UK: Equal pay audits - draft regulations published for implementation on 1 October 2014

The Government has published its response to last year's consultation on the proposal to require tribunals to order equal pay audits where an employer loses an equal pay case.  Draft regulations have been published to take effect on 1 October 2014 (subject to the parliamentary affirmative resolution procedure) and will apply to equal pay claims presented on or after that date.

Tribunals must not order an audit if the employer has already carried out a qualifying audit within the preceding three years, the action required to avoid equal pay breaches is clear without an audit, there is no reason to think there may be other breaches, or the disadvantages of an audit outweigh the benefits.  There are also exemptions for existing micro-businesses and new businesses.

The audit must include pay information for men and women for the categories of employees and period specified by the employment tribunal, the pay difference and reasons, the reason for any potential equal pay breach identified, and the employer's plan to avoid equal pay breaches. The tribunal will set a date for the audit to be completed which must allow the employer at least three months. The tribunal will determine whether an audit is compliant and, if not, order this to be rectified; it can also impose a penalty for £5,000 for each failure to comply with an audit order.

Significantly, the Government appears to have backtracked on its original decision not to require employers to publish the results of their audits generally, but only to the employees subject to the audit. The draft regulations require publication on the employer's website for at least three years (save to the extent it would involve a breach of a legal obligation), together with a requirement to inform all employees covered by the audit where they can obtain a copy. Our enquiries have confirmed that, despite the ambiguous commentary in the response, the drafting does indeed reflect a change in policy to require publication on an external website and not just an intranet;  no doubt this wil be discussed by ministers in the forthcoming parliamentary debates. Clearly employers will need to factor this into decisions on settlement of claims and on whether to conduct a voluntary audit. The financial penalty provision does not apply to a failure to publish the audit, but non-compliance with a tribunal order would be contempt of court.

The Government does not propose publishing its own guidance on audit requirements, instead pointing to EHRC good practice guidance on how to carry out an equal pay audit.