Equal pay risk review – what you need to know
Equal pay lawsuits in the UK: What HR and business leaders need to know
Equal pay lawsuits are making headlines in the UK, following a high-profile case involving one of the nation’s largest retailers. This successful claim has set a precedent, encouraging workers from various high street stores to consider similar actions. With “no win, no fee” firms actively promoting collective claims, the time for business owners and HR leaders to take notice is now, as potential liabilities could reach millions.
Beyond the immediate financial impact, these cases highlight the importance of transparency and fairness within organisational pay structures—a growing expectation among employees and regulators alike.
For HR and business leaders, understanding the potential exposure to equal pay claims and taking proactive steps to mitigate these risks could be crucial for the long-term stability and reputation of their organisations.
Why are the court cases happening?
The surge in equal pay lawsuits has roots in long-standing disparities that have often gone unnoticed in large organisations. In many cases, pay differences between employees in roles perceived as “male-dominated” versus those in “female-dominated” roles have persisted, even when the work is comparable in value. Under the Equality Act 2010, employees doing “like work” or work of “equal value” should be paid equally, yet discrepancies are prevalent in many sectors, including retail.
Some of the most recent claims against major retailers revolve around warehouse and shop floor employees—roles often differentiated by gender and, historically, by pay. The argument is that employees in these roles perform work of equal value, meaning they should be compensated similarly. With more “no win, no fee” firms making it accessible for employees to bring collective claims, retailers and other businesses are finding themselves under scrutiny.
Key steps for organisations to protect themselves against equal pay claims
For HR leaders and business owners, the implications are clear: equal pay practices must be thoroughly reviewed and understood. Here are several steps to help mitigate risk and ensure that your organisation is prepared should similar claims arise.
- Conduct a thorough equal pay audit
An audit of your current pay practices is an essential first step in identifying potential vulnerabilities. By evaluating whether employees performing “like work” are paid consistently across your organisation, you can address discrepancies before they become a legal issue. An effective audit should also consider roles of equal value, where employees may perform different tasks but contribute equally to the business in terms of responsibility, skills, and effort required.
An audit typically involves:
- Reviewing a cross-section of roles, from shop floor to support positions like finance, IT, and HR.
- Conducting a “snapshot” analysis of wages across various sites or departments.
- Looking at variances between departments, locations, or demographic groups.
- Historical practices that may no longer align with current legislation.
- Broader issues around compensation and benefits that may indirectly contribute to perceived inequalities.
By completing an initial audit, you lay the groundwork for a more streamlined review process and ultimately more successful risk mitigation strategies.
2. Examine pay and reward structures
Beyond the audit, consider the broader framework of your pay and reward structures. Are there legacy factors or historical practices that could be introducing bias? An inclusive and well-documented approach to compensation can help ensure that future pay reviews are consistent, fair, and compliant with equal pay obligations.
HR leaders should work closely with finance and legal teams to assess if existing pay structures may be exposing the organisation to risk. Consider whether your pay strategy allows for adjustments to address identified gaps and, crucially, whether it aligns with market standards and internal job evaluation outcomes.
3. Implement clear documentation and communication practices
Transparency around pay policies is crucial, both for employees and for the organisation’s legal protection. Ensure employment contracts, offer letters, and internal policies are clear and consistent. Accurate documentation is invaluable in the face of an equal pay claim, demonstrating that decisions around pay have been made fairly and in accordance with company policy.
Effective communication is equally important. Clear, open dialogue with employees about how pay decisions are made and opportunities for progression can enhance trust and reduce the likelihood of employees feeling the need to pursue claims.
4. Prepare for future claims proactively
While prevention is always preferable, it’s wise to have a strategy in place for dealing with any future equal pay claims. Designate a cross-functional team—including representatives from HR, legal, and finance—to act swiftly in the event of a claim. This team should be equipped to gather data, consult relevant records, and work with legal advisors to respond robustly.
A clear plan not only ensures that you’re prepared for any claims but also signals to employees that your organisation takes equal pay seriously, further enhancing trust and goodwill.
Beyond retail – is your sector prepared for claims?
Whilst recent high-profile equal pay cases have centred on large retailers, the potential risks reach well beyond the retail sector. Businesses in industries like hospitality, manufacturing, logistics, and even financial services could face similar claims if they do not proactively address pay practices. Each sector has its own unique risk areas, often driven by a combination of gender-segregated roles and historical pay practices that may no longer align with current expectations around fairness. Organisations need to act now to assess their potential exposure, address and gaps and create robust pay structures that align with modern standards of fairness, not just to avoid costly claims but to ensure they have created a transparent workplace, where all employees feel valued.
For a deeper understanding of your organisation’s risk areas and practical steps to mitigate them, read more about our equal pay risk review or get in touch for tailored support.