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Equal pay law: how to avoid costly equal pay claims

Equal pay is not just moral imperative; it could save your business from expensive law suits. Find out how to get ensure compliance with the Equal Pay Act.

It’s been four and a half decades since the Equal Pay Act came into force in the UK, yet men still earn more than women in nearly 90% of job categories, according to recent government figures.

The 1970 legislation has now been superseded by the Equality Act 2010, which created a new duty to demonstrate their compliance to equality. Under the new duty, employers with 250 staff have to publish staff salaries and pay grades, provide equal opportunities for all regardless of gender, race, disability or sexual orientation and eliminate unlawful discrimination. But SMEs, too, must take careful account of the Act.

Equality Act 2010 for UK SMEs

The bad news for SMEs is that the government is currently consulting on whether to lower the threshold; small businesses could subsequently be required to publish staff salaries. The results of the consultation, are expected to be revealed at the end of 2015.

Emma Bartlett, employment partner at Charles Russell Speechlys law firm, says a lower threshold could make life difficult for small businesses when it comes to confidentiality and data protection compliance. “SMEs will be keen to watch how the larger enterprises respond to the legislation. They should ideally start to operate best practice now so that when the legislation does eventually impact them, they are ready,” she advises. “There is likely to be workshops and seminars in which they could participate sponsored by The Department for Business, Innovation & Skills (BIS) and otherwise within their industry.”

Stephanie Kleyman, partner at Kleyman & Co solicitors, says there are a number of steps SMEs can take now to help prepare. “Make sure all your staff have clear contracts setting out their rates of pay, which are updated as salaries are adjusted. It should make it clear what bonuses or overtime are payable as well,” she advises. “Review your contracts to see if they contain anything that is contrary to the ethos of transparency in salaries. For example, if you have a clause saying that employees are not allowed to discuss their salaries with others, you may want to remove this going forward.”

Equal pay for women

Keeping clear records of staff earnings and staff schedules, outlining what exactly the role entails is also important, says Kleyman. “Review pay structures carefully and regularly, being mindful not just of what each individual earns, but how their pay compares to others,” she notes. “You should include everyone, such as part time staff, those on maternity leave, people who temp for you or who are supplied through agencies. That doesn’t mean they all have to receive the same level of pay, but simply that you should show that you took everyone in to account when deciding pay levels.”

Above all, Kleyman advises, keep careful notes of any pay-related decisions you have made. “If it does turn out you are paying someone more than a colleague, it will not be in breach of the legislation if you can show that there is a good reason for it, such as productivity, performance, experience or extra training that they have undertaken and clear notes of your thought process can be the best protection you can get.”

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