Higher pay for hard-to-fill roles wins the day – but equal pay risks remain
Key takeaway: The Employment Appeal Tribunal has ruled in a long running equal pay claim that market forces can justify paying warehouse workers more than predominantly female shop-floor staff doing work of equal value. The decision raises important considerations for employers on when differences in pay may be objectively justified.
Major retailer Next has secured a hard-fought victory in a long-running equal pay case, with a ruling that market forces can justify paying warehouse staff more than predominantly female shop-floor workers doing work of equal value.
The Employment Appeal Tribunal (EAT) decision (7 September) will be closely watched within and beyond the retail sector, particularly by employers facing recruitment and retention pressures in different parts of their business.
More than 3,500 Next retail employees argued that they should receive the same pay as warehouse operatives, after an employment tribunal found their jobs were of equal value in terms of factors including skill, effort and decision-making. The warehouse workforce was approximately 53% male, compared with 77.5% female among retail staff.
Why Next won its equal pay appeal
The original tribunal accepted that there was no direct sex discrimination but found that the market-related factors relied on by Next put the predominantly female retail workforce at a particular disadvantage and did not sufficiently justify the difference in basic pay.
But now that ruling has been overturned on appeal, with the EAT accepting that Next had a legitimate business reason for paying warehouse staff more. It accepted the retailer’s argument that it needed to offer higher rates to recruit and retain warehouse workers in a competitive labour market, and that those pressures did not apply in the same way to shop-floor staff.
Employment law Partner Sean McDonough at Mogers Drewett Solicitors said: “This is an important decision for employers because it recognises that businesses operate in real-world labour markets.
“The fact that two groups of employees may be doing work of equal value does not necessarily mean they have to be paid identically, where there is a genuine, non-discriminatory reason for the difference.”
What the Next ruling means for employers
But experts are urging employers to avoid seeing the ruling as a green light to pay different groups differently.
The ruling underlined the importance of being able to explain and evidence pay decisions. An employer relying on market forces needs to be able to demonstrate what those forces are, why they genuinely apply to one group and not another, and why the resulting difference in pay is proportionate.
What parts of the equal pay claim were upheld?
The EAT did not overturn all of the original findings. Claims relating to some elements of pay, including night-time pay, overtime and paid rest breaks, were upheld.
Sean added: “The EAT’s decision turned on specific evidence around Next’s unique recruitment and retention pressures and how the pay difference was justified.
“This reinforces why it’s important to document any reasons behind pay differences and to keep a clear record of the evidence supporting them. If challenged, being able to demonstrate that a pay decision was driven by a genuine business need, rather than assumptions about the people doing the job, could make all the difference.
If you have any questions, please contact Managing Partner & Head of Employment Sean McDonough using the details below.
Sean McDonough, Managing Partner – Mogers Drewett
Sean.McDonough@mogersdrewett.com