What is Equal Pay?

When people do work of equal value, they should ideally be given equal pay. But despite the law, this isn't always the case for many businesses.

Equal pay covers fair wages, gender pay gap, and equal opportunities. Whilst it's a big topic, employers must comply with all its legal requirements. If you don't, you could end up facing tribunal hearings, paying missing wages, and causing reputational damage.

In this guide, we'll look at what equal pay means, what the law covers, and how to provide fair and lawful wages to your staff.

What is equal pay?

Equal pay is about a person's entitlement to the same wage as someone - of the opposite gender - doing the same work. (It's also known as 'pay equity').

These jobs include work that's similar, equivalent, or of equal value. Employers use job evaluation schemes to determine which category a person's work falls into.

It's important to note that equal pay means covering wage differences between men and women. However, it's not the same as gender pay gap or gender equality. Despite that, it's fairly evident that women today are still paid less compared to their male colleagues in the same job.

Is equal pay the same as gender pay gap?

Both equal pay and gender pay gap do touch on the wage difference between men and women - but they're not the same.

Gender pay gap is a measurement that highlights the difference in average earnings between men and women in the same job. It doesn't account for employment role or job hierarchy like equal pay does.

Only businesses with more than 250 staff are legally required to publish average earnings or pay gap between men and women in their workplace. This is usually done through presenting a gender pay gap report.

Even with equal pay policies in play, employers could still suffer from gender pay gap issues within their business. For example, they could find that most employees in their lowest-paid jobs are women.

What does equal pay include?

Equal pay doesn't just refer to wages; it applies to all contractual terms like:

• Basic salary and wages.
• Working hours.
• Annual leave entitlement and holiday pay.
• Overtime pay.
• Performance-related pay.
• Redundancy pay.
• Sick pay.
• Pension schemes.
• Commission and bonuses.
• Travel allowances and company cars.

Who should receive equal pay?

There are many types of staff who should legally receive equal pay. For example, employees and workers. This includes those on full-time, part-time, and temporary contracts; like agency workers. Self-employed people who are personally hired to do work are also entitled to equal pay.

Under UK law, equal pay has no relation to a person's years of continuous service. That means they should receive equal pay from their first day if they do equal work.

What counts as equal work?

There are many factors that can define equal work between two workers. The law divides equal work into three categories:

'Like work'

'Like work' is when a job or skill is the same or broadly similar. These jobs involve tasks that require similar knowledge and capability. The term also outlines differences within the work that aren't significantly crucial.

'Work rated as equivalent'

'Work rated as equivalent' is when a job or skill is classed as equal through valid job evaluation schemes. The level of talent, responsibility, and effort needed for the work categorises it as equivalent.

'Work of equal value'

'Work of equal value' is when a job or skill isn't similar (or rated as equivalent) but it requires equal standards. The level of training, responsibility, or demands are outlined as working conditions.

What is covered by equal pay law?

Equal pay legislation was first covered under the Equal Pay Act 1970. However, the legislation was consolidated into the Equality Act 2010.

In recent times, employers must refer to the Equality Act and the Equality and Human Rights Commission (EHRC) statutory code of practice on equal pay.

The reason behind the consolidation was simple - to ensure men and women doing equal work are given the same pay and rewards. Equal pay is categorised under equal opportunities. That means employers have a legal duty to create workspaces that promote equal pay, along with fairness, tolerance, and respect.

Equal pay law can be a complex area for an employer to deal with. Yet, they still must be compliant, so they don't breach the law. If neglected, it could lead to unlawful discrimination claims, not just ones about unfair wages. Under the Equality Act, it's illegal to pay someone less based on nine protected characteristics:

• Age.
• Disability.
• Gender reassignment.
• Marriage and civil partnership.
• Pregnancy and maternity.
• Race.
• Religion and belief.
• Sex.
• Sexual orientation.

What are the consequences of an unfair pay gap?

If a claimant (employee or worker) believes they're not being given equal pay, they should be able to argue this with confidence. Employers should aim to either resolve it or explain their pay gap difference. This will help protect work relationships and avoid potential legal action.

If the claimant doesn't believe the issue has been resolved , they may raise their concern to an employment tribunal. They'll need to prove that they received less pay based on discrimination grounds. For example, showing that an employee of the opposite sex receives higher pay for equal work.

The claimant can use more than one comparator; i.e., like one colleague or a team of workers. A comparator can also be someone who currently works for the employer or previously worked for them. The employment tribunal judge will cover certain factors relating to the concern. For example, they'll:

• Decide whether the claimant does equal work compared to the comparator/s.
• Look into pay and contractual terms (specifically the extent of their pay gap difference).
• Check if the Equality and Human Rights Commission (EHRC) statutory code of practice on equal pay has been followed.

If the claim is successful, the employer may need to carry out an equal pay audit and publish the results. (This won't apply to businesses with less than 10 workers, or if they've been open for less than a year). The employer could even be forced to pay compensation, missing wages, and even legal fees.

Is unequal pay ever allowed?

Yes, there are times where people might be paid differently to other workers. This could be based on ‘material factors’ like:

• Qualification: Employees could be paid more because they're more qualified compared to others in the same job. For example, they have crucial skills that are hard to find in candidates.
• Location: Employees could be paid more based on where they're located. For example, they may live in London where the cost of living is greater.
• Working conditions: Employees may need to produce certain work faster or with more effort compared to normal circumstances. For example, they may need to work overtime or do night shifts.

Whatever the reason may be, workers must not be paid more or less because of their protected characteristics. For example, an employer cannot pay someone more or less based on their sex. It should be based on talent, skill, responsibility, or effort - not whether they're a man or woman.

How to provide equal pay within the workplace

When it comes to pay gap differences, it can be hard to manage. Employers may face difficulties with defining jobs as 'like work', 'work rated as equivalent' or 'work of equal value'.

In the end, you need to be proactive and comply with the law on pay equity. When you focus on its importance, you're guaranteed to achieve gender equality across your workforce.

Let's look at how to provide equal pay within your workplace:

Check for equal pay issues

The first step employers should take is checking for any equal pay issues found within their business.

Any employer will automatically assume they provide equal pay to all workers - men and women. However, a working provision, criterion or practice can easily account for pay gap issues. For example:

• Lack of transparency within pay and grading systems.
• Having out-of-date job evaluation schemes.
• Neglecting contractual bonuses (especially for those on sick leave or parental leave).
• Using more than one grading and pay system.
• Not being clear about starting salaries.

Carry out an equal pay audit

The next step involves carrying out an equal pay audit. This is usually done if an employer has more than 50 workers. The equal pay audit will help:

• Determine who performs equal work. (Remember, this includes the terms, 'like work', 'work rated as equivalent' and 'work of equal value'.
• Conduct job evaluation schemes to help measure the value of different jobs.
• Collect information on pay and contractual terms. (This will highlight any differences between men and women doing equal work).
• Highlight whether the pay gap difference is legal or illegal (and how to rectify this).

If an employer has less than 50 workers, they can hold an equal pay review. This involves identifying people doing equal work, collecting information on pay differences, and deciding on an action plan to rectify the pay gap average.

Create an action plan

The next step you should take is creating an action plan to address pay gap issues. This action plan will help you achieve a fair, transparent, and up-to-date pay system. Make sure your action plan covers the following:

• Producing an equal pay policy.
• Presenting clear and transparent job titles and specs.
• Outlining a job evaluation scheme.
• Managing grading structures and pay systems.
• Establishing a fair pay system.

In the end, the action plan will help all employees understand pay and benefits systems within your business. And it'll assure them that they're receiving equal pay in compliance with the law.

Establish a fair pay system

One of the most important steps to follow through on your action plan is the pay system. This is the crux of your equal pay compliance; without it, it's near impossible to pay workers fairly.

When establishing a fair pay system, employers should:

• Check all pay terms presented as starting salaries.
• Manage bonuses, commission, and performance-related pay schemes.
• Eliminate any gender bias found in working conditions and pay.
• Carry out an equality impact assessment.

Document your progress

Whilst establishing any pay systems, it's best to document your progress. It not only tracks your changes, it can also prove useful during future pay gap disputes.

Whilst reviewing your pay systems, it's good to check the impact of your new pay policies. Make sure you identify whether pay equality is progressing equally within your business. For example, how does it look for women-only workers; or even across race or sex.

It's also best to carry out an equality impact assessment or equality analysis. This is used to identify, reflect, and manage any risks linked to your changes. They can also help you keep legally compliant with your equality duty and avoid discrimination (which is especially crucial for all businesses).

Get expert advice on equal pay with Peninsula

Every employer has a legal duty to provide equal pay to their staff. This is especially applicable when they're doing the work that's the same, equivalent, or of equal value.

If you neglect equal pay law, your business could face serious consequences. Like, attending employment tribunal hearings, paying missing wages, and causing reputational damage.

Peninsula offers expert advice on equal pay. Our teams offer 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.

Want to find out more? Contact us on 0800 029 4377 and book a free consultation with an HR consultant today.