Equal pay
In Ireland, equal pay provisions are contained in the Employment Equality Acts 1998 to 2021. Under this legislation, an employer is prohibited from paying an employee less (either directly or indirectly) in the same employment doing 'like work’ on nine different grounds of discrimination. An employer is entitled to demonstrate an objective justification for a pay differential unrelated to any of the protected characteristics under the Employment Equality Acts (including gender).
Complaints related to unequal pay can be brought to the Workplace Relations Commission (WRC). The WRC 2020 Annual Report showed that gender was the second most cited ground of referral made under the Employment Equality Acts in 2020, just behind disability.
The time period within which an employee (or former employee) can take such a claim is significantly longer than the usual six-month limit (or 12 months where there is reasonable cause for the delay) imposed on taking most employment-related claims to the WRC. These statutory time limits do not apply to claims related to unequal pay.
Complaints can be costly, both financially and reputationally, as the WRC can make an order for equal pay and an order for compensation in the form of arrears of remuneration. Also, following recent case law in Ireland, WRC hearings are now held in public with all decisions published online and party names no longer anonymised.
Although an organisation may be fully committed to equal pay, it is essential that businesses review their pay systems and consider carrying out an equal pay review to highlight any issues they may not be aware of. If there are equal pay gaps, organisations must explain why; if no reasonable explanation can be found, steps must be taken to close the gaps.
Gender pay gap
There is often confusion around the difference between the gender pay gap and equal pay. Equal pay is a legal obligation on employers to pay men and women equally if they are employed to do work that is similar or of equal value, whereas the gender pay gap measures the difference between the average pay of men and women. So, even if employers comply with equal pay obligations, they may still have a gender pay gap if, for example, most of the lower-paid jobs in the company are carried out by women and the higher paid jobs are carried out by men.
The Gender Pay Gap Information Act 2021 was signed into law by the President on 13 July 2021. It requires employers to publish details of the mean and median hourly pay and bonuses for men and women, the percentage of men and women receiving bonuses or benefits-in-kind, explanations for any gender pay gap that arises, and measures they will take to eliminate or reduce this gap.
The implementation of the Act has commenced on a phased basis. The first phase imposes reporting obligations on public and private sector organisations with 250 or more employees. The second phase will extend the obligations to organisations of 150 or more employees, and phase three will extend the obligations to those with 50 or more employees.
If companies do not comply with the obligations set out in the Act, they could be exposed to court action by either their employees or the Irish Human Rights and Equality Commission. Failure to report could lead to reputational damage, making it more difficult to attract and retain staff.
National minimum wage
Another key area of focus for employers is the national minimum wage (NMW). This concept is central to ensuring fair pay and that workers’ rights are met. Employees are entitled to a minimum wage under the National Minimum Wage Act, 2000. The national minimum wage tends to change each year but as of 1 January 2022, it is €10.50 per hour.
Over the last number of years, HMRC in the UK has started to deploy more resources to investigate employers who are breaching NMW regulations. Also, in 2021, the UK Government called out 208 employers for not paying their employees the minimum wage – many of which were household names. Employers were forced to repay employees who were out of pocket and penalties of around £2 million were also imposed.
The premise of national minimum wage requirements is simple – governments publish minimum rates of hourly pay that employees must be paid for each hour of work they do. Businesses know the hours worked by employees and the applicable NMW rate, and they pay at least the relevant NMW rate for all worked hours. What can possibly go wrong? Lots, it seems. The legislation, and its application, is complex.
The UK experience reinforces the need for employers to ensure that they understand legislative components around the hours that must be paid for, the category of worker, and the pay that can be considered in determining whether NMW compliance is achieved.
Conclusion
Organisations must ensure that they have internal policies, processes, systems and data flows to meet the increasing and ever-changing regulations that underpin fair pay and all worker rights.
The three key actions businesses can take now
When it comes to ESG and pay governance, there are three priorities that employers cannot afford to ignore:
- Ensure that you understand fully what is required by legislation.
- Ensure that your strategy, processes and systems are robust and accurate.
- Validate that you can easily produce the required statistical data to ensure compliance with the legislation or, if not, to identify where the gaps are.
We are here to help you
While the environmental and governance aspects may dominate boards’ ESG agendas, companies mustn’t let themselves down on ‘S’ or ‘social’ table stakes by not paying employees in line with pay legislation. PwC can help you on this journey – contact us today.
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