Equal Pay Audits, new regulations coming into force on Wednesday, 1 October 2014

The Equality Act 2010 currently provides that men and women should receive equal pay for equal work, and from 1 October 2014 Employment Tribunals will be obliged, in certain circumstances, to order employers in breach of equal pay to conduct an Equal Pay Audit.

When will an Employment Tribunal order an Equal Pay Audit?

In respect of a claim brought on or after October 2014, where an Employment Tribunal finds that an employer has breached the Equality Act in terms of equal pay, it must order that employer to conduct and publish an Equal Pay Audit (Regulation 2).

By way of Regulation 3, the Employment Tribunal must not order an audit if:

1. The employer carried out an audit in the three years preceding the date of the Tribunal's judgment that it breached equal pay law.
2. It is clear without an audit whether any action is required to avoid equal pay breaches occurring or continuing.
3. The breach found by the Tribunal gives no reason to think that there might be other breaches, or
4. The disadvantages of an audit would outweigh its benefits.

Content of an Audit

The Equal Pay Audit must:

• Include relevant gender pay information related to the descriptions of employees specified by the tribunal.
• Identify any differences in pay between men and women and the reasons for those differences.
• Include the reasons for any potential equal pay breach identified by the audit, and
• Set out the employer's plan to avoid breaches occurring or continuing.

The employer must send the audit to the Tribunal by the date specified, then the Tribunal will determine if that audit is compliant. If it is, the employer should publish that audit on their website, (unless they can show that doing so would result in a breach of a legal obligation) for a period of at least 3 years

Exemptions

Micro-businesses (those with less than 10 full time employees or, in the case of part time employees, the equivalent of) and new businesses (less than 12 months old at the time of the equal pay complaint) will be exempt.

Penalties

Where an employer fails to conduct a satisfactory Equal Pay Audit when ordered to do so, and has no reasonable excuse, the Tribunal can order it to pay a penalty not exceeding £5,000 (Regulation 11). In reaching its decision as to penalty, the Tribunal must take the employer's ability to pay into account.

The Tribunal must also make an order specifying a new date by which it must receive a satisfactory audit (Regulation 7). If the employer again fails to comply, it might face a further penalty of up to £5,000.