In recent times, pay issues have never been far from the spotlight. The Government’s proposals to introduce mandatory gender pay gap reporting have run alongside some high profile litigation relating to equal pay.   Although the concepts of gender pay gaps and equal pay are different, both place important obligations on employers and give rise to important considerations about how employers may wish to structure their business.

Equal pay encapsulates the principle that men and women should have equal pay for equal work. Employees who feel that this principle has been breached must be able to demonstrate this by pointing to a comparator of the opposite gender who works in the same employment. The meaning of ‘same employment’ (which includes employment at the same establishment or at a different establishment but where ‘common’ terms of employment apply) has recently been tested in a case involving a comparison between the pay of (predominantly female) retail store workers and the pay of (predominantly male) distribution depot workers.  The employment tribunal found that in the particular circumstances of this case, despite certain geographical and organisational distinctions between the two sets of  workers, they were each found to be in the same employment and, therefore, their pay could be compared.  However, the circumstances of each business will be different – and the case should give employers pause for thought in considering how different facets of their business are organised.  In some instances it may be more difficult for employees to identify comparators in the ‘same employment’ if, for example, certain aspects of the business have been  outsourced to a third party.

Reviewing how a business is structured may also be an important consideration in the context of gender pay gap reporting. A gender pay gap is different to unequal pay. It shows the difference between the average earnings of men and women as a percentage of men’s pay. A gender pay gap of 20% for example, would show that a woman was earning 80p for every £1 earned by a man.

From April 2017, the Government is proposing to make gender pay gap reporting a mandatory obligation for all employers with 250 or more employees. Some employers may be reviewing the number of employees who are employed in its business and whether it may be appropriate to employ certain individuals through one or more other legal entities.  This could potentially obviate the need to report altogether (if the employee number threshold for reporting is no longer met), or remove from the business certain individuals whose income may significantly skew the gender pay gap results.   Employers should exercise caution, however.  Reputation is paramount and employers should be slow to take any measures which may damage the organisation’s equality profile with competitors, clients or the media.  The final regulations are also awaited and, until then, uncertainty continues over the extent of the obligations which will apply.

For now, what is certain is that pay issues will remain firmly in the spotlight for some time to come. Employers should be mindful of the impact of the current equal pay litigation in the courts, and in particular, whether its high profile will increase the potential for claims from employees.  If there are any concerns about equal pay issues, legal advice is a must to minimise legal risks and to obtain the protection of legal advice privilege over sensitive information, where possible. In terms of gender pay gap reporting, despite the absence of final regulations, employers should already be taking measures to ensure they are prepared. Legal advice will again be key if there are any concerns about the potential existence of gender pay gaps, or if there is information which the company wishes to keep confidential whilst it assesses its obligations.  As part of a process of reviewing pay structures, employers may wish to take our quiz, How equal is your organisation’s pay?