Equal Pay Audit Regulations

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Employers may wish to take the opportunity check their pay arrangements and policies are in line with equal pay law following the introduction of the Equality Act 2010 (Equal Pay Audits) Regulations 2014 which came into force on 1 October 2014. The Regulations effectively give existing equal pay law a new ‘set of teeth’ and are designed to tackle pay inequality in both the public and private sectors. They oblige Employment Tribunals to order an employer to carry out an equal pay audit where it has lost all or part of an equal pay claim, subject to certain exemptions.

The Regulations emphasise the importance of transparency and employers will be required to publish the results of the audit publicly on their website for no less than 3 years.

Whether the Regulations have any notable impact on closing the existing gender pay gap remains to be seen. That said, they are likely to influence the way in which equal pay claims are litigated. Claimants and their representatives may well perceive that they have greater leverage in settlement negotiations. Employers facing claims will have to factor in the increased risk of being ordered to conduct an audit, with the associated potential consequences for employee relations and additional cost and management time. We are seeing more equal pay claims being brought in the private sector and Unions will undoubtedly be keeping a look out for sections of the workforce ripe for group claims.

An exemption is available to employers who have already carried out a pay audit in the last 3 years (as some public sector employers may well have done). It is therefore well worth considering carrying out a pre-emptive audit to provide this assurance. It is crucial that any audit is carried out via professional legal advisors to ensure the contents of the audit are legally privileged. Failure to do this could result in a serious ‘own goal’ because without the benefit of privilege all documents relating to the audit (including the results and all pay data contained in it) would potentially be disclosable in any future equal pay claim.

The question of whether to carry out a voluntary audit now (or at least a review of pay arrangements and policies) or to adopt a ‘wait and see’ approach is a question that many employers will wish to consider further.

For further details on the Regulations please see our Business Insight Compulsory Equal Pay Audits – giving equal pay law more bite.