Next, the retailer, has lost a six-year equal pay claim against more than 3,500 current and former staff members. As a result, the total amount payable by Next is estimated to be in excess of £30 million.
The employment tribunal held that sales consultants, who were predominantly women, should not have been paid lower hourly pay rates than warehouse operatives, who were mostly male.
According to the tribunal's ruling, between 2012 and 2023, 77.5% of Next's retail consultants were female, while 52.75% of warehouse operators were male.
The individuals claiming against Next argued that sales consultants received between £0.40 and £3 less than warehouse workers. This amounted to the claimants’ average salary loss being more than £6,000 each.
The legal position
Under the UK’s equal pay law, the default position is that men and women must get 'equal pay' compared to each other if they are performing:
- 'like work' – work where the job and skills are the same or similar;
- 'work rated as equivalent' – usually using a fair job evaluation. This could be because the level of skill, responsibility and effort needed to do the work are equivalent; or
- 'work of equal value' – work that is not similar but is of equal value. This could be because the level of skill, training, responsibility or demands of the working conditions are of equal value.
This has been successfully challenged against Next as it was argued that those in retail were performing 'work of equal value' as compared to those in the warehouses and given the gender breakdown of those two populations, it was concluded there the pay rates were unlawful.
Potential defence – 'material factor' defence
Next argued that the difference in pay rates was in response to market forces driven by the wider labour market.
This is one of the factors considered as potentially able to 'justify' inequal pay.
It falls under the wider defence known as 'the material factor defence' which in essence argues that an employer can pay a man more than a woman for doing work of equal value, but only if it can prove that the variation in pay is due to a material factor which is not directly or indirectly discriminatory.
Other factors that can fall within this defence are: geographical reasons, seniority and/or different collectively-agreed pay scales for jobs.
Next argued unsuccessfully that it was the supply/demand interface of the two roles being different that caused the pay rate discrepancy and that the market dictated that warehouse roles can command a higher rate of pay.
The employment tribunal rejected this argument.
Although, the employment tribunal did accept that the difference in pay rates between the jobs was not related to any direct discrimination or conscious or unconscious bias of gender on Next’s duty as an employer, it ruled that Next’s efforts to reduce costs was not outweighed by the discriminatory effect of lowering basic pay.
Ultimately, the employment tribunal ruled that there has to be something more to justify the inequality in pay.
Liability?
Given these breaches are typically ongoing but also historical in nature, employers can be on the hook for retrospective payments going back 6 years.
It is for this reason, the estimated cost to Next is in excess of £30 million.
In addition to this, there will be an ongoing cost increase given that the pay rates will have to be corrected/increased moving forward for retail staff.
Next steps
Whilst Next has already confirmed its intention to appeal the decision, the general consensus is that it does not have strong grounds to do so.
The impact of this decision will reach far wider than Next and the retail sector is expecting an influx of cases in relation to equal pay.
There are similar claims pending against the five major supermarkets Asda, Tesco, Sainsburys, Morrisons and Co-op. Therefore, retailers across the UK should note the significance of this case and ensure that their business practices in relation to staff pay are fair and justified.
Preventative measures
Employers do have measures they can take to either address equal pay concerns or reassure themselves of their current practice.
Employers can conduct equal pay audits or a more comprehensive Job Evaluation Scheme internal assessment.
This helps group job roles into salary bands and ensures that all within a band which are 'rated as equivalent' are paid the same.
Clearly there is still a risk that employers will wrongly categorise which roles are 'equivalent'.
There is also a risk that taking such measures (especially if the conclusion is that there is inequal pay), will make it easier for employees to bring claims and puts pressure on the employer to take corrective action immediately which will raise costs in the short term.
Harry Abrams is an employment partner at JMW Solicitors in London
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