Compulsory pay audits from 1 October 2014

Regulations come into force from 1 October 2014 making it compulsory for employment tribunals to order equal pay audits against non compliant employers in equal pay claims, unless certain exemptions apply.

In relation to claims brought from 1 October 2014, in the event that the employer is found to be in breach of the equal pay provisions, the tribunal must then go on to require the employer to carry out an equal pay audit. However, before doing so, the tribunal  must consider the following circumstances and if they apply, an order requiring an equal pay audit must not be made:

• The employer has carried an audit within the last three years;
• It is clear without an audit what action is required;
• The tribunal has no reason to think that there will be other breaches; or
• The disadvantages of ordering the audit outweigh its likely benefits.

There is also an exception for businesses under twelve months old, and those with fewer than ten employees.

Content of audits

The audits will require employers to provide the tribunal with a report detailing:

• Information on the gender and pay of certain types of employee specified by the tribunal;
• Differences between pay for men and women and the reasons for these differences;
• Reasons for any potential equal pay breach identified by the audit; and
• The employer’s plans to avoid breaches occurring or continuing.

Employers must be given at least three months to complete the audit. The employer then submits their report to the tribunal, who will determine whether or not the audit is compliant with the Regulations. If it is, the employer must then inform employees of its content and publish the report on its website, if it has one, for a period of at least three years.

There is a penalty payable to the Secretary of State of up to £5,000 where an employer fails to carry out the audit without reasonable excuse.

Implications

In any event, employers need to be proactive in reviewing their pay structures. The new rules provide an added element of risk when faced with equal pay claims.  Audits can only be ordered where an employer loses an equal pay claim. However, if one has to be carried out, the audit results have to be published. Employers may prefer to carry out an audit before going ahead with a hearing, given the exemption mentioned above.