Swift on the heels of the victory for Next’s shop workers, Asda is facing a pay equality battle that could see the retail giant paying out to the tune of billions.
Whilst the phrase “equal pay for equal work” is embedded within the public consciousness, few understand the variety of factors these claims can involve, leading to online outrage and misunderstandings as decisions are made.
Equal pay legislation: The three claims
There are three different types of claim under equal pay legislation that vary in complexity.
Claim one
The simplest claims are those of ‘like work’ which refer to two people in the same job role, where one is being paid less.
Claim two
The second type of claim occurs following a formal job evaluation scheme. This type of scheme is prevalent in the public sector and describes a systematised methodology of determining the relative importance of a number of different jobs, often requiring input from independent experts.
Using such a scheme allows organisations to identify where different roles in fact share the same “value”, and consequently to ensure they are treating workers equally based on this benchmark.
Workers are able to rely on the results of the scheme to bring claims should it be found that they are not being paid the same as others whose roles are on the same point on the scale.
Claim three
The third type of claim, which Next fell foul of and is now being faced by Asda, is that of ‘work of equal value’: a vague phrase that forces a complex value judgement to be made.
The basis for these cases is that the work being carried out is of equal value to the employer in terms of its demands, such as effort, skill and decision-making.
In the retail context, where ultimately the business objective is to sell products, the argument is that each part of the chain within that process is equally valuable to the business: from the workers who unload shipping containers to warehouse workers and ultimately to the shop floor staff.
More at stake than reputation
Should the courts conclude in favour of the workers, as happened in the case of Next, the damage to Asda stretches far beyond the business’ reputation. The financial consequences will be severe, with a predicted payout of billions.
The immediate bill will consist not only of backdated pay, for up to six years before the claims were first issued, but also interest on the full amount, at the statutory rate of 8%, for up to three years.
businesses need to be prepared to undertake swift action following such a discovery
However, on top of that, Asda will have to find additional money every single month to cover the ongoing cost of the higher future pay structure.
The inevitable impact on the bottom line and reduction in profit of such an enormous bill will almost certainly affect share prices in the short term; in the longer term, the giant retailer will surely look to pass the cost on to customers in the form of increased prices.
A wave of pay claims
Historically, equal pay claims have been the preserve of the public sector, but they are rapidly becoming more popular in the private sector too.
Continuing successes by workers in such claims will only serve as a catalyst that places more private sector businesses in the legal firing line. So it is more important than ever for companies to ensure that their messaging on equal pay and equality matches what is happening at every level of operations.
To protect themselves from a potential flood of future claims, businesses should conduct a range of activities, from pay structure and policy reviews to examining employee demographics and arranging sessions in which staff concerns can be raised.
They might also look at implementing job evaluation schemes to create objective benchmarks when it comes to pay. Whilst this would bring benefits in terms of transparency, there is a risk that the findings would expose areas of inequality.
Therefore, businesses need to be prepared to undertake swift action following such a discovery, as if left unaddressed, the results could provide an easy pathway for a claim.
Pay discrepancies
Not all discrepancies in pay will be a breach of equal pay legislation. There may be legitimate non-discriminatory reasons why different roles are paid at different rates: for example, there may be a variation in the geographical location of the roles, or differences in the length of service or seniority of those carrying out the work.
The drive for equal pay is a juggernaut that has been gathering pace for years
In the Next case, the employer sought to rely on market forces, and the consequent need to offer higher wage to attract quality candidates in areas of skills shortages. Businesses will successfully defeat equal pay claims if they can demonstrate a “material factor” defence of this nature.
The drive for equal pay is a juggernaut that has been gathering pace for years, and the decisions in cases that follow should act as a wakeup call to businesses to get their houses in order.
Those that act now may well avoid the risk of lengthy court proceedings, improve their relationships with their workforce and position themselves in their market as an employer of choice.
