Draft equal pay audit regulations published

Equality 146x219Earlier this week the Government published the draft Equal Pay Audit Regulations. Daniella McGuigan and Khurram Shamsee consider their impact.

Publication of draft Equal Pay Audit Regulations follows on from publication earlier this month of the Government's response to the consultation: Equal Pay Audits: A Further Consultation. The is the latest in a line of steps intended to address the gender pay gap - current figures show that men in full-time employment are paid on average 10% more than women in full-time employment for doing the same types of jobs.

As expected, the Regulations require employment tribunals to order an employer to carry out an equal pay audit where it is found an employer is guilty of gender discrimination on a matter of pay (whether base salary, commission or bonus), unless one of the exceptions or exemptions applies. The Regulations are intended to come into force later this year and will affect tribunal claims submitted on or after 1 October 2014. The Regulations are intended to complement the Government's ongoing voluntary initiative for businesses, Think, Act, Report.

To assist you we have attached a flowchart setting out whether and equal pay audit will be ordered, click here to find out more.

The Regulations are quite detailed. In summary:

  • An audit will be ordered where an employer is guilty of gender discrimination on a matter of pay unless: an audit completed by the employer in the previous 3 years meets the requirements set out in the Regulations; it is clear without an audit whether any action is required to avoid equal pay breaches occurring or continuing; the breach gives no reason to think that there may be other breaches; the disadvantages of an audit outweigh the benefits; or the respondent is exempt as a micro or new business.
  • The essential elements of an equal pay audit are set out in the Regulations. The audit will need to identify any differences in pay between men and women, provide reasons for any differences and set out an action plan for eliminating those differences. However, the Regulations will give tribunals discretion to specify the coverage and the timescale for completion, on a case by case basis, based on the evidence presented at the hearing.
  • The tribunals, rather than an independent auditor, will determine whether or not an audit has complied with the terms of a tribunal’s order. The Regulations set out how compliance will be determined and the next steps if a respondent is found not to have complied, including a power for tribunals to impose financial penalties of up to £5,000 (repeatedly if necessary).
  • In order to ensure transparency, employers are required to publish the results of the equal pay audit (except in very limited cases i.e. where publishing the results would breach a legal obligation under UK, EU law or Article 8 of the European Convention on Human Rights i.e. the right to respect for private and family life). The audit must be published on the respondent's website for at least 3 years and everyone whose pay information was included in the audit must be told where they can obtain a copy. However, at this stage there does not appear to be any power in the Regulations to impose penalties if employers do not comply with this requirement. This is surprising and is likely to be tightened up before the Regulations are finalised.

The Government will not publish additional guidance on the requirements of the Regulations as it considers that to do so would duplicate guidance already published by the Equality and Human Rights Commission (EHRC). However, the Government will ‘engage’ with business representative organisations in summer/autumn 2014 to discuss and explain the intended effect of the regulations.

What this means for employers

The Government’s plan to push ahead with this proposal is not surprising, although some commentators had thought that the proposal would be shelved until after the election. Many NHS bodies/public sector organisations will be able to rely on the fact they have carried out an audit in the past three years to avoid this penalty. However, where organisations have moved away from national terms and conditions the risk of being ordered to carry out an audit will remain.

Given that the requirement to carry out a pay audit will only apply as a consequence of losing a relevant tribunal claim, the impact of this change in the law may be limited. Nevertheless, many organisations will be concerned at the move. Although the Government's response to the consultation said they did not find any research / evidence that more claims would settle, we believe employers may feel under increased pressure to settle equal pay claims that they might otherwise have defended, to avoid the risk of having to carry out and disclose an analysis of pay and jobs across their organisation.

The threat of having an equal pay audit imposed by the tribunal also gives employees more leverage when it comes to settlement discussions, which is clearly an unwelcome development.

Daniella McGuigan and Khurram Shamsee are partners at DAC Beachcroft. Daniella can be reached on 0113 251 4858 or This email address is being protected from spambots. You need JavaScript enabled to view it. while Khurram can be contacted on 020 7894 6556 or This email address is being protected from spambots. You need JavaScript enabled to view it..