Equal pay risk – what HR leaders need to know

Equal pay lawsuits in the UK: What HR and business leaders need to know

Equal pay claims haven’t gone away. In fact, they’re becoming easier for employees to pursue and harder for employers to defend. High-profile retail cases may dominate the headlines, but any organisation that can’t explain and evidence its pay decisions could face scrutiny.

With “no win, no fee” firms actively promoting collective claims, employees also have easier access than ever to information about their rights. AI tools are making it much simpler to understand equal pay law and identify potential issues before speaking to a solicitor. Whilst AI can’t replace legal advice, it is making employees more informed, more confident and more likely to question pay decisions they believe are unfair. For employers, the potential financial and reputational consequences can be significant, making now the right time to review pay practices before concerns become claims.

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 carrying out ‘like work’ or work of ‘equal value’ should receive equal pay unless any differences can be objectively justified. However, historical pay practices and evolving job roles have left many organisations exposed to equal pay challenges.

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.

Whilst retail has become the focus of many high-profile equal pay claims, the underlying risks are not unique to the sector. Any organisation with historical pay practices, inconsistent approaches to pay decisions or legacy reward structures could face similar scrutiny. Differences in pay are not automatically unlawful, but employers should be able to demonstrate that they are based on objective, evidence-based reasons rather than assumptions or inconsistent decision-making.

Key steps organisations can take to reduce equal pay risk

For HR leaders, the challenge isn’t simply identifying pay differences, it’s understanding whether those differences can be objectively justified and evidenced if they’re ever questioned. As equal pay claims become more common and employees have easier access to information about their rights, taking a proactive approach is no longer just good governance, it’s good risk management.

1. Understand where your equal pay risks exist

An equal pay review is an important first step in identifying areas of potential risk before they develop into formal claims. Rather than waiting for concerns to be raised, employers should regularly assess whether pay differences exist between employees carrying out like work or work of equal value, and whether those differences can be objectively justified.

A review should typically consider:

• Pay across comparable roles and functions.
• Differences between locations, business units or departments.
• Historical pay practices that may no longer reflect current organisational structures.
• Recruitment, promotion or retention decisions that have created pay variations over time.
• Reward and benefits arrangements that could contribute to wider perceptions of inequality.

Understanding where potential risks exist allows organisations to prioritise action, strengthen governance and make informed decisions before issues escalate.

2. Review how pay decisions are made

Pay structures are only part of the picture. Many equal pay risks arise through individual decisions made over time, whether during recruitment, promotion, internal moves or retention discussions.

Organisations should regularly review whether managers are applying pay policies consistently, whether decisions are appropriately authorised and whether there is clear evidence to support any differences in pay. Consistency, governance and objective justification are often just as important as the pay framework itself.

3. Ensure decisions are documented and evidence-based

If an equal pay claim is raised, employers need to demonstrate not only what decisions were made, but why they were made.

Clear documentation should support decisions around starting salaries, pay increases, promotions, market supplements and other discretionary payments. Where differences exist, organisations should be confident they can evidence legitimate business reasons rather than relying on historical arrangements or individual manager discretion.

Open communication around pay principles and career progression can also help build trust and reduce misunderstandings before they become disputes.

4. Take specialist advice before issues become claims

Where potential equal pay risks are identified, obtaining specialist advice at an early stage can help organisations understand their exposure, prioritise action and make informed decisions before concerns escalate.

For more complex or higher-risk matters, organisations may also benefit from advice provided under legal privilege. We offer a legally privileged Equal Pay Risk Review, helping employers identify potential vulnerabilities, assess areas of concern and understand the practical steps needed to reduce future risk while protecting sensitive legal advice.

Equal pay risk extends far beyond retail

Whilst supermarkets have dominated recent headlines, equal pay risk is by no means limited to the retail sector. Any organisation with large workforces, historical pay practices or complex reward structures could face similar challenges if pay differences cannot be objectively justified.

Sectors such as manufacturing, logistics, hospitality, healthcare, education, financial services and local government can all be exposed to equal pay risks for different reasons. In some organisations, roles have evolved over time without pay structures keeping pace. In others, legacy allowances, market supplements, acquisitions, TUPE transfers or inconsistent local pay practices have created differences that are difficult to justify years later.

Differences in pay are not automatically unlawful. Employers can pay employees differently where there is a genuine, objective reason for doing so. The challenge comes when organisations cannot clearly evidence why those differences exist or demonstrate that pay decisions have been applied consistently.

As scrutiny of workplace fairness continues to increase, and employees have easier access to information about their rights, organisations should be reviewing pay practices before concerns become formal claims. Taking a proactive approach not only helps reduce legal risk but also strengthens employee trust and confidence that pay decisions are fair, transparent and evidence-based.

Why equal pay risk is increasing

Equal pay has been a legal requirement for decades, but the environment in which employers are managing pay is changing. Employees have greater access to information than ever before, making it easier to understand their rights, compare experiences and question decisions they believe may be unfair.

Artificial intelligence is also changing employee behaviour. Whilst AI cannot replace professional legal advice, it can help individuals understand equal pay principles, identify potential issues and feel more confident about raising concerns or seeking further advice.

At the same time, collective claims continue to attract significant attention, with claimant law firms making it easier for large groups of employees to pursue action together. The Government has also signalled its intention to strengthen the equal pay framework through consultation on reforms aimed at improving enforcement and making it easier for employees to bring claims.

Taken together, these developments mean employers are operating in an environment of greater scrutiny, higher employee awareness and increasing expectations around fairness and transparency. Reviewing pay practices before concerns arise can help organisations identify potential risks, strengthen governance and ensure they can evidence the decisions they make.

Questions every HR team should be asking

Equal pay claims are often the result of issues that have developed gradually over many years, making them difficult to identify without taking a step back and reviewing existing practices. Before concerns become formal claims, HR leaders should ask:

• Could we explain and evidence every significant difference in pay across comparable roles?
• Are pay decisions made consistently across different managers, departments and locations?
• Do we have clear records to support decisions around starting salaries, promotions, market supplements and discretionary pay increases?
• Have historical pay practices, organisational changes or acquisitions created disparities that we have never formally reviewed?
• If an equal pay claim were brought tomorrow, would we be confident that we have the evidence to objectively justify our decisions?

Answering “no” or even “I’m not sure” to any of these questions doesn’t necessarily mean your organisation has an equal pay issue. It may, however, indicate that there are areas worth reviewing before they become more significant risks. Taking a proactive approach can help employers identify potential vulnerabilities, strengthen governance and ensure pay decisions remain fair, consistent and well documented.

Review your equal pay risk before it becomes a claim

Equal pay reviews shouldn’t simply identify differences in pay. They should help organisations understand whether those differences can be objectively justified, where further investigation may be needed and what action should be prioritised to reduce future risk.

Halborns, part of the Empowering People Group, offers a legally privileged Equal Pay Risk Review designed to help employers identify potential vulnerabilities before they become costly disputes. By combining legal expertise with practical employment advice, organisations can gain a clearer understanding of their exposure while ensuring sensitive legal advice remains protected by legal professional privilege where appropriate.

Find out more about the Equal Pay Risk Review and how it can help your organisation take a proactive approach to managing equal pay risk or get in touch for tailored support.