Ritika Janiya
A landmark ruling has found that the popular high-street fashion retailer Next was paying its female shop employees unfairly. The tribunal heard that the chain’s female shop workers are said to be paid less than their male warehouse colleagues. The decision could be costly for Next, which might now have to pay more than £30 million in back payments to current and former employees.
This case is not singular. One at the supermarket chain Asda has also been going on for many years. The largest case so far involves Birmingham City Council, which was forced to teeter on the brink of bankruptcy after a mega equal pay judgment estimated to be in the region of £250 million to £750 million. In this instance, male road workers and refuse collectors received bonuses not given to women doing jobs as cooks, cleaners, and care staff.
So, why is this happening? Back in 1983, regulations were brought in to bring the UK in line with the EU’s Equal Pay Directive. This Directive required men and women to be paid the same not only when doing the same work but also when doing different work of equal value. In practice, it means companies such as Next and Asda must give different jobs a rating according to the skills, responsibilities, and complexity involved. Jobs receiving similar ratings should receive similar pay.
If an organisation does not have a job evaluation scheme, or is deemed inadequate, then the employment tribunal can evaluate jobs itself. This sounds like a fair principle but has a few difficulties. It is based upon the Marxist labour theory of value, which was applied in the past in Soviet Russia and Eastern Europe. This theory does not take into account the forces of the market, such as how difficult it might be to find warehouse workers compared with shop assistants.
For example, warehouse work may be more solitary and less fulfilling than working in a store with customers. Warehouse workers may have to work very long hours-and their breaks are considered sandwich-eating with aching backs. Shop assistants will, on occasion, have more opportunities for socialising and advantages like being outside the store during lunch.
Pay differences might reflect such job differences naturally in a free market. For instance, if warehouse work is more difficult to fill, it may be paid more. But current laws ignore these market forces with the result that there might be potential labor shortages and less efficient job markets. As seen in the Asda case, in the wake of high costs, companies may replace staff with self-service machines.
A further twist is that existing legislation makes the equal pay rules apply only in respect of comparisons between men and women. Accordingly, if 90% of Next’s warehouse workers and store assistants were women, the company could pay the warehouse workers more without infringing the legislation.
But it’s about to get a whole lot bigger. The government will extend the principles of equal pay to include comparisons involving ethnic groups and people with disabilities. That will mean that someone in a wheelchair, or someone from a particular ethnic background, who thinks they are paid less than others in similar jobs can make a claim. As tensions increase, and with riots on the streets, we may see claims of people who think they are paid unfairly compared to their colleagues from other backgrounds.
This could mean that it causes a lot of confusion and complication for businesses. Should companies get these comparisons wrong, then they risk incurring extremely costly lawsuits. Public sector organizations may also face such problems, thus increasing costs for the taxpayer.
These changes could flatten pay structures, making pay differences based on performance and job complexity more difficult to justify. Instead of focusing their efforts on increased productivity and growth in the economy as a whole, management may find themselves having to devote more time to dealing with disputes over pay and resulting legal challenges.
In short, the equal pay issue is turning gray. This judgment against Next highlights how difficult it is to weigh fair pay against business practicalities-a tightrope balance that is going to become even more burdensome as the government intends to extend these rules.
