In May 2023, 2,000 employees of UK retailer Next plc, won the second stage of their equal pay claim. In the second stage of the Next equal pay case, an employment tribunal ruling agreed that the work of its predominantly female sales consultants was of equal value to warehouse jobs occupied by mainly male workers.
The unanimous decision means that the burden of proof now shifts to Next to prove there is a non-discriminatory reason for the difference in pay.
The third and final stage of the case is expected to be concluded by May 2024. The average salary loss is estimated at over £6,000 ($7,500), which could result in tens of millions of pounds in backdated compensation for the retailer.
Background to Next Equal Pay Case
In 2021, over 400 Next employees working in the company’s retail and fashion outlets won the first stage in their claim for equal pay, when Next conceded that the warehouse jobs comparison was valid, and the two types of roles could be compared. The claim was first initiated in 2018, when the employees filed a claim with conciliation service Acas.
Lawyers Leigh Day stated that store employees in the Next equal pay case are entitled to receive the difference in their pay for up to six years from the beginning of the case to its conclusion. Ongoing contracts of employment would also be amended to include equal terms. Leigh Day is also representing over 85,000 supermarket shop floor workers in Asda, Tesco, Sainsbury’s, Morrisons, and Co-op in equal pay cases.
Implications for supermarket employees
The ruling of this case has significant implications for supermarket employees, whose claims also focus on warehouse jobs comparisons. The most recent rulings in all cases have determined which roles are comparable for the purposes of equal pay. In 2021, Bloomberg estimated the potential combined costs of the equal pay claims for the supermarkets at $11 billion (£8 billion).
In April 2023, the UK’s Court of Appeal rejected supermarket Sainsbury’s attempt to throw out an equal pay claim on a technicality. The retailer argued that the employment tribunal should have rejected the case as most claimants’ names were omitted on early-stage paperwork.
Under the UK’s Equality Act 2010, men and women performing equal work are entitled to equal pay, unless a pay difference can be justified. The UK’s Chartered Institute for Personnel Development (CIPD) defines equal work as:
“like work” which involves similar tasks, knowledge and skills;
“work rated as equivalent” under a job evaluation scheme, or;
“work of equal value”, equivalent in effort, skills and decision-making, which applies in the above cases.
Next’s gender pay gap report for 2022 revealed a mean gender pay gap of 31.2% compared to 24.2% in 2021. The mean gender bonus gap is 72.2% (up from 63.3%). Part of the claim against the company relates to more lucrative bonuses for warehouse employees.
Next employs approximately 43,000 employees in the UK.
How does the Next equal pay case impact global trends in pay equity?
The Next equal pay case is symptomatic of an underlying global trend towards pay equity which may also impact the outcome of Asda, Tesco, Sainsbury’s, Morrisons, and Co-op equal pay cases. This trend includes several key developments:
The UK recently published guidelines for voluntary ethnicity pay gap reporting to encourage employers to report more widely on pay transparency. The UK’s gender pay gap stands at 14.9%, compared to the US gender pay gap of 18%, and has seen only a marginal fall since the introduction of the 2010 Equality Act. Equal Pay Day in the UK, the date when women’s wages finally equate to men’s earnings of the previous year, occurred on February 23rd, 2023.
Equal Pay Day in the US took place on March 14th, 2023. It was no coincidence that the Salary Transparency Act was introduced on that date. Bill HR 1599 would require all US employers to disclose pay ranges in job listings, and provide wage ranges to job applicants, and existing employees.
The EU Pay Transparency Directive is also a potential gamechanger for global pay equity. The legislation, which must be transposed into law by 2026, requires employers to act when an unjustified gender pay gap of 5% or more exists. For the first time, intersectional discrimination has also been defined in EU legislation.
High profile claims citing gender pay gaps and discrimination in the US have also been made against Nike, the NFL, and Goldman Sachs. The investment bank recently agreed to pay $215 million in settlement.
In the UK, Next’s Gender Pay Gap Report states that its pay gap is strongly influenced “by the fact that such a high percentage of our colleagues in stores are women. Therefore, overall we have a significantly larger proportion of women than men in our lower paid roles.”
It also states that it is committed to ensuring “salary differentials between individuals .. are fair and justifiable.”
The employment tribunal ruling means that statement must now be supported in court.
Adopting a strategy of pay equity
A commitment to pay transparency and pay equity must be a priority for all employers. It not only helps to avoid a negative impact on your employer brand, but creates more inclusive organizations, resulting in greater customer satisfaction, more innovation, improved financial returns, more engaged employees and attracts more talent.
The CIPD recommends that all organizations should:
Check for transparent pay structures.
Carry out a pay audit.
Create a plan to remediate “unjustifiable inequalities.”
A pay equity audit is the first vital step to identifying pay disparities in your organization. Trusaic’s PayParity is a software solution that conducts a pay equity audit at the intersection of factors such as gender, race/ethnicity, age, and disability. The results identify risk areas for remediation and pay gaps within every employee group and at every level in your business.
Talk to one of our pay equity experts today.
Conducting a pay equity audit is a key component to ensuring equitable compensation within your organization. Just as important as the analysis is how you communicate findings and progress with various stakeholders. Download The Pay Equity Communications Planner to learn best practices for discussing compensation, both internally and externally.