Essential Legal Updates in Employment Law – August 2024 Newsletter

Pay Transparency and Equity – Preparing for Change

The EU Pay Transparency Directive is poised to significantly alter the landscape of employee compensation and workplace equity by June 2026. This directive, aimed at reducing gender pay disparities and fostering a more equitable workplace, introduces several key changes:

• Right to Pay Information: Employees will have the legal right to request detailed pay information, broken down by gender, for employees doing the same work or work of equal value. This provision ensures transparency and gives employees a clearer picture of pay practices within their organisation.
• Ban on Salary History Inquiries: Employers will be prohibited from asking prospective employees about their previous salary during the recruitment process. This measure is designed to prevent the perpetuation of historical pay inequalities, ensuring that compensation offers are based on the role’s value rather than an individual’s salary history.
• Enhanced Pay Gap Reporting: Employers will be required to provide more comprehensive reports on pay gaps within their organisations. If a gender pay gap of 5% or more is identified and cannot be justified by objective, gender-neutral factors, employers must conduct a joint pay assessment with workers’ representatives and take corrective action.

The UK government has been proactive in exploring similar measures. In 2022, a pilot scheme was launched encouraging employers to include salary details in job adverts and to avoid asking candidates about their salary history. Although the pilot was paused in May 2024 to assess the experiences of other countries, this signals a potential shift towards greater pay transparency in the UK. Employers should start preparing now to align with these upcoming changes and ensure compliance.

Equality (Race and Disability) Bill

Among the many employment law reforms announced in the King’s Speech in July, the Equality (Race and Disability) Bill stands out for its focused approach to addressing pay gaps affecting ethnic minorities and disabled people. This bill introduces significant new rights and obligations for employers:

• Right to Equal Pay for Ethnic Minorities and Disabled People: The bill will establish a legal framework to ensure that ethnic minorities and disabled individuals receive equal pay for equal work, closing longstanding pay gaps.
• Mandatory Ethnicity and Disability Pay Gap Reporting: For organisations with more than 250 employees, the bill will introduce mandatory reporting on ethnicity and disability pay gaps. This reporting will mirror the existing gender pay gap reporting requirements, which have been instrumental in highlighting pay disparities and driving change.

Currently, equal pay laws operate through three equality clauses – sex equality, maternity equality, and pensions equality. The Equality (Race and Disability) Bill is expected to function similarly, with specific clauses dedicated to ethnicity and disability. For example, the sex equality clause ensures that women (or men) are entitled to the same favourable terms as their opposite-sex counterparts when performing equal work, unless a non-discriminatory material factor justifies the difference. This clarity will make it easier for employees to challenge pay inequalities and for employers to maintain compliance with the law.

Strengthened Whistleblower Protections

Globally, there is a growing movement towards enhancing protections for whistleblowers, reflecting an increasing recognition of their role in promoting transparency and accountability within organisations. The UK has traditionally offered protections against dismissal and detriment for whistleblowers, but there is mounting pressure to extend these safeguards.

As part of its “Plan to Make Work Pay,” Labour has committed to strengthening whistleblower protections. This includes updating legal protections for individuals, particularly women, who report sexual harassment in the workplace. Such measures aim to create a safer environment for employees to report misconduct without fear of retaliation.

In addition to legislative changes, UK regulators, including the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), have emphasised the importance of effective whistleblowing processes as a cornerstone of good corporate governance. Companies are now required to appoint a “whistleblowers’ champion” and to implement robust whistleblowing policies.

Recent survey results published by the FCA in 2023 revealed significant dissatisfaction among whistleblowers regarding how their complaints were handled by the regulator. In response, the FCA has taken steps to improve transparency, including proposals to make public announcements at an early stage when it launches investigations into regulated firms. These changes underscore the importance of fostering a culture where whistleblowers feel supported and protected.

Key Legislative Developments

Predictable Hours Law: The Labour government has decided to pause the introduction of a law granting workers the right to request more predictable working patterns. Instead, they are focusing on establishing a stronger contractual right for employees to work the hours they typically do. This shift aims to provide workers with more stability and predictability in their work schedules.

Non-Disclosure Agreements (NDAs): Legislation that was set to ban the use of NDAs by higher education providers in cases involving sexual misconduct, bullying, and harassment has been delayed. The government is re-evaluating the proposed legislation to ensure it balances the interests of all parties involved.

National Living Wage (NLW): The government has expanded the remit of the Low Wage Commission (LPC) to include considerations of the cost of living, business competitiveness, and the broader economy when recommending changes to the NLW. The government remains committed to establishing a genuine living wage for workers and has signalled its intention to eliminate age bands between different wage rates. While a single rate for all adults is unlikely by April 2025, the government has directed the LPC to narrow the gap between the NLW and the national minimum wage (NMW) for 18- to 20-year-olds in its next review.

Equality and Human Rights Commission (EHRC): The EHRC has published its draft strategic plan for 2025–2028, identifying several key issues as priorities for workplace reform. These include tackling sexual harassment, improving pay gaps for women, ethnic minority groups, and disabled people, addressing barriers to employment for disabled individuals, and clarifying legal conflicts that arise from home/hybrid working and the use of new technologies like AI.

By Suraj Purohit.

Employment Paralegal at Kalra Legal Group.

28/08/2024.