Pay Audits

Under the Equality Act 2010, it is unlawful for an employer to discriminate between men and women in terms of their pay and conditions where they are in the same employment and are doing the same or similar work, work rated as equivalent or work of equal value. An employer only has a defence against a claim of sex discrimination with regard to pay where the difference in contractual terms is due to a 'material factor' which is not directly or indirectly discriminatory.

The Equality Act 2010 (Equal Pay Audits) Regulations 2014 set out the circumstances in which the ET must order an employer found to have breached the equal pay provisions of the Equality Act to carry out an equal pay audit, the required contents of the audit and the timetable for ensuring compliance with the order.

The Regulations set out the circumstances in which the ET must order the employer to carry out an equal pay audit, the required contents of the audit and the timetable for ensuring compliance with the order.

Employers will not be ordered to carry out an audit where the ET considers that:

  • an audit has been completed in the previous three years that meets the requirements as to the content of an equal pay audit;
  • it is clear without an audit being done whether any action is required to avoid equal pay breaches occurring or continuing;
  • the breach in question gives no reason to think that there may be other breaches; or
  • the disadvantages of an audit would outweigh its benefits.

There is also an exemption for existing micro-businesses (i.e. those with fewer than ten employees) and new businesses (i.e. brand new businesses started in the twelve-month period before the complaint was made).

Where an order is made, this will include a description of the persons for whom relevant gender pay information must be included, the period of time covered by the audit and the date on which the audit must be received by the ET.

An audit must:

  • include the relevant gender pay information as specified by the ET;
  • identify any differences in pay between the men and women specified and the reasons for those differences;
  • include the reasons for any potential equal pay breach identified by the audit; and
  • include the employer's plan to prevent equal pay breaches occurring or continuing.

Once the audit has been satisfactorily completed, the gender pay information it contains will normally be required to be published 'in a format accessible to all affected staff', which will usually be on the employer's website, for a period of at least three years.

Failure to comply with an order may result in a penalty not exceeding £5,000, with possible additional penalties for employers who continually fail to comply with an order.

Whilst the Equality Act requires public sector organisations to consider gender equality within their workplace as part of the Equality Duty and to publish relevant gender equality data, there had hitherto been no requirement for employers in the private and voluntary sectors to do so. However, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, which came into force on 6 April 2017, introduce mandatory gender pay gap reporting on an annual basis for private and voluntary sector employers with 250 or more employees. The first report will be due no later than 4 April 2018.

In addition, the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 have extended to public sector employers the requirement to produce annual statistics on the gender pay gap in a prescribed format. These Regulations are introduced as part of the existing public sector equality duty and the first report will be due no later than 30 March 2018.