Recent court decisions mean the financial implications of the public body gender duty are greater than anticipated by the government, according to a new report by the Local Government Employers (LGE).
The report, ‘Unblocking the route to equal pay in local government’, says the requirement imposed by the courts to backdate pay settlements mean some local authorities are facing liabilities of up to £250 million.
In addition, HMRC has said that tax and National Insurance must be paid on the back pay, increasing the costs by an estimated 26 per cent.
Local authorities which are unable to use revenue funding, balances for example, to meet the costs may be able to ‘capitalise’ expenditure through borrowing or capital receipts but this is subject to the approval of the Department for Communities and Local Government and must fall within limits set by the Treasury.
Now the LGE is calling on ministers to allow councils to capitalise their assets in order to rectify equal pay and to reconsider the current Treasury cap of £200 million.
As well as needing to find ways to fund equal pay, authorities need to be confident that they can strike deals with unions without the risk that settlements will be overturned by mass equal pay claims at employment tribunals.
So the LGE is also asking for legal reforms that will allow employers and unions to reach agreement on equal pay via arbitration.
Managing director of LGE, Jan Parkinson, said: “Councils want equal pay within their workforce and are working hard to achieve it.
“Government has issued a letter stating that bids to capitalise back pay settlements will be subject to an overall cap of approximately £200 million.
“With one council’s equal pay liability standing at £250 million alone, this is clearly insufficient and will significantly affect the ability of some councils to fund back pay costs, especially as the figure covers all items permissible for capitalisation.
“While relaxing capitalisation rules for local authorities may have implications for the Chancellor’s ‘golden rule’, councils have a commitment to deliver an ever better deal for the taxpayer.
“The largely unexpected scale of this problem means it is simply unrealistic to avoid providing local authorities with appropriate tools to manage this issue and ensure women feel the benefit of equal pay.
“This is not a begging bowl to central government. This is asking for the flexibility for councils to be allowed to access their own resources.”
A copy of the report is available at Unblocking the route to equal pay
The gender duty does not just affect local government – it affect all public sector employers across a range of sectors. The Equal Opportunities Commission (EOC) has produced lists of organisations affected, both in A-Z and sector format.
In addition, the EOC has issued updated guidance on the specific duties. In particular, the pay duty has changed, with public authorities now being required to address the three causes of the pay gaps: pay discrimination, caring responsibilities and occupational segregation.