d&i Leaders Monthly Equality Law Update
Pay transparency and pay gaps – what is the law doing to fix this?
By Paul McFarlane on 2 December 2024
Since the Equal Pay Act 1970 came into force in 1975 it has been the law in the UK that men and women must get equal pay for doing ‘equal work’. Equal work can be one of three things:
- ‘Like work’ – work where the job and skills are the same or similar
- ‘Work rated as equivalent’ – work that’s found to be equivalent, usually using a job evaluation process. This could be because the level of skill, responsibility and effort needed to do the work are equivalent
- ‘Work of equal value’ – work that is not similar but is of equal value. This could be because the level of skill, training, responsibility or demands of the working conditions are of equal value
However, in practice, down the years there have a been numerous cases which have illustrated women continue not to receive equal pay for equal work e.g. that number of cases since 1975 which show that this often not the case. A notable recent example of this was the case involving the BBC presenter, Samira Ahmed, who was successful in her equal pay claim against the BBC. She argued, and the Employment Tribunal agreed that her work on Newswatch was like, or of equal value to, Jeremy Vine’s work on Points of View for equal pay purposes. The BBC was also unable to show that the difference in pay was because of a material factor which did not involve sex discrimination. It is understood she received compensation in excess of £700,000 for the losses she suffered compared to Mr Vine over a six-year period.
Pay gap reporting in the UK
Equal Pay should not be confused with the gender pay gap. The gender pay gap looks at what the average pay for men is compared with women. Since 1997, the gap between men and women’s average pay has been monitored on a national level by the Office for National Statistics (ONS).
In 2016 (the year before the reporting obligations were introduced), the gap was 9.4% for full-time employees. Since then, it has been:
– 2017 : 8.6%
– 2018 : 9%
– 2019 : 7.4%
– 2020 : 7.9%
– 2021 : 8.3%
– 2022 : 7.7%
– 2023 : 7.4%
– 2024 : 7.0%
For all employees (full and part-time) the gender pay gap has reduced from 18.1% in 2017 to 13.1% in 2024. Lots of reasons have been given as to why a gender pay remains including, but not limited to: outright discrimination, including the lack of quality part-time work, job segregation, the impact of motherhood on women’s careers, and the lack of women in senior roles. Evidence has also shown that part-time workers, who are more likely to be female, are less likely than full-time workers to enjoy pay progression
In the private or voluntary sector employers with 250 or more employees must produce gender pay gap reports.
In the public sector whilst the pay gap regulations do not apply to them, there are other regulations which impose similar requirements to publish gender pay information on a large list of public bodies who employ 250 or more employees.
Action Plans and other pay gap reporting (ethnicity and disability)
Currently there is no requirement in law for employers who are required to publish gender pay gap reports, to also publish an action plan which explains why they have a gender pay gap and what measures they plan to take to reduce/illuminate the pay gap.
However, there is a government guidance published on the Government Equalities Office (GEO) website which is there to assist employers on how to tackle their pay gaps.
Finally, it is worth noting that the new Labour UK government is committed to require employers who have to publish gender pay gap reports to also publish their actions plans for addressing any pay gaps they have.
Further, they committed to introduce mandatory pay gap reporting which shows the pay gaps due to ethnicity and disability. It is anticipated that there will be a consultation exercise on these proposals next year.
What is happening in the EU?
In March 2021, the European Commission adopted a proposal for a Directive (The EU Pay Transparency Directive) aimed at increasing the transparency of pay systems and enhancing the enforcement of the fundamental right to equal pay. The European Commission and the European Parliament had identified a lack of pay transparency and inconsistency in terms of effective implementation and enforcement across the EU as key obstacles to achieving equal pay. The Directive intends to address the transparency gap and create a minimum standard of equal pay enforcement and regulation across the EU.
The Directive came into force in June 2023 and gave member states three years to implement it into each of their own jurisdictions i.e. by June 2026. For some member states this will involve introducing a new regime, and for others it will require an expansion of existing provision.
The Directive’s measures are more onerous than most existing reporting obligations.
What are the Directives key measures?
The Directive will:
- Require member states to establish gender pay gap reporting regimes, with company-wide results as well as results broken down by categories of workers. Those regimes will need to cover company-wide mean and median gaps in pay and ‘complementary and variable’ components of pay such as bonuses, as well as the proportion of men and women in each quartile pay band and receiving the complementary and variable components
- Require employers to conduct a pay assessment where pay reporting reveals a gender pay gap of 5% or more in any category of workers that cannot be justified by objective and gender-neutral factors, and which has not been remedied within six months of submission of the report
- Require employers to disclose the pay level or pay range for an advertised role to ensure pay transparency for jobseekers
- Prohibit employers from asking job candidates about their current pay and pay history
- Place limits on the extent to which employers can control workers from discussing their rate of pay
- Increase the transparency in setting rates of pay
- Give workers a right to information about pay rates in an effort to ensure that workers are able to identify disparities
- Require employers to identify categories of workers for pay reporting, joint pay assessment and pay transparency purpose, bringing the concept of equal value to the forefront of the approach to equal pay in the EU. Affected employers will need to have assessed upfront which workers are undertaking work of equal value in order to comply with these requirements.
Will the Directive impact UK employers?
As we are all aware the UK has now left the EU. Therefore, as a matter of law, UK employers (with UK only staff) will not be required to implement its provisions. However, the Directive may be relevant where the employer has operations in the EU.
Employers in the UK, who also have operations across the EU may decide to harmonise the approach to pay transparency. Further, such employers may find that workers, or their representatives, push for application of the Directive requirements as a minimum reporting standard for cross-group comparison. Accordingly, once the Directive is implemented it will be interesting to see how this plays out in practice.
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About the author:
Paul McFarlane, Partner, Capsticks LLP
Paul is a Partner in the employment and pensions department at Capsticks with almost 30 years’ experience advising clients in the public and private sector on all aspects of employment law. His particular specialisms include: advising on complex discrimination and whistleblowing claims. Paul recently step down after his term as Chair of the Employment Lawyers Association (‘ELA’) (2022 –2024). ELA is an apolitical association representing almost 7,000 employment lawyers who act for both employers and employees – 2022-2024. Paul was named as Chambers & Partners Minority Lawyer of the Year 2019 for work he has done to make the legal profession a more diverse and inclusive.
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