Tesco faces possible £4bn bill over equal pay claims

Tesco potentially faces the UK's largest ever pay out for equal pay claims following the lodging of a group action from a possible 200,000 employees, claiming for back pay totalling £20,000 per employee.

The action comes as it was revealed last week that Tesco pays its warehouse workers, who are largely male, up to £3 more per hour than its workers on the shop floor, who are predominantly women.

The claims highlight an inherent problem in many businesses whereby lower paid roles are dominated by women, and have been so historically, despite these roles being of equal importance to the overall success and profitability of the business in question.

Precedent set in a group action claim against Birmingham City Council suggests that the Tesco employees' claims will also succeed. Birmingham City Council were forced to pay £1bn in fines over the course of the last decade, when it was revealed that women employed as cooks, cleaners and carers received lower pay than men employed as bin collectors and road workers.  Reading Borough Council has also been stung by equal pay claims, so far paying out £3m to claimants.

Tesco's rivals, Asda and Sainsbury's, face similar claims with an Employment Tribunal already establishing in the Asda case that shop floor workers could compare themselves to male colleagues working in warehouses, the first step to succeeding in bringing a claim for equal pay.

The Tesco claims are  currently only at the Early Conciliation stage, which is a mandatory step in all Employment Tribunal litigation, facilitated by ACAS (Advisory, Conciliation and Arbitration Service)  , so there is a long way to go before any pay-outs are made.  Arguably at this point therefore, the headlines serve as more of a scare tactic than anything else but should be a point of real consideration for other companies who employ individuals in similar roles to Tesco who may find themselves in a similar position, particularly as the Government's recent gender pay reporting legislation brings the issue of equal pay further into the spotlight.

Differences in pay for male and female employees is certainly a hot topic at the moment as the recent deadline for the publication of reports on the gender pay gap  has compelled companies to report their overall mean and median pay gaps based on gross hourly pay for men and women.  The gender pay gap itself refers to the discrepancy in pay between men and women irrespective of their role.  Though this is distinct from equal pay, it will no doubt bring to the fore companies for whom disparities in pay as between men and women are prevalent.

Once more, retailers were the main protagonists in the initial gender pay gap reporting figures with women's clothes shop Phase Eight reporting that their female employees received an hourly rate of pay 64.8% lower than men.  According to not-for-profit organisation Women in Retail, women make up 60% of retail workers but only 10% of executive roles in that sector.  Phase Eight Chief Exec Benjamin Barnett explained that its instore employees are “overwhelmingly female” but in head office, the split between men and women is more balanced and therefore claimed that “This will cause significant disparity across our results where this imbalance is not taken into consideration. Similar issues will apply to other organisations in the women’s fashion retail sector".

Other companies in the spotlight include Easyjet who reported a 51.7% lower pay rate for women and Virgin Money who reported 32.5%. The British Museum on the other hand came out on top, reporting a remarkable 0% gap between pay for men and women.

The recent focus on gender pay following the first round of reporting under the new Government legislation, alongside the headline grabbing group actions against the large supermarket retailers, will almost inevitably lead to further litigation in this area.  Businesses should therefore be keeping an eye on the composition of their workforce and how this translates in terms of pay so as to avoid similar action arriving on their doorstep in the future.