Pay transparency and equal pay audits

Section 139A of the Enterprise and Regulatory Reform Act 2013, gives tribunals the power to order an employer to carry out an equal pay audit, but only if the tribunal has already found a breach of equal pay law affecting contractual or non-contractual pay (such as discretionary bonuses). An equal pay audit is an “audit designed to identify action to be taken to avoid equal pay breaches occurring or continuing”.

New regulations, the Equality Act 2010 (Equal Pay Audits) Regulations 2014 (EPAR14), affect tribunal claims brought on or after 1 October 2014.

An Equal Pay Audit must:

• state the pay of men and women;

• identify differences in pay between the men and women and the reason(s) for the pay differences;

• give the reasons for any potential equal pay breach identified by the audit; and

• set out the plan to avoid equal pay breaches occurring or continuing.

(Regulation 6, EPAR 14)

The Equality and Human Rights Commission has put together an equal pay audit toolkit available from their website.

The scope of a tribunal’s power to order an equal pay audit under these new regulations is very limited. Only if a woman succeeds with an equal pay claim will the audit obligation be triggered at all (regulation 2, EPAR 14), even though it is the absence of pay transparency that makes it so difficult for women to find out whether equal pay obligations are being breached in the first place and to launch a claim.

Even if a claimant brings a successful equal pay claim, the employer can still escape a compulsory equal pay audit on one of the following grounds:

• a qualifying audit was carried out by the employer in the last three years;

• what needs to be done is already clear without an equal pay audit;

• there is no other reason to believe there is unjustified equal pay;

• the disadvantages of an audit would outweigh the benefits; or

• the employer is a new or micro-business.

(section 139A(5) EA 10, regulation 3 EPAR 14)

Once the audit is completed, a tribunal must decide whether it meets the requirements of the legislation. The employer is then given 28 days to publish the audit on their website or, if they do not have a website, to tell affected employees where they can get a copy — unless publication would breach a legal obligation such as data protection laws (regulations 6 and 7, EPAR 14).

Employers can be fined up to £5,000 for non-compliance with an order to produce an audit, with the possibility of a further £5,000 fine if there is continued non-compliance, but this penalty is paid to the Treasury, not to affected workers.