Conducting an Equal Pay Audit

May 15, 2014

Conducting an Equal Pay Audit

Under the Equality Act 2010, an employer must give a woman who is doing work equal to that of a man in the same employment equal treatment as regards the terms and conditions of her employment contract, and ensure that pay systems are transparent. Where a pay system lacks transparency, the employer must be able to prove that there is no sex discrimination behind a pay differential.

Even though equal pay legislation has been with us since the introduction of the Equal Pay Act 1970, significant differences in pay between male and female workers still exist. Generally, such differences arise not out of any intention to discriminate but because the pay system has not been kept under review and up to date. However, an employer that takes a proactive approach with regard to ensuring equal treatment in the workplace is less likely to face a costly discrimination claim.

The Equality Act requires public sector organisations to consider gender equality within their workplaces as part of the Equality Duty and to publish relevant gender equality data. Whilst it is not currently mandatory for businesses in the private and voluntary sectors to undertake a pay audit, the Government has campaigned to get them to report on a voluntary basis. Furthermore, in October 2014, it plans to introduce regulations requiring Employment Tribunals to order an equal pay audit in the specific circumstance where an employer is found to be in clear breach of equal pay law.

A recent survey carried out by XpertHR found that only 32 per cent of private sector employers had carried out, or were in the process of carrying out, an equal pay review and, of those who had done so, 43 per cent reported that no results had been published even to employees whose terms and conditions were reviewed.

The benefits of carrying out an equal pay audit include:

  • identifying, explaining and, where unjustifiable, eliminating pay
  • inequalities;
  • having rational, fair and transparent pay arrangements demonstrating to employees and to potential employees a commitment to equality; and
  • demonstrating the organisation's values to those with whom it does business.

The audit should include:

  • comparing the pay of men and women doing equal work – ensuring
  • that this considers work that is the same or broadly similar ('like work'),
  • work rated as equivalent and work that can be shown to be of equal
  • value or worth;
  • identifying and explaining any pay differences; and
  • taking appropriate action to eliminate any pay inequalities that cannot be explained on non-discriminatory grounds.

A model for carrying out an equal pay audit can be found in the Equal Pay Statutory Code of Practice.