Corporate law

What next for equal pay?

Written by Alex Haines on 6th September 2024 | 8 minute read

Following a six-year legal battle, more than 3,500 current and former Next employees have emerged victorious in their Employment Tribunal complaints for equal pay. The ruling means that Next may have to pay the Claimants a total of up to £30 million in back pay. The retailer has announced that they will appeal the Tribunal’s decision, but this preliminary decision could have potentially far-reaching implications for other employers.

The legal victory, the first of its kind against a national retailer in the UK, highlights the risks facing the other UK major supermarkets. These retailers are currently dealing with equal pay claims from 112,000 workers. J Sainsbury's Plc, Tesco Plc, W Morrison Supermarkets Ltd, Asda Group Ltd, and Co-operative Group Ltd are all subject to similar claims from workers. If these claims are successful, they could potentially cost the retailers billions of pounds.

This case focused on a pay disparity between the predominantly male warehouse staff and principally female shop staff. Next unsuccessfully argued that the reason for the pay difference was owing to wider market forces and that the average warehouse operator in the industry received a higher salary. The retailer contended that this pay structure was needed for the viability of the business. The Tribunal ruled that this need was not sufficient to justify the discriminatory effect, despite accepting that the difference in pay was not down to gender bias influencing pay decisions, but instead because of efforts to reduce costs and enhance profit.

This raises the question of whether an employer should be forced to offer higher rates of pay if it can be proven that they can afford to. Is it now the case that all employers should consider how different roles compare in terms of value and cost (pay) particularly where there are any roles that are predominantly filled by either gender? In the Next case 77.5% of retail consultants were female whilst 52% of warehouse employees were male. Based on this the Tribunal ruled that work of the retail staff was of equal value to that of the warehouse staff and that therefore Next was obliged to pay staff equally.

Employers should think carefully about their remuneration responsibilities and the value of different job types. When the roles could have equal value, employers should take care to ensure that any pay policies are not directly or indirectly discriminatory.

Equal value must be determined which will involve multiple hearings and will often require a report from an independent expert. It will ultimately rest with the Claimant to prove that their work is of equal value. The expert will compare the Claimant’s work with that of a comparator and will produce a score to each job. If the Claimant scores the same or higher than the comparators, then there will be equal value, and a Tribunal can ignore minor differences if they decide there is no overall measurable and significant difference between the jobs.

As the experience of the Next employees’ highlights, equal pay claims take a long time to reach their conclusion. As Next, who is appealing the decision, notes that "this is the first equal pay group action in the private sector to reach a decision at tribunal level", it is unlikely to be the last such case. Even after six years, the end is still not in sight and the workers will be waiting for some time before any back pay compensation reaches them. The battle continues, accompanied by further time lost and mounting legal fees. The potential implications of the Tribunal's ruling are significant.

To stay on the safe side of the law, we recommend employers develop and implement clear, transparent policies regarding pay and promotion criteria. It is important to ensure that all employees understand how their pay is determined and what factors influence pay raises and promotions. If there is a disparity, the reasons for these should be clearly documented and based on objective criteria such as experience, qualifications, performance, in addition to market conditions. Justifying pay difference solely based on market rates without further substantiation should be avoided.

If you promote a culture of continuous learning and development to help all employees progress in their careers, employers can minimise the risk of equal pay claims and demonstrate their commitment to fair treatment and pay equity for all employees. Above all, regular consultation with legal experts is fundamental to ensure compliance and best practice. Call our specialist company commercial experts today on 0808 231 1320