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07th August 2012

Publication of pay audits for employers who fall foul of equal pay

Back in 2011, the Government launched its Consultation on Modern Workplaces which looked at the ways to provide for a “culture of flexible, family-friendly employment practices in Great Britain”.

The consultation made proposals for a new system of shared flexible parental leave, an extension of the right to request flexible working, revisions to the way annual leave is dealt with and compulsory pay audits for employers who are found to have breached the equal pay laws.

The consultation closed on 8 August and whilst we are still waiting for the Government’s response to the consultation on the vast majority of the proposals made, the Government has confirmed that it shall be introducing the most controversial proposal from the consultation.

The Government has confirmed that it shall be going forward with the plans to introduce powers for Employment Judges to order that employers complete and publish a pay audit if they lose a claim for equal pay. The proposal requires that, where a claim is made in favour of a claimant in relation to a claim for equal pay the Employment Tribunal will be obliged to order the employer to carry out a pay audit where it considers there may be continuing or likely discrimination.

If, however, an audit has been carried out in the past three years, or the Tribunal finds that the employer has transparent pay practices or can show a good reason why an audit would not be useful, the Employment Judge will not be required to order an audit.

It is hoped that the introduction of this power will help close the gender pay gap that still exists in Britain despite equal pay legislation being introduced over 40 years ago. The Government’s view is that pay audits will not have any effect on the majority of employers, but will ensure that those who have not complied with the relevant legislation look at their pay structures in more detail. Employers who are ordered by a Tribunal to complete a pay audit but fail to do so will be subject to a civil financial penalty.

The confirmation that the introduction of pay audits will be going ahead will not be welcome news for employers, especially as it will be imposed on those who have already had the bad news of a successful claim for equal pay. Further, the introduction of this proposal does not fit well with the Government’s promise to reduce red tape for businesses. However, the Government’s argument is that given that this will only be imposed on those who have broken the law, the introduction of pay audits is not inconsistent with their approach to de-regulate UK employment law.

The Government has advised that further consultation will be carried out later this year to consider how the proposals shall work in practice. The Government shall also be seeking views on the detail that shall need to be included in pay audits and the publication requirements before the proposals are implemented.

For further information please contact Lynne Adams on 01604 233233 or on lynneadams@hewitsons.com

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