In brief
The government has published a consultation seeking views on reform of the equal pay and pay discrimination framework. The reforms proposed by the government are significant, and if approved will significantly increase the cost, complexity, and resource required to deal with pay discrimination complaints.
The consultation proposes a two-phased approach: first, to improve the operation of the existing equal pay system through greater pay transparency, stronger enforcement and procedural reform; and second, once those changes are in place, to extend key protections to a wider group of workers.
Background
The current equal pay framework has long been criticised as complex, costly and slow, with large numbers of claims remaining in the tribunal system and some cases taking more than a decade to resolve.
Although the government's manifesto and its Plan to Make Work Pay included initial commitments on equal pay, the consultation suggests that newly commissioned research and feedback from employers, trade unions and other stakeholders have highlighted the need for more comprehensive reform.
Against that backdrop, the government is consulting on measures intended to prevent pay discrimination more proactively, strengthen the role of enforcement bodies and simplify the resolution of disputes. Responses to the consultation are due by 27 October 2026.
In more detail
Consultation proposals
Phase 1
The first phase of the proposed reforms is to fix the system. The government intends to do so by increasing pay transparency through a number of measures. This includes:
- Introducing a new requirement for employers to publish information about pay and conditions in job adverts, which could include the size of a salary range. This is similar to the approach we are seeing in EU Member States under the Pay Transparency Directive.
- Strengthening the measures applying to employers found to be in breach of the equal pay scheme by
- Limiting the exceptions to the requirement for an Employment Tribunal to order an employer to carry out an equal pay audit and,
- Requiring the employer to carry out a job evaluation scheme (JES) where an up-to-date scheme is not already in place.
Both of these measures are significant. To date, only one Employment Tribunal has ordered an employer to conduct an equal pay audit, and many private sector employers will not have a JES of the type envisaged by the legislation in place. This will place a material administrative burden on employers found to be in breach of pay equality laws.
- Increasing enforcement powers by establishing the Equal Pay Regulatory and Enforcement Unit ("Unit") to move the enforcement burden away from the individual claimant by making it the Unit's responsibility. It is proposed that the Unit will be given the power to:
- Compel evidence (e.g., pay data) from an employer before deciding whether to commence a formal investigation.
- Investigate effectively including the ability to require an employer to carry out an equal pay audit and/or JES, although there will be procedural safeguards in place to protect employers from the risk of disproportionate requests.
- Demand a response from an employer to any recommendations issued in its report following an investigation into pay discrimination and provide updates on implementation.
- Improve the tools available to help employers and workers on the equal pay framework including clear guidance on points of contention such as what factors may or may not be relied on by employers when relying on the "material factor" defence, which currently allows an employer to defend a difference in pay by proving it is due to a material factor which is neither directly or indirectly discriminatory.
In addition, the government proposes to:
- Reintroduce the statutory questionnaire procedure to allow claimants in pay discrimination cases to raise questions about relevant matters.
- Review the operation of the independent panel of experts.
Phase 2
Sex-related contractual pay claims generally have to be brought as equal pay claims, unlike race or disability pay discrimination claims, which use broader Equality Act discrimination routes. These different legal routes have distinct requirements, protections and remedies.After the steps outlined in phase one have taken effect, the second phase of reform will take place, and will focus on ensuring that individuals who experience pay discrimination on the basis of race or disability, and those who experience it on the basis of sex, have the same rights and protections. The government describes this as "levelling up" so that the advantages of equal pay claims which are not available in claims of pay discrimination on the basis of race and disability will apply to both, and vice versa, while keeping the two regimes separate and distinct.
Specifically, the government is proposing to:
- Allow claimants in race and disability discrimination claims to:
- Rely on an equality clause, so that any discriminatory terms are automatically equalised with those of their comparators, providing immediate and ongoing entitlement to those more favourable terms.
- Rely on comparators doing work of equal value. Currently, comparators must be in materially the same circumstances as the claimant, which may preclude reliance on comparators employed in different roles in some circumstances.
- Expand the Tribunal's power to require an employer to conduct an equal pay audit to include claims of race or disability pay discrimination.
- Allow claimants in equal pay claims to rely on hypothetical comparators in circumstances where:
- They can be construed by reference to a successor in post (e.g., if someone replaces a claimant and receives better terms)
- An improvement in terms is precipitated by the employment of a person employed on equal work and receives higher pay, i.e., a claimant's terms are improved to bring them into line with a comparator who was employed after them, but the increase in the claimant's pay is not backdated.
- Extend the time limit for bringing claims where it is just and equitable to do so, which mirrors the existing time limit provisions for other types of discrimination claims.
In addition, the government proposes to bring more into the system by creating a duty on employers to take "all reasonable steps" to uphold pay equality in their contractual arrangements in order to limit any "loophole" that may be achieved by employers outsourcing services, in order to avoid equal pay obligations. The proposal is subject to certain parameters (e.g., threshold test and guidance on what is "reasonable"). Currently there must be a direct employment relationship in order for a equal pay claim or pay discrimination claim on the grounds of race and/or disability to be possible.
Comment
Whilst it remains to be seen how much difference many of the changes to the law proposed at Phase 2 of the government's plan will have, others are clearly going to have a significant impact.
In particular, the ability of the new Equal Pay Regulatory and Enforcement Unit to require, and the obligation on Employment Tribunals to order employers to carry out both equal pay audits and JES will ensure that pay compliance breaches are likely to have significant additional impact way beyond the cost of an individual breach. Both assessments are complex, costly, and require significant business time and resource. By shifting the emphasis on enforcement to a new dedicated equal pay unit, wider pay practices are far more likely to come under scrutiny than under the present system, and the government's proposals signal a clear intention to bring the UK position more closely in line with those which apply in the EU under the Pay Transparency Directive.
If you would like to discuss what the proposed measures set out in the consultation means for your business, please get in touch with your usual Baker McKenzie contact.