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Bankruptcy at Birmingham City Council sparks warnings on equal pay

An effective bankruptcy at Birmingham City Council has sparked warnings about the value of equal pay in mitigating financial and legal risk and allowing employers to access vital skills.

Earlier this week the council issued a notice saying it cannot meet financial liabilities and commit to new spending.

At the centre of the national media focus is a 2010 tribunal victory for 5,000 women council workers in Birmingham over equal pay.

It has meant that the council has paid out almost £1.1 billion in equal pay claims so far and still has a £760 million bill which is increasing by up to £14 million each month.

Read more: Employers threatened by “ticking time-bomb” of pay claims

Jemima Olchawski, chief executive at the Fawcett Society, said the equal claim bill at represents a total lack of responsibility towards the importance of equal pay.

She told HR magazine: “The council should never have sustained such an extraordinary liability and they would have avoided it had they adequately valued and remunerated their women employees in the first place.”

But the financially beleaguered council is not the only organisation to face up to equal pay claims.

Sainsbury’s, Asda, Tesco, Morrisons and Next are all big-name retailers that are caught up in ongoing multi-stage equal pay claims.

For Charles Cotton, senior reward advisor at the CIPD, these cases should make employers consider equal pay reviews to ensure that they don’t experience similar negative outcomes.

Speaking to HR magazine, he said: “As well as the impact of employee retention, engagement, and brand reputation, failure to ensure fair pay could result in legal challenges and financial repercussions.

“As such, employers should carry out an equal pay review regularly to see whether men and women doing the same jobs are being paid the same.

“And, if not, can the gap be justified? For example: two employees doing the same job, but one gets paid more because they’re based at the London office and the other at the Newcastle office”.

How HR can pioneer equal pay

Cotton added that employers need to review this regularly to ensure that role changes, such as the introduction of technology, mean pay scorings are still relevant.

Samantha O'Sullivan, policy lead at the Chartered Institute of Payroll Professionals (CIPP), advised focusing on the interaction between pay and policy to ensure pay claims don’t end up at tribunal.

She told HR magazine: “Employers can mitigate these risks by having an equal pay policy, up-to-date job descriptions, making sure that men and women who do the same work do not have different job titles and being consistent when deciding people's pay and contractual terms and conditions.”

Kevin Poulter, employment partner at Freeths, explained that any negative publicity about a firm not paying men and women equally can disadvantage a business’s ability to hire.

This is especially important for lower-pay jobs, where many of the equal pay claims are coming from, which exist in sectors where ongoing hiring struggles have been widely reported.

Speaking to HR magazine, Poulter said: “In a competitive jobs market, confidence that employees are being treated and rewarded fairly may determine which job is chosen over another.

“Such reassurance can also have a positive impact on employee engagement, job satisfaction and worker retention.”