Equality Act 2010 (Equal Pay Audits) Regulations 2014

Baroness Donaghy Excerpts

Monday 28th July 2014 Grand Committee

In conclusion, if the Minister is really committed to ending pay discrimination against women—and I am certain that she is—can she tell us what earthly justification there is for a 10-year exemption period for micro and new businesses? Can she review that decision? Let us remember that the EPAs are good for business: they mitigate future liability and increase retention rates. In micro-businesses they can take as little as one hour to complete. Let us remember, too, the most fundamental point of all. Every employer in Britain is required to pay equal pay. No employer, large or small, should be breaking the law simply because a woman does the job. I hope that the Minister will be able to reassure us that this is not a retrograde measure to exempt smaller businesses from equality law, because if it were—and that seems to be where the regulations are heading—that really would be a backward step.

[Baroness Donaghy (Lab)]

My Lords, I think it was 10 years ago that I sat on a Government working party chaired by Bob Mason to see how we could make the Equal Pay Act more effective. Central to the recommendations that we made were equal pay audits and the importance of having a transparent pay system. We estimated at the time that it would take about 50 years to obtain equal pay. I looked carefully at the Explanatory Notes for this particular regulation and I thank the Minister for pointing out that the gaps still are very serious. In the build-up the Explanatory Notes accept that the issue of equal pay has an impact on economic growth. It goes on to say that the Government intend to do something about it in these regulations, so I got terribly excited. But then I looked at the impact assessment, which estimates that an average of two equal pay claims will be brought each year. The Minister was so embarrassed by that that she said “two or three” would be brought. As I say, it is estimated that an average of two or three equal pay claims a year may result in the imposition of an equal pay audit order—that is out of 23,638 equal pay cases that were brought in 2012-13. That really is a nut to crack a hammer, is it not?

It is important that the Government realise what message they are giving out about topping and tailing the issue of equal pay for women. We have the noble Baroness the Leader of the House who does not yet enjoy equal pay and we are now to have small businesses and new businesses possibly not being followed up through the law. That sends the wrong signal about equal pay. Will new businesses include those that start up again after bankruptcy, and will there be any qualifications around that? Some companies seem to make quite a habit of that. They start up anew when it suits them. It is important to know what the impact will be on so-called new businesses which are really only starting up again under a different name. Further, does the Minister really think that these regulations will do anything to narrow the pay gap? I have my doubts when the estimate is an average of two cases per year.

[Baroness Northover]

Well, my script says that I am very grateful to all noble Lords who have contributed to this debate, which has been so constructive and considered. However, I can then go on to say that we have been clear, as have all those who participated, that paying women less than men for doing the same, similar or equal value work is totally unacceptable and therefore must be tackled head on. If women are ever to realise their full potential in their chosen career, they must be paid the same as their male counterparts. We believe that these regulations are an important step in the right direction. They will ensure that employers who have been found to have breached equal pay requirements have transparent pay systems where hitherto they have not.

I shall turn to the various questions which have been put to me by noble Lords to see if I can answer some of them. I will follow up my remarks in writing if I do not cover them all. I start by addressing the contribution of the noble Baroness, Lady King. She quoted the figures that were used by the noble Baroness, Lady Thornton, in an Oral Question on 25 June. We had a little discussion back and forth. The previous Government, like this Government, rely on a particular set of figures from the Office for National Statistics published in the Annual Survey of Hours and Earnings. The previous Government and this Government share the view that these are the most robust figures. On the basis of those figures, there is not the falling-off that the noble Baroness, Lady King, mentioned.

There are problems with the set of figures that the noble Baroness, Lady Thornton, and now the noble Baroness, Lady King, have used in the sense that they are not as comprehensive and they are self-reported, whereas the other figures are derived from PAYE and HMRC information. There are very good reasons why the previous Government and this Government both use the ONS figures. However, if one uses the figures referred to by the noble Baroness—I have asked my noble friend Lady Jolly to print out for me what I was given before—one of the things I find quite striking is that the noble Baroness mentioned that pay for women working full time fell by 0.1% for the quarter. These quarterly figures fluctuate considerably, so that the previous quarter saw a 0.4% rise. I do not claim that that is a true representation of the situation because I do not claim that the 0.1% fall is a true representation of the situation any more than would the previous Government, under which the noble Baroness was the Minister. They, too, would not have decided to use this particular set of figures. I know that her colleagues in the other place quoted them, but I suggest to her that she looks again at the Office for National Statistics figures and works out the ones that she should rely on.

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[Baroness Northover]

The figure that the noble Baroness gave was actually for the last quarter, as she will probably find out when she investigates.

One thing that I find striking and encouraging is that the gender pay gap between men and women under the age of 40 who are working full time has narrowed considerably. The difference in the gender pay gap is for those above that age and those working part time. One reason why there is a major difference in part-time work is the type of work that men and women are in. We know that equal numbers of kids are going through school and that often girls come out better qualified. More are going to university, but they are grouping in different subjects. Some of those subjects lead to better-paid careers, which is something that we, like them, seek to address—I am referring to the STEM subjects.

The most important thing is the caring responsibilities that women often have, which is why you start to see this difference as you go through life. That is why in some ways it is quite encouraging to see that the gender pay gap has narrowed so much for those up to the age of 40, although we need to do much more to make sure that that carries on through.

[Baroness Donaghy]

I apologise to the noble Baroness, but I just wanted to query the impact on workers under 40. It might sound like good news, but it might be because men are being paid less in this low-wage economy. Does the noble Baroness have any more information to reassure us on this point?

[Baroness Northover]

I think that the noble Baroness would be reassured by the progress being made in this regard. I will probably need to write to her with the details but, again, I looked at this and I did not see the negative trends that she may be hinting are there. I will write to her and clarify that.

I am glad that the noble Baroness, Lady King, welcomes the audit. Obviously, that follows on after cases have been lost by employers. She is quite right, as is the noble Baroness, Lady Donaghy, to emphasise that it is in the interests of the companies and for the health of the companies to make sure that their employees are paid fairly between the genders. If they are not, there will not be a happy and effective workforce. I think that forward-looking companies recognise that now; indeed, they should recognise that it is in their own interests to make sure that this moves forward. If they lose such cases, they need to take action to put it right.

The kind of pay audits that we are talking about help to shine the spotlight that the noble Baroness mentioned on this. She mentioned the exceptions and seemed to imply that a company could say to the tribunal, “We can’t afford to do this”. I hope that she will be reassured by the fact that the tribunal, not the company, decides whether there are reasons for exemptions. I hope that I illustrated, in listing the four cases where there might be an exemption, how tightly drawn that is. I gave an example in each case of the kind of thing that we are thinking about there. Clearly, if they persist—suppose that they said they were about to go bankrupt and the tribunal thinks that that is the case, but then another case is brought and it turns out they had misled them—they are obviously in a much weaker position.

I reassure the noble Baroness, Lady King, that new businesses only have that exemption for the first year, not for 10 years. She grouped them together, but the committee asked for further elucidation about micro-businesses, which I hope that we have provided.

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[Baroness Northover]

I am suddenly inspired to say that the regulations allow the tribunal to apply a £5,000 penalty repeatedly if the employer remains in breach. Therefore, it could have quite an effect cumulatively. I hope the noble Baroness will be somewhat reassured that there is a possibility of that follow-up if they are not taking action. I think that I have addressed most of her questions.

I now come to the main points raised by the noble Baroness, Lady Donaghy. I agree absolutely with her support of the notion that unequal pay does not help the business or the economy. That has to be a major incentive for companies to ensure that this moves forward. I do not think I have an answer to what happens if a company goes into bankruptcy and then resurfaces; maybe I have and I have buried it somewhere.

[Baroness Donaghy]

Perhaps the noble Baroness would write to me about that.

[Baroness Northover]

That is extremely kind of the noble Baroness. She asked me quite a bit about narrowing the pay gap. I hope that I have helped to address some of those. This is obviously a lever to help in these cases. It is very important that the law is there, that we ensure it is implemented and that companies are heading in the right direction. However, we all know that there are much wider reasons why this is difficult to shift. We are in line with what is happening in northern European companies—many more women are working than in the eastern European and southern European countries where, curiously enough, there is a narrower pay gap. That is because many women are not working. We share that particular challenge with our northern European neighbours, but we all need to ensure that we take forward the kind of support and legal changes that help to underpin women’s ability to participate in the labour force as equal to men’s. We also need to ensure that we tackle instances where there is genuine discrimination.