Avoiding unlawful discrimination when you decide what pay and benefits workers will receive

The next part of this guide looks first at the general rules on avoiding unlawful discrimination when setting levels of pay and benefits. It then explains the specific rules on equal pay between women and men, what to do if someone says you are paying them less than someone else because of a protected characteristic, and the specific rules that apply in equal pay cases in the Employment Tribunal. It covers:

  • Avoiding unlawful discrimination when you decide what pay and benefits workers will receive
  • Who is responsible for a service you give your workers as a benefit
  • Bonuses
  • Occupational pension schemes
  • Health insurance and disabled workers
  • Pay discussions
  • Making sure you are giving women and men equal pay and benefits
  • Sex equality clause
  • Equal work
  • Like work
  • Work that is rated as equivalent
  • Work that is of equal value
  • The employers defence of 'material factor'
  • Pay protection schemes
  • Pay, benefits and bonuses during maternity leave
  • What to do if someone says you are paying them less than someone else because of a protected characteristic
  • What the Employment Tribunal has to decide in an equal pay case
  • Which claims can the Employment Tribunal hear?
  • Time limits
  • Burden of proof
  • Assessment as to whether the work is of equal value
  • What the Employment Tribunal can decide in cases where money is owed
  • Pension cases

There are different ways you might decide what to pay a person and what benefits to provide, such as:

  • the going rate for the job in your sector and/or area
  • the skills and qualifications needed by someone when they do the job
  • their performance in the job.

You must make sure that the way you work out and apply these criteria does not discriminate unlawfully.

Always remember that specific rules apply where pay or benefits are part of the workers contract of employment and women and men are being paid differently. If, for example, the jobs for which you are paying workers at different rates are mainly done by women or mainly done by men.  Read more in Making sure you are giving women and men equal pay and benefits.

Good practice tips for avoiding unlawful discrimination in pay and benefits

  • Make sure you know why you are paying people differently.
  • Check that people who share a particular protected characteristic do not generally do worse than people who do not share it.
  • Use an equal pay audit to check the impact of your decisions on pay and benefits.
  • A transparent, structured, pay system based on a sound job evaluation scheme is more likely to be free of bias than one that relies primarily on managerial discretion.
  • There is useful guidance in part 2 of the Code of Practice on Equal Pay, 'Good equal pay practice'.

Who is responsible for a service you give your workers as a benefit

If you are an organisation that provides services, goods or facilities (which this part of the guide calls 'a service') to the public or a section of the public, you may give your workers access to that service either on the same basis as the public or on special terms, such as a staff discount.

Or you may pay someone else to provide your workers with a service.

There are five questions to think about in this situation:

  • Do you provide a service to your workers in exactly the same way you provide it to members of the public (for example,they can hire a function room from you on the same terms as a member of the public)?
  • Do you provide a service to your workers which is almost the same as a service you give the public but in a special way because they work for you (for example, they receive a staff discount when they buy something from you)?
  • Does someone else provide a service on your behalf?
  • Are you supplying group insurance?
  • Does equal pay law apply?

Do you provide the service to your workers in exactly the same way you provide it to members of the public?

You may be providing a service to your workers in exactly the same way you provide it to members of the public. For example, they can hire a function room from you on the same terms as a member of the public.

If this is the situation and a worker says you've discriminated against them in that situation, you should read the Equality and Human Rights Commission guide: What equality law means for your business when you are providing goods, facilities or services to the public or the equivalent guide for other types of organisations. The introduction to this guide tells you how to get hold of this information.

Do you provide a service to your workers which is almost the same as a service you give the public but in a special way because they work for you?

You may be providing a service to your workers in almost the same way you provide it to members of the public, but with special arrangements because the person works for you. For example, they receive a staff discount on the service.
If this is the situation and a worker says you've discriminated against them, this is the right guide for you to be reading.

Does someone else provide a service on your behalf?

Sometimes, you might arrange for someone else to provide a service to a group of your workers.

If the person or organisation providing the service discriminates unlawfully against one of your workers, it will be the service provider who is responsible. Your workers would have a claim in the county court (in England or Wales) or the sheriff court (in Scotland) against the service provider, just like any other member of the public using that service, and not against you.

But if it is your behaviour that amounts to unlawful discrimination, the worker's claim would be against you, and this is the right guide for you to read.

Are you supplying group insurance?

Some employers offer their workers insurance-based benefits such as life assurance or accident cover under a group insurance policy. Equality law allows employers to provide for different premiums or benefits based on sex, whether people are married or in a civil partnership, pregnancy and maternity or gender reassignment. However the difference in treatment must be reasonable, and be done by reference to actuarial or other data from a source on which it is reasonable to rely.

In this situation, it is you as the employer, not the insurer, who is responsible for making sure that provision of benefits under group insurance schemes is not unlawfully discriminatory.

For example:

An employer arranges for an insurer to provide a group health insurance scheme to workers in their company. The insurer refuses to provide cover on the same terms to one of the workers because she is a transsexual person. The employer, who is responsible for any discrimination in the scheme, would only be acting lawfully if the difference in treatment is reasonable in all the circumstances, and done by reference to reliable actuarial or other data.

Does equal pay law apply?

Remember that special rules apply where the service you are providing as a benefit is part of the workers contract of employment and there is a difference between the benefits men and women get (for example, if the jobs in relation to which you provide the service as a benefit are mainly done by women or mainly done by men).  You should also read the information in Making sure you are giving women and men equal pay and benefits.

Bonuses

Bonus payments are payments made on top of basic salary, and are usually designed to motivate employees by rewarding them for achieving particular targets or standards.

Sometimes, a bonus will be set out in a workers contract. Sometimes it will be up to you as the employer if a bonus is paid (this is often referred to as a discretionary bonus). Many schemes are a mixture of both types, so that a worker has the right to be considered for a bonus, but you have the final say as to whether to pay out.

You must avoid unlawful discrimination in awarding bonus payments. This includes all the different types of unlawful discrimination.

This might mean, for example, making reasonable adjustments for a worker who is a disabled person.

For example:

A worker in sales takes every Thursday afternoon as unpaid leave for a disability-related reason. As a reasonable adjustment, their employer reduces their sales target to reflect their absence. Their teams target is also reduced by a proportionate amount. 

You can read more about making reasonable adjustments to remove barriers for disabled people.

Always remember that specific rules apply where pay or benefits are part of the workers contract of employment and women and men are being paid differently. If, for example, the jobs for which you are providing a bonus are mainly done by women or mainly done by men, or bonuses are set in a way that means generally people of one sex end up significantly better off than the other.

Occupational pension schemes

If you provide an occupational pension or work or company pension scheme to your employees (or one is provided on your behalf), those running the scheme must avoid unlawful discrimination in how they run it. This includes all the different types of unlawful discrimination.

For example:

A pension scheme that offers benefits to opposite-sex partners must give the same benefits to same-sex partners. If people have to be married to receive benefits, then the same benefits must be offered to civil partners. Not doing so would be discrimination because of sexual orientation.

The duty to make reasonable adjustments to remove barriers for disabled people applies to pension schemes. You can read more about making reasonable adjustments to remove barriers for disabled people.

Specific rules apply where membership of an occupational pension scheme is part of the workers contract of employment and women and men are treated differently by the scheme.

You can find out more about how equality law applies to occupational pensions in the Codes of Practice on Employment and on Equal Pay. If you are concerned about whether your occupational pension scheme may be unlawfully discriminating against workers, you should get specialist advice.

Health insurance and disabled workers

If you offer private health insurance to your workers as a benefit, you and the insurer must not exclude a worker who is a disabled person or offer them different terms, unless you can objectively justify any difference in treatment. 

Equality good practice: what you can do if you want to do more than equality law says you must

Make sure that all employees are made aware of any new benefits or changes to existing provision, including anyone temporarily out of the workplace, for example, who is on maternity leave or absent because of a disability.

Look from time to time at who is using which benefits. If people with a particular protected characteristic are not actually using a benefit, they may be receiving a worse benefits package. This may be indirect discrimination unless you can objectively justify it. Keeping track of whether benefits are being used and seeing if there are any patterns relating to protected characteristics (for example, through monitoring) will help you avoid this. 

If you make changes to the benefits you offer your workers, think about whether it may be less valuable to people who share a particular protected characteristic than it is to those who don't. Unless you can objectively justify what you are doing, this could be indirect discrimination. Think about this in advance, and consider offering an alternative of equal value to the people who are unlikely to use a particular benefit.

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