2 April 2024

Giving employees clear pathways to promotion and higher pay grades will generally help to improve their performance and keep them motivated and committed to your organisation.

Having these structured opportunities in place should also – as long as the criteria for access are fairly and consistently applied – reduce the risks of discrimination and equal pay claims arising from promotions and pay increases. In this article, we highlight some ways of mitigating these legal risks.

Discrimination risks

Unlike most claims for unfair dismissal, employees do not need two years’ service to bring a discrimination claim. Where conscious or unconscious bias affects a decision as to who to promote, employers may be at risk of a claim for direct discrimination. For example, if a stronger female candidate is passed over for a senior management role because the decision-maker believes the team will respond better to a male manager, the woman may be able to establish a claim for direct discrimination.

Employers can also be exposed to discrimination claims if they do not consider part-time employees for more senior roles, unless they can justify this.

Employers need to be careful that decisions about promotions and pay increases are not influenced by factors such as an employee taking family-related leave, asserting their employment rights, whistleblowing, or being pregnant. Any decision based upon one of these reasons could lead to a tribunal claim and an order to pay compensation to the affected employee, along with reputational damage.

Hybrid and remote working

Hybrid and remote working practices sometimes influence decisions to promote. Employees who work with their manager in person may be more likely to have their work recognised, and often have more opportunities to build rapport. Remote workers may be less prominent in their manager’s mind when promotion opportunities arise.

As a result, indirect discrimination can occur if, for example, non-promoted remote workers are more likely to be disabled or to be women with primary caring responsibilities. Employers must also take care not to forget about employees on family-related leave when considering promotions.

Equality of opportunity

Affording equality of opportunity affects more than the promotion decision itself. This principle should inform day-to-day decisions like the allocation of work, training opportunities, access to clients, and allocation of corporate entertainment budgets. These can all be crucial opportunities for employees to stand out as suitable for promotion or increased pay grades.

Equal pay

Men and women alike are entitled to receive equal pay for equal work. Although most equal pay claims involve public-sector workers, other sectors are not immune. The gender pay gap has received substantial media attention in recent years.

Where an employee can compare him/herself to a current or former employee of the opposite gender who is doing equal work but for better pay or benefits, the employer is at risk of an equal pay claim. Employers may be able to defend a claim on the basis that there is a non-discriminatory material factor that accounts for the difference. Examples of material factors which have been upheld as valid include seniority, past performance, recent experience, and skills shortages.

Employment tribunals sometimes accept market forces as a sound reason for differences in pay. However, this is unlikely to legitimize the explanation: ‘I paid him more because he asked for more, but she was willing to do the work for less’.

Finding and addressing pay inequality

Employers who are committed to rooting out and correcting unequal pay can introduce a job evaluation scheme. Jobs are assessed and allocated to a salary band, which is determined by factors such as the level of skill, qualifications, and responsibility that each job entails. Pay scales are then introduced for the different bands.

Transparent pay structures are ubiquitous in the public sector, but employers in other sectors may decide that the benefits are outweighed by the inflexibility of a pay structure.

Employers with less than 250 employees, who are not required to publish gender pay gap data, may consider that transparency could bring pay inequalities to the surface and increase the risk of equal pay claims in the short term. A lighter-touch option is to carry out an equal pay audit and then exercise the option to take steps to address unjustifiable differences in pay. This has the advantage of being carried out behind the scenes.

Keeping pay confidential

Employment contracts often used to include a clause prohibiting employees from discussing pay at all. A change in the law meant that these pay secrecy clauses became unenforceable where they stop an employee from sharing information about pay with colleagues to unearth unlawful pay differences. Now, where these clauses are included in contracts, they are usually carefully drafted to allow employees to discuss pay only for this purpose. Employees who engage in these discussions are protected from acts of victimisation by the employer, such as being excluded from meetings they would usually attend or denied promotion opportunities.

Reducing risks

Employers should aim for consistency across a business to avoid damage to employee morale. Using robust, well-documented and fair assessment and decision-making processes should reduce the risk of legal claims.

How we can help

We can help you navigate the whole range of issues relating to promotion and remuneration, from drafting promotion and pay-grading policies to defending equal pay claims.

For further information, please contact the team at Synchrony Law.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.