On 22 August 2024, an employment tribunal held that Next discriminated against more than 3,500 female store staff by paying them lower hourly wages than male warehouse operatives. Sales consultants received lower pay of up to £3 per hour, meaning their average annual salary differential was more than £6,000.
Paying employees differently for the same or similar jobs may be unlawful under the Equality Act 2010 if the disparity in pay is due to a protected characteristic such as gender. However, pay differences may be lawful if they are based on factors like experience or performance. Employers can defend equal pay claims by proving that the difference is due to a material factor other than gender.
If a claim for equal pay succeeds, the woman’s contract is treated as if it had always contained the same pay as the man’s, and she can claim up to six years’ worth of compensation, going back from the date when her claim was issued. For Next, the total back pay due is estimated to be more than £30 million.
The tribunal’s judgment against Next, although not binding, could make it difficult for Asda to defend the equal pay claims it faces from 60,000 of its female shop workers when these go to final hearing in November. As with Next, the claims against Asda arose because female shop workers were historically paid almost £4 an hour less than their male warehouse colleagues. It is estimated that, unless Asda successfully argues that the discrepancy was not based on gender, the compensation payable could total £1.2 billion.
To avoid legal challenges and reputational damage, employers should ensure they document pay decisions and the reasoning behind them. Carrying out equal pay audits, maintaining transparent pay policies and providing relevant training to HR and managers may also help counteract discriminatory pay practices. This is especially relevant for employers with 250 or more employees which, under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, are required to report annually on the gender pay gap in their organisation.
The cases of Next and Asda highlight the importance for employers of achieving pay equality. Not only is fair pay fundamental to employee engagement and talent retention, but the readiness of employees to challenge unfair pay is seen in the 30% rise in equal pay claims reaching tribunal since 2020. Therefore, while employers may need to invest time and resources to achieve pay equality within their organisation, it is clear that the costs of not doing so, financially and in terms of reputation, are far greater.
James Townsend is head of employment, and Elizabeth Coyle is employment associate at Payne Hicks Beach
