A £30 million equal pay ruling has just been overturned on appeal. For HR teams and business owners, this case is a useful reminder of how equal pay claims actually work and what you can do to protect your organisation.
Let’s break down what happened, what the law says, and what practical steps you should be taking.
What happened in the Next case?
The original tribunal found that Next had failed to justify the pay difference between its predominantly female shop floor workers and its predominantly male warehouse staff. The shop workers argued they were doing work of equal value but being paid less. The tribunal agreed, and Next was facing a bill of around £30 million.
Next appealed. And won.
The appeal found that Next had provided valid reasons for the pay differences. These included factors like different market rates for warehouse and retail roles, and the different demands of the work involved.
This does not mean the shop workers were wrong to bring the claim. It means the employer was able to show that the pay gap was not down to sex discrimination.
What is an equal pay claim?
Under the Equality Act 2010, men and women are entitled to equal pay for equal work. This applies to all contractual terms, not just basic salary. Bonuses, overtime rates, pensions and other benefits are all in scope.
There are three types of equal pay claim:
Like work is where two people are doing the same or very similar jobs.
Work rated as equivalent is where a job evaluation scheme has rated two different roles as equivalent.
Work of equal value is where two different jobs are equally demanding when you consider factors like effort, skill and decision making. This is the most complex type of claim and the one at the heart of the Next case.
Equal pay claims compare roles typically done by one sex against roles typically done by another. The claimant has to show their work is equal to a comparator of the opposite sex who is being paid more.
How do employers defend against equal pay claims?
If a claimant can show they are doing equal work for less pay, the burden shifts to the employer. You need to prove there is a genuine, non-discriminatory reason for the difference.
This is called the material factor defence.
To succeed, you need to show that the pay difference is because of a real factor that is not related to sex. Examples might include:
- Different market rates for different types of role
- Location, for example London weighting
- Specific skills or qualifications required for one role but not the other
- Unsociable hours or difficult working conditions
- Length of service, in some circumstances
The key word is genuine. You cannot use a factor that looks neutral but actually disadvantages one sex more than the other, unless you can objectively justify it.
This is where many employers come unstuck. If you have always paid warehouse staff more than shop staff because that is what you have always done, that is not a defence. You need to be able to explain and evidence why the difference exists.
What does this case tell us?
A few things stand out.
First, equal pay claims are not automatic wins for claimants. Employers can and do successfully defend them. But it takes clear reasoning and solid documentation. Next had done the work to show why the pay difference existed and that it was not about sex.
Second, these cases are expensive and time consuming regardless of the outcome. Even when you win, you have spent significant time and money getting there. Prevention is cheaper than defence.
Third, tribunals will look hard at whether your justifications hold up. Vague explanations or historical practices that no one can really explain are not going to cut it.
What should you be doing now?
If you have not looked at your pay structures recently, now is a good time.
Review comparable roles. Are there roles in your organisation that could be argued to be of equal value? Think beyond job titles. A tribunal will look at what people actually do, not what their role is called.
Document your reasoning. If you pay one group more than another, why? Can you explain it clearly? Is it written down anywhere? If the answer is no, you have a gap that needs filling.
Consider a pay audit. This does not have to be complicated. Start by mapping out who is paid what and whether there are any patterns that could raise questions. If you find issues, you can address them before they become claims.
Train your managers. Pay decisions often happen at line manager level. Do your managers understand how to make and record pay decisions in a way that is fair and defensible?
Keep records. If a claim comes in three years from now, you need to be able to show what you were thinking at the time. Notes from pay reviews, job evaluations and market benchmarking exercises all help.
Taking the next step
Equal pay claims are a real risk for UK employers. But they are also manageable if you put the groundwork in now. The Next case shows that a well prepared employer can defend a claim successfully. It also shows that these claims can come from anywhere and can quickly become very expensive.
If you are not sure where you stand, or you want to talk through your pay structures with someone who can help you spot potential issues, we offer a free consultation. No obligation, just a chance to get some clarity and work out whether you need to take action.
Get in touch to book yours.
