The UK’s general election on 4 July is expected to deliver a landslide victory to the opposition Labour Party. One of their key pledges around corporate governance concerns closing the gender pay gap, and expanding the ability of other groups affected by pay disparities, such as ethnic minority workers and disabled workers, to bring equal pay claims.
What is the current law around equal pay?
Under the Equality Act 2010, which incorporated the Equal Pay Act 1970, if an employee’s contractual terms, such as those relating to pay, are less favourable than a colleague of a different gender doing equivalent work, such terms are automatically modified to be no less favourable. This would come after the result of an equal pay claim. Where an employer is in breach of the sex equality provisions, an employee can bring an equal pay claim to an employment tribunal under different rules than a standard discrimination claim. Successful equal pay rulings mean people can claim arrears of pay going back up to six years in England and Wales and five years in Scotland.
How do equal pay claims work currently?
To bring an equal pay claim, a worker must show that someone of the opposite sex is paid more than them for doing a job of equal value. Once this claim is brought, the burden then falls on the employer to explain the difference. An ordinary discrimination claim requires the worker to show why a situation is discrimination, such as for pay disparities based on other characteristics under current law.
If statistics show there is a difference in pay between two jobs of equal value, one of which is mainly done by women and one mainly by men, the employer may be called upon to objectively justify this difference. This means the employer has to show that its explanation for the difference is a proportionate means of achieving a legitimate aim if women (or men) are being disadvantaged.
If the equal pay claim is successful, the result is a permanent change to the worker’s contract. There is also a longer time limit for bringing claims – six months from the end of employment instead of three months from the act of discrimination) – and the losing employer can be ordered to carry out a compulsory equal pay audit.
What would a Labour government do on equal pay?
Labour have pledged to expand the rights that women have to make equal pay claims to Black, Asian and Minority Ethnic workers, alongside disabled workers. This will mean equal pay claims on the basis of ethnicity and disability will be treated the same as those made by women. Equal pay claims have seen Birmingham City Council go bankrupt trying to pay back compensation, with Trade Unions taking cases against a number of public and private sector employers, including Asda and Glasgow City Council.
Under the party’s plans a new Race Equality Act would enshrine in law the full right to equal pay for black, Asian and ethnic minority people, as well as disabled people.
The party has already said a Labour government would require large employers to publish ethnicity and disability pay gap reports to reveal any disparities in wages between different groups.
Companies with more than 250 employees in England, Wales and Scotland have been required to publish their gender pay gap statistics since 2017. Labour would make this mandatory for ethnicity or disability.
What is the ethnicity and disability pay gap?
The ethnicity pay gap means the difference in the average pay between an employee from an ethnic minority background, compared to a ‘white’ employee. The disability pay gap is similar, but it refers to the difference in the average pay between a disabled and non-disabled employee.
The ethnicity pay gap concept is particularly used by British companies. In the UK, around 85% of the population is considered to be white ethnicity. This figure amalgamates the different categories of ethnic origin in the British Isles, such as White British, White Scottish, White Irish, and White Other.
Around 15% of the UK population is considered to be from an ethnic minority. This means an ethnic group other than white. In the UK, ethnic minority categories include Asian / Asian British, subdivided into Indian, Pakistani, Bangladeshi, Chinese and Other Asian; Black / Black British, subdivided into African, Caribbean and Other. Other categories are sometimes included such as Arab, Mixed, and Other.
While these categories are not always exact, nor do they always accurately reflect the diversity of people’s experience, these are the general categories used by the UK Government and the Office of National Statistics (ONS). Ethnic minority is sometimes referred to as BME or BAME, (Black, Asian and Minority Ethnic).
Multiple studies across sectors and industries have consistently uncovered a difference in what an employee from an ethnic minority earns, versus a typical white employee.
Evidence gathered by the Equality and Human Rights Commission demonstrated that the average white British employee earned a median hourly rate of £11.62, compared to £9.93 for British Pakistani workers and £9.24 for British Bangladeshi workers.
How to report on the ethnicity pay gap
Similar to gender pay gap reporting, employers should report their ethnicity data breakdowns in each pay quartile, as they would for gender. This can show in which pay quartile ethnic minority employees are underrepresented. It can also deliver clear targets, such as increasing ethnic minority representation in middle management by 10%, and in senior management by 15%.
The two key numbers which should be reported on are the median pay gap and the mean pay gap.
The median pay gap is the difference between the midpoints in the ranges of hourly earnings of ethnic minority and white staff. It takes all salaries in the sample, lines them up in order from lowest to highest, and picks the middle salary.
The mean gender pay gap is the difference between the average hourly earnings of ethnic minority and white staff.
Other relevant factors to report on would include:
- The median bonus gap
- The mean bonus gap
- Bonus proportions
- Quartile pay bands
- Total ethnic minority workforce
- Proportion of employees who have disclosed their ethnicity
What does this mean for business?
- Ensure your organisation is able to collect data and report on the gender pay gap
- Consider expanding that data collection model to ethnicity, race and disability
- Analyse any disparities in pay on sex, race, ethnicity or disability
- Consider practical measures to close these gaps over a period of time
- Publish goals and periodically report on progress towards closing pay gaps
The General Election and Compliance – Special Webinar
Every sector could be impacted and every area of compliance is likely to be reviewed by the next government. From overhauls of financial services regulation, reviews of data protection law, closer alignment with EU regulations and an expansion of health and safety protections, the next parliament will see compliance at the centre of the regulatory agenda.
With everything from whistleblowing reform to overhauls of corporate governance, new employment rights like menopause leave and expanded equal pay rules, alongside crackdowns on tax evasion and expansion of the money laundering regulations, organisations large and small should prepare for the outcome of the general election.
This webinar will cover:
- What the main parties are pledging on key compliance areas
- Potential changes to legislation including the Equality Act, sexual harassment and employment rights
- Expected legislation on AML, bribery, sanctions, fraud and economic crime
- Possible expansion of regulations around GDPR, AI and health and safety
- Preparing your organisation for future regulatory changes and new requirements
