The Next equal pay judgment: two things you must do
30th September 2024
Samantha Gee
The recent landmark ruling from the Next equal pay case is a significant one. The Employment Tribunal has ruled that store staff (predominantly women) should not have been paid at lower rates than warehouse staff (predominantly men).
159 MPs have also recently written to Asda to urge them to put an end to their similar long-running equal pay case.
In fairness, paying equitably for work of equal value really isn’t anything new. The Equality Act 2010 requires equal pay for ‘like work’ (e.g. similar tasks, knowledge and skills), ‘work rated as equivalent’ (e.g. using job evaluation) or ‘work of equal value’ (not similar, but equivalent in effort, skill and decision-making).
But the Next ruling is significant, (and not just for the retail sector), because it has shone a huge spotlight on the fact that:
- work comparisons do not have to be similar and can be on the basis of equal value – this impacts how you judge the relative size of different roles internally
- pay benchmarking alone cannot be used to justify pay differences in roles of equal value – this impacts how you use market data
For so long now employers have relied too much on market data providing the ‘answer’ of how much to pay people.
If you think about it, market data is full of bias. It is simply what others are paying for similar roles, including those that have discriminated in their decision-making.
It also perpetuates the discriminatory decisions of the past which have led to certain roles being paid differently by virtue of the type of people who used to do them (e.g. roles typically carried out by women being paid less than those typically done by males).
But before you throw all that good benchmarking practice away, there is a better way. And that involves how you use benchmarking data.
As I’ve written about many times before, the market median is not the answer. It is not what you should pay someone. It is merely a stick in the ground of what is paid externally.
The key is to combine the market data for roles with a similar value and use this to create a pay structure. For example, pay ranges based on groups of jobs, or internal levels, rather than spot rates for individual roles.
Creating pay ranges with market data not only reflects the internal value of roles, it also removes some of the volatility you can get with market data and increases the sample size, so making the base data more reliable.
And when it comes to similar value internally, you will need a systematic framework to establish the relative size of roles.
For some organisations, implementing an off the shelf job evaluation scheme will feel right. But for others this lacks transparency and creates an industry of HR ‘control’.
We often design tailored job classification frameworks for clients that assign roles to broad internal levels in a light-touch and transparent way. The key with job classification is that you base it on factors so that it is seen to be ‘analytical’ and that the language is checked for any bias.
The answer is to balance competitive pay with equal pay. If you don’t already, there are two things you absolutely need to ensure is in place:
- a gender-neutral system to establish work of equal value in your organisation e.g. job classification or evaluation
- an approach to setting pay takes account of work of equal value and not just market data e.g. a pay structure based on internal levels
We’re experts in creating pay foundations and here to help if needed.
How we can help
Do get in touch if you’re looking to create clear internal career levels, or implement pay structures based on robust market benchmarking data. We can also help with pay gap reporting and equal pay audits.
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