Equal Pay Audits – What do employers need to know?

Written on 28 Sep 2014

The Equality Act 2010 (Equal Pay Audits) Regulations 2014 will come into force on 1 October 2014.
Under the 2014 Regulations, Employment Tribunals will be obliged to order employers who are found to have breached the equal pay provisions of the Equality Act 2010 (in respect of claims brought on or after 1 October 2014) to carry out a pay audit and publish the results.

Limited exceptions

Audits must not be ordered:

  • Where an audit has been completed by the respondent in the previous 3 years, which meets the requirements set out in the Regulations;
  • When it is already clear (without carrying out an audit) whether action is required to avoid equal pay breaches occurring or continuing;
  • Where the breach identified by the Tribunal does not give it reason to think that there may be other breaches;
  • When the disadvantages of an audit would outweigh its benefits;

Exemptions will also apply to micro-businesses (i.e. businesses with fewer than 10 employees who collectively, work no more than 375 hours per week) and new-businesses.

What must an audit include?

  • The relevant gender pay information for those employees within the scope of the audit;
  • Identification of any differences in pay (together with reasons) between men and women;
  • The reasons for any potential equal pay breach identified by the audit;
  • The employer’s plan to avoid equal pay breaches occurring or continuing.

Are any penalties applicable?

If an employer fails, without reasonable excuse to conduct a satisfactory pay audit when ordered to do so, the Tribunal can order it pay a penalty not exceeding £5,000. The Tribunal will then make a further order specifying a new date for compliance. If the employer again fails to comply, a further penalty of up to £5,000 may be imposed. There is no limit on the number of times this can occur.

Once the Tribunal is satisfied that the employer has complied with its order, the employer will then be ordered to publish the completed audit on its website (if it has one) within 28 days and maintain it for a period of at least 3 years. This is in addition to a requirement to directly inform all employees (whose pay data is included in the audit) where they can obtain a copy.

Is there anything else that employers should be aware of?

The aim of this new law on equal pay audits is to make sure that employers carry out a systematic review of their pay policies in a comprehensive and transparent way. It is important that equal pay audits are made accessible to demonstrate that employers pay policies are not discriminatory because of sex.
However, as the Employers Network for Equality and Inclusion has already pointed out @en4ei, the Government’s impact assessment is only predicting two audits a year.

Furthermore, owing to the nature of at least three of the specific exceptions set out in the Regulations (which would appear to be open to interpretation) there may be some additional scope for employers to argue why an equal pay audit should not be ordered, and/or, if appropriate, to appeal against such an order if a Tribunal had erred in its application of the exceptions.