Pay transparency and equal pay audits

The current government favours a voluntary strategy to achieve pay transparency and equal pay (see the government’s Equality strategy progress report, May 2012).

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 both contractual and non-contractual pay (for example, discretionary bonuses). An equal pay audit is defined as an “audit designed to identify action to be taken to avoid equal pay breaches occurring or continuing”.

The power to order an equal pay audit is heavily circumscribed, and effectively creates a classic “Catch 22” situation. Only if a woman succeeds with an equal pay claim will the audit obligation be triggered, but it is the lack of pay transparency to begin with that makes it so difficult for women to find out whether equal pay obligations are being breached and to launch a claim.

Even if employers lose an equal pay claim, they can still escape the new duty to carry out an audit by relying on one of the following four grounds (section 139A(5):

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

• a tribunal finds the employer’s current pay arrangements transparent, so that it is clear, without the need for an audit, whether activity is needed to prevent breaches of equal pay laws;

• a tribunal finds no reason to believe the breach of equal pay laws to be a systemic problem; or

• the disadvantages of an audit would outweigh the benefits.

In May 2013, the government launched a further consultation on equal pay audits, to make sure the obligation does not impose an “unnecessary burden” on employers, with a view to introducing legislation in October 2014. The latest consultation concerns the extent to which audit results should be made public, and who should be involved in carrying them out.