Companies will not be forced to publish results of equal pay audits, says Government

Out-Law News | 28 May 2013 | 11:28 am | 3 min. read

Companies that are required to undertake equal pay audits would not be required to make the results of those audits public, the Government has proposed.

It said that the "unforeseen consequences" of publication, mean that "the disadvantages of publication outweigh the advantages". However, the Government recommended firms do publish the results of equal pay audits "if they wish to do so" providing they are mindful of "data protection issues" (280KB Word document).

Companies would, though, have to disclose the results to employees covered by the audit, applicable trade union bodies and the employment tribunal that ordered the audit, under the Government plans.

The Enterprise and Regulatory Reform Act, introduced last month, gives the Government power to create new regulations that would allow employment tribunals to order businesses to undertake an equal pay audit if they are found to have breached equal pay laws. Businesses that are ordered to undertake an equal pay audit could be fined up to £5,000 by an employment tribunal if they fail to adhere to the requirements under the new regime.

Employees can bring an equal pay claim against their employer under UK employment laws where they can show that they are being paid less than members of the opposite sex for performing work of equal value providing the staff concerned work in the same 'establishment' or are subject to a collective set of terms and conditions. Employers have to be able to objectively justify any differential in pay between men and women.

The Government first consulted on the equal pay audit plans last year and it has now launched a second consultation in a bid to ensure "unnecessary burdens" are not placed on employers as a result of the regime.

Businesses ordered to conduct an equal pay audit should be required to compare the "employment terms and conditions of men and women doing equal work, including contractual and non-contractual pay", according to the Government's proposals. This could involve comparing how male and female staff are treated in terms of overtime or unsocial hours payments, whether there are differences in performance-related pay incentives, for example, the Government said.

Firms would have to identify and explain pay differences and detail what action could be taken to "eliminate pay inequalities" that cannot be justified.

The Government said, though, that the equal pay audits would have to adhere to standards set by the employment tribunal. It said tribunal judges or independent auditors could be involved in reviewing the compliance of the audits with those standards.

"Independent auditors could be commissioned by the employment tribunal to sign off the equal pay audit," the Government said in its consultation. "By so doing, they would be confirming that the equal pay audit meets the standards set out in regulations, and imposed by the tribunal."

The advantages of involving independent auditors is that they "could provide employers with compliance guidance for the requirements of an equal pay audit ordered by an employment tribunal" and they "might also be in a position to advise the employer on how best to carry out the equal pay audit", it said. However, involving auditors would add "an extra cost burden" for employers.

"We are aware however, that only specially trained employment judges hear equal pay cases in employment tribunals," the Government added. "These judges are skilled and experienced in interpreting and applying equal pay legislation and are conversant with all the relevant case law and different job evaluation schemes. As a result, we believe that employment tribunal judges too may have an important role to play in deciding whether or not an equal pay audit presented to it complies with the standards set out in an equal pay audit order."

The Government said that it intends to introduce new equal pay audit regulations next year.

Employment law expert Selwyn Blyth of Pinsent Masons, the law firm behind Out-Law.com, said that employers should not be unduly concerned about the Government's proposals.

"Businesses were intimidated by the idea of being forced to carry out an equal pay audit under the original plans of the Labour Government," Blyth said. "This is because they were to be compulsory depending on an organisation’s size, not the outcome of a tribunal case."

"Under these latest plans, a tribunal could only order employers to undertake an audit following a successful claim for unequal pay. These claims can take years to process and an employer has the option of settling the claims at strategic points during that process, allowing them to avoid an adverse finding and an order to conduct an equal pay audit. In addition, the tribunal would not be compelled to order an audit even if there has been a successful claim – this is in contrast to the Labour Government’s proposals in which audits would have been routine and compulsory. The circumstances when an audit should not be ordered are broad and arguable," he added.

Blyth said that the proposed penalty of a fine of up to £5,000 that companies could face for failing to comply with an order to conduct an equal pay audit is "not fit for purpose". He said the costs involved in undertaking such an audit would be greater than the maximum penalty and that therefore the proposed sanction would be unlikely to encourage compliance.

The expert said, though, that whilst most employers would welcome not having to make the results of an audit public beyond their own workforce, they would find it "very difficult to monitor a 'leak'" of the results by that workforce.