Employment law and compliance

Equal pay: legal requirements for employers

Your legal duties to provide equal pay for equal work under the Equality Act 2010. Covers like work, work rated as equivalent, work of equal value, comparators, defences, and gender pay gap reporting for larger employers.

UK-wide
Guide summary

You must pay men and women equally for equal work. Check if jobs are similar, rated the same, or of equal value. If an employee finds a higher-paid comparator of the opposite sex, you must justify the pay difference or match their pay.

  • Pay men and women equally for equal work
  • Equal work includes similar, rated same, or equal value jobs
  • Employees can compare pay with opposite-sex colleagues
  • Justify pay differences with non-sex reasons like skills or location
  • Claims can go back 6 years with no compensation limit
  • Gender pay gap reporting required for 250+ employees
  • Public sector report by 30 March, private by 4 April
  • Job evaluation studies must be fair and unbiased
  • Market forces can justify pay differences if proven
  • Keep records to defend against equal pay claims
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UK-wide

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Equal pay law requires you to pay men and women equally for equal work. This is not about paying everyone the same - it is about ensuring there is no sex-based discrimination in pay and contractual terms.

The Equality Act 2010 implies a "sex equality clause" into every employment contract. If an employee can show they are doing equal work to a comparator of the opposite sex who is paid more, the law automatically modifies their contract to match - unless you can justify the difference.

Equal pay claims can result in significant liability: employees can claim up to 6 years of back pay arrears, and there is no cap on compensation.

What is "equal work"?

Section 65 of the Equality Act 2010 defines three types of equal work. An employee only needs to establish one of these to bring an equal pay claim:

Understanding the three types of equal work

Like work is the most straightforward. Two employees do like work if their jobs are the same or broadly similar, and any differences are not of practical importance in relation to terms and conditions. For example, a male and female warehouse operative doing the same picking and packing tasks would be doing like work, even if one occasionally uses a forklift.

Work rated as equivalent applies where a job evaluation study (JES) has been conducted and has given both jobs the same score. The study must be analytical (breaking jobs into components like skill, effort, responsibility) and free from sex discrimination. If your JES rated jobs as equivalent, you must pay them equally.

Work of equal value is the broadest category. Jobs that are completely different can still be of equal value if they make equivalent demands in terms of effort, skill, and decision-making. A female dinner lady and male grounds maintenance worker might be doing work of equal value, even though the jobs look nothing alike.

Finding a comparator

To bring an equal pay claim, an employee must identify a comparator of the opposite sex who is paid more for equal work. The comparator must be:

  • Of the opposite sex: The claim is specifically about sex-based pay inequality
  • Employed by the same employer (or an associated employer in the same group of companies)
  • Working at the same establishment, or at a different establishment where common terms apply
  • Currently employed or formerly employed: Employees can use a predecessor in the role as a comparator

The comparator does not need to be doing exactly the same job. For work of equal value claims, the comparator can be in a completely different role - the tribunal will assess whether the jobs make equal demands.

You cannot prevent employees from choosing their comparator. The employee selects who they wish to compare themselves against, and you must then justify any pay difference.

The material factor defence

If an employee establishes equal work with a higher-paid comparator, you must prove the pay difference is due to a "material factor" that is not sex (Section 69). This is your only defence.

The material factor must be:

  • Genuine: A real reason, not a sham or pretext
  • Material: Significant and relevant to the pay difference
  • Not discriminatory: The factor must not itself be tainted by sex discrimination, whether direct or indirect

If the factor is indirectly discriminatory (disadvantages one sex more than another), you must show it is a proportionate means of achieving a legitimate aim.

Examples of material factors

  1. 1

    Market forces

    You needed to pay more to recruit or retain a particular employee due to skills shortages or competitive market. Must be supported by evidence (recruitment difficulties, market salary data). Cannot use indefinitely - must review periodically.

  2. 2

    Qualifications and experience

    Higher qualifications or greater relevant experience can justify higher pay, but only if they are genuinely used in the job. A qualification that is not utilised is unlikely to justify a difference.

  3. 3

    Performance-related pay

    Differences based on objective, transparent performance criteria. The performance scheme itself must not be discriminatory in design or application.

  4. 4

    Length of service

    Service-related pay increments are generally accepted up to 5 years. Beyond 5 years, you may need to demonstrate the service genuinely reflects increased experience that benefits job performance.

  5. 5

    Geographic location

    London weighting or regional allowances can justify differences if employees are based in different locations with genuinely different costs of living.

  6. 6

    Red-circling

    Protecting an employee's historical pay during restructuring or redeployment. Must be temporary and part of a plan to phase out the difference. Indefinite red-circling is unlikely to succeed as a defence.

  7. 7

    Different collective agreements

    May justify differences where employees were historically covered by different bargaining groups, but this diminishes over time as the historical explanation becomes less relevant.

What material factors will NOT succeed

These are unlikely to justify a pay difference:

  • "That's what they negotiated": Better negotiating skills is not a material factor - it may itself reflect sex discrimination in pay expectations
  • "We've always paid them differently": Historical practice without genuine justification is not a defence
  • "The comparator's role is more valuable": This is circular - the question is whether the work is equal, not whether you value it differently
  • "We didn't know we were paying unequally": Ignorance is not a defence
  • Budget constraints: Financial limitations do not justify discriminatory pay

Pay secrecy clauses are unenforceable

Section 77 of the Equality Act 2010 makes pay secrecy clauses unenforceable. Any term in a contract that prevents employees from discussing their pay with colleagues is void, if the discussion is relevant to exploring whether pay discrimination exists.

This means employees can:

  • Ask colleagues what they are paid
  • Share their own pay information
  • Discuss pay with trade unions or legal advisers

You cannot discipline an employee for making such disclosures. However, this protection only applies to pay discussions related to exploring discrimination - it does not extend to all pay conversations.

Equal pay audits

An equal pay audit is a systematic review of your pay practices to identify and address any unjustified gender pay gaps. While not generally mandatory, audits are valuable for:

  • Identifying potential equal pay risks before claims arise
  • Demonstrating good faith in addressing pay inequality
  • Supporting your material factor defences with evidence
  • Informing action plans to close unjustified gaps

An equal pay audit typically involves:

  1. 1

    Collect and analyse pay data by gender

    Gather data on pay, bonuses, and other contractual benefits. Break down by job family, grade, role, and other relevant factors. Calculate mean and median pay for men and women in comparable groups.

  2. 2

    Identify pay gaps within comparable groups

    Look for significant differences between male and female employees doing equal work. Focus on roles where there is mixed-gender representation to compare like with like.

  3. 3

    Investigate causes of gaps

    For each gap identified, examine the reasons. Is it explained by material factors (experience, performance, qualifications)? Or is there unexplained residual difference?

  4. 4

    Assess material factors for discrimination risk

    Even if a factor explains the gap, check whether that factor is itself discriminatory. For example, does your performance pay system disadvantage part-time workers (predominantly women)?

  5. 5

    Develop action plan

    For unjustified gaps, plan corrective action. This may include pay increases for underpaid groups, reviewing grading structures, or addressing discriminatory practices.

  6. 6

    Monitor and review

    Equal pay is an ongoing obligation. Repeat audits periodically (at least every 3 years) and review whenever you make significant changes to pay structures.

Mandatory equal pay audits after tribunal findings

If an employment tribunal finds that you have breached equal pay law, it can order you to conduct an equal pay audit. This audit must be completed within a specified timescale and published. The tribunal will specify the scope and methodology.

Failure to comply with a tribunal-ordered audit can result in an additional financial penalty.

Equal pay vs gender pay gap: understanding the difference

These are related but distinct concepts:

Equal pay is the legal right to the same pay as a colleague of the opposite sex doing equal work. It is about comparing specific individuals in comparable roles. If you pay a female accountant less than a male accountant doing the same job, that is likely an equal pay breach.

Gender pay gap is the percentage difference between average male and female earnings across your whole workforce. A gender pay gap does not necessarily indicate equal pay breaches - it often reflects workforce composition (e.g., more men in senior roles, more women in part-time roles).

You can have a significant gender pay gap without any equal pay breaches, and you can have equal pay breaches even with a zero gender pay gap. Address both, but understand they require different analyses and solutions.

Time limits and remedies

Time limit for claims: Equal pay claims must be brought within 6 months of the end of employment. During employment, there is no time limit - employees can claim at any time.

Arrears of pay: Successful claimants can recover up to 6 years of back pay (5 years in Scotland). This is calculated as the difference between what they were paid and what they should have been paid, plus interest.

Ongoing entitlement: A successful claim modifies the contract going forward. The employee is entitled to equal pay from the date of the claim onwards.

No compensation cap: Unlike unfair dismissal, there is no statutory cap on equal pay compensation. For long-serving employees with significant pay gaps, liability can be substantial.

Practical steps to ensure equal pay compliance

  1. 1

    Conduct regular equal pay audits

    Review pay data by gender at least every 3 years. Identify gaps in comparable roles and investigate causes. Document your analysis and any material factors explaining differences.

  2. 2

    Use objective, transparent pay criteria

    Base pay decisions on documented, objective factors such as skills, qualifications, experience, and performance. Apply criteria consistently and train managers on pay decision-making.

  3. 3

    Review job evaluation schemes for bias

    If you use job evaluation, ensure it is analytical (breaking down jobs into components) and free from sex discrimination. Review factor weightings - do they disproportionately value characteristics associated with male-dominated roles?

  4. 4

    Address historical anomalies

    Inherited pay structures from mergers, TUPE transfers, or historical practices may contain discriminatory elements. Develop plans to harmonise pay over time.

  5. 5

    Be cautious with individual pay negotiations

    Unconstrained negotiation can perpetuate gender pay gaps. Consider using structured pay scales or bands to ensure consistency.

  6. 6

    Document material factors

    When paying employees differently for similar work, document the genuine business reason. Vague or retrospective justifications are unlikely to succeed if challenged.

  7. 7

    Train hiring managers

    Ensure managers making pay offers understand equal pay obligations and avoid perpetuating gaps from previous employers' discriminatory pay.

Common mistakes to avoid

  • Assuming different job titles mean different work: Equal value claims can compare very different jobs if they make equivalent demands
  • Relying on "competitive" salaries as justification: Market rates must be evidenced and kept under review - they do not justify permanent differences
  • Ignoring part-time pay rates: Part-time workers (predominantly women) are entitled to pro-rata equivalent pay rates, not discounted rates
  • Treating gender pay gap as equal pay compliance: Publishing gender pay gap data does not prove you are paying equally - it measures something different
  • Assuming no complaints means no problem: Many employees are unaware of colleagues' pay. Proactive auditing is essential
  • Delaying action: Back pay liability accumulates over time. The sooner you identify and address gaps, the lower your exposure