Whatever the Bible may say about the love of money being a “root of all kinds of evil”, as Paul wrote in his first letter to Timothy, there aren’t many of us who wouldn’t be happier with a little bit more. 

In living memory, and immortalised by the film Made in Dagenham, the Equal Pay Act 1970 was first mooted in the 1964 General Election by the Labour Party in its manifesto when proposing a charter of rights that included “right to equal pay for equal work”.
We’ve come a long way since then and the topic now encompasses low pay, gender inequality and pensions auto enrolment. The topic is still as relevant now as it was in 1964 and is not just a problem for the UK. Recently, CBNC reported that Apple, Airbnb, AT&T, and Salesforce were among 13 companies to pledge support for California’s Equal Pay Pledge, an initiative designed to help achieve pay equality for women. Seyfarth Shaw LLP, in a webinar, reckoned that Iceland operates the gold standard in equal pay law; it has a requirement for firms with 25 or more employees to obtain certification for equal pay or face daily fines of around £400.
Chloe Themistocleous, an associate in the employment department of Eversheds Sutherland, says that it’s the National Minimum Wage and National Living Wage (NMW), maternity pay, sick pay and the threshold of earnings for claiming that cause problems for businesses. She says that “while these are not necessarily troublesome, they all add increasing cost pressures on businesses every year as the statutory minimums increase due to the rising cost of living”. It’s entirely logical that these pressures will affect the profitability of businesses and could ultimately lead to redundancies, especially in today’s tech-laden environment.
John Palmer, senior guidance advisor at Acas, the government’s independent conciliation service, echoes Themistocleous’ sentiment. He knows that “pay affects workplace in lots of different ways... and it isn’t regulated by one particular piece of legislation.”

Simmering pressures

It’s apparent to any bystander that the world of work in 2019 is markedly different from that of 10 years ago, let alone that of the 20th century. It was for this reason that the government ordered a review of modern working practices. Termed the Taylor Review, after its author, Matthew Taylor, the government responded with a policy paper called the Good Work Plan that set out the vision for the future form of the UK’s labour market. As Themistocleous explains, “the Taylor Review made 53 recommendations and the government accepted majority of them.”

The recommendations include devising a better definition as to who a worker is as they are entitled to various benefits, NMW, holiday pay, sick pay, etc; ensuring that piece rates meet NMW; having a better alignment of tax between the employed and self-employed; considering a higher minimum wage for zero hours workers; stopping the rules referred to as Swedish derogations that allow agency workers to be paid less than permanent staff; and giving HMRC the right to enforce holiday and sick pay.

The Good Work Plan is significant for Themistocleous as it is “a holistic review of the UK labour market. It demonstrates that the government is engaging in making change in the labour market in an employee-friendly and protective manner that could be extremely costly and operationally difficult for business.”
Gender pay differentials have been in the news recently. Despite the legislation being in place for more than a year it’s telling that, according to a BBC report, fewer than half the UK’s biggest employers have succeeded in narrowing their gender pay gap.

The report noted that “across 45% of firms the discrepancy in pay increased in favour of men, while at a further 7% there was no change. Overall, 78% of companies had a pay gap in favour of men, 14% favoured women and the rest reported no difference”.

And this is where it gets interesting for print. Paragon Group, the biggest player in the UK printing industry, reported an overall gender pay gap of 23.16%. The company pointed out that this is higher than the national average, but drew attention to print’s traditional male dominance and Paragon’s recent history of acquisition. The company said it was committed to addressing the underlying causes of the pay gap and acknowledged the likelihood of unconscious bias in recruitment and promotion processes, adding that it was training managers to avoid this issue.

Moo is an interesting case as it has more female workers than male, yet it reported a pay gap of 20.4% globally and 27.1% for the UK operation. The company says it has a long-term action plan based on education, training and monitoring aimed at closing the gap.

Overall, Equality and Human Rights Commission (EHRC) found that the UK pay gap average was 9.6% (real estate and manufacturing). The worst sector was construction (28%) while the best was accommodation and food (1%).

Apart from gender issues, there is another change to reckon with, and it’s one that will be obvious to anyone wondering why their take home may have fallen post 5 April. Simply put, pension auto-enrolment saw an increase to the minimum employer and employee contributions. Based on past experience Themistocleous wouldn’t be surprised “if there were further minimum increases in the future too in order to encourage a move away from a reliance on state pensions.”

Spilling over from the world of IT contracting some changes to the IR35 legislation which affects whether someone is truly self-employed for tax purposes. Highlighted by Cotton, he sees it as another issue that HR teams will have to deal with: “If an organisation outsources work to a contractor, it will soon be down to the HR function to decide if the individual is self-employed or employed, impacting the amount of tax they pay. Previously the burden was on the individual.”

Practically speaking, he thinks that this change could result in “tensions between the individual and an organisation and will require careful handling”. He advises HR functions to think about putting a grievance process in place in the likely event that individuals want to appeal any decision that’s been made.

The real problem as Palmer sees it is that “there are different challenges for small and large employers. New and small employers often have a challenge of working out what they need to know as quickly as possible, and large employers can face the challenge of being more heavily scrutinised and ensuring consistency across the organisation.” Even so, he makes it plain that getting pay right is important and it takes some effort to get right, but there is help available from the likes of Acas and HMRC.

Enforcement is altering the pay landscape

Naturally, for legislation to be effective it needs enforcement. For breaches of NMW legislation it’s notable that action can be brought by affected employees and workers while HMRC has the power to carry out audits of potentially non-compliant firms. Themistocleous thinks that most firms, understandably, do not welcome an HMRC audit as it invariably means upheaval and potential issues coming to the fore especially as “there can be high fines and public naming and shaming.” Her advice to business that may have NMW, holiday pay or sick pay issues is to “think seriously about how to rectify them in the event they become the subject of an audit.”
And if matters do get serious and end up before a court, evidence indicates that they too are taking a hard line when dealing with employers who do not meet statutory pay requirements, especially with regard to the NMW. As she points out, that the “employment tribunals have been given the power to publish names of employers who do not pay tribunal awards.”

Employees are alive to their rights. A number of recent high-profile equal pay cases have made many employees question if their pay is comparable to colleagues in similar roles. And in the world of supermarkets, Themistocleous explains that “a court ruled in favour of the employees, so that retail workers stacking shelves in stores, should receive comparable pay to warehouse staff.”

But no matter what employers may think, Palmer says that the “employment tribunals have to act even-handedly due to their nature. There are rules they follow meaning they have judges from employee and employer backgrounds who don’t substitute their personal views for the law.” Despite the courts relying on quite specific legislation around pay, “there are areas where the courts continue to develop case law to make sense of legal situations.”

More changes

From a legal perspective Themistocleous reminds firms to be aware of the regular changes to statutory pay that are subject to annual review. She adds that current hot topics are those relating to agency workers and the gig economy. She says that “there is an increasing trend to give rights usually reserved for employees to workers to ensure they are treated fairly and are not taken advantage of. There are other changes that some may have missed. The first relates to payslips; these must be given to workers, not just employees, it must include the total number of hours worked where the pay varies accordingly. Then there’s new legislation that gives employed parents two weeks of leave if they lose a child or suffer a stillbirth from the 24th week of pregnancy”.

At the core of these changes is a concern that low pay is still a problem with wages still failing to recover in real terms since the financial crash. Says Cotton: “It used to be a widely held view that being in work helped lift people out of poverty, but that is no longer a guarantee. In order to deliver sustainable wage growth, employers need to improve their productivity. Raising the standard of their people management practices can help them to achieve this.” As he points out, “all these changes will increase demand on HR teams, particularly organisations with a large headcount, and they should start preparing for these changes now to ensure they are ready.”
He gives an example. Most organisations only ask their staff to disclose their ethnicity on a voluntary basis, “but if they don’t start to be more proactive about collecting this data now, they could find themselves with little to draw from when a deadline is looming.”