Watch out for discrimination with salary levels
The practice of paying employees less than the salary levels of other colleagues is a contractual provision that requires great care on the part of employers. Especially those who carry out the same or broadly similar functions.
Job evaluation exercises will often produce salary structures that contain an initial start rate. This then leads to an increase to a “job rate“, following the successful completion of a probationary period. This arrangement can affect existing employees who transfer into a new role. As well as new employees who are recruited externally by the organisation. The practice of having an introductory salary level can generally be objectively justified, primarily through the processes within the job evaluation policy itself. Additionally, the differential may be related to the length of time it normally takes an employee to get “up to speed”. And to be able to fulfil all of the job requirements without supervision.
However, problems may arise from lower initial pay rates if a trial period is excessive in length. Or the employee has been carrying out the job function for an extended period prior to taking up a formal appointment. For example, to cover for the sickness absence of a colleague. Issues of fairness can also come into question where the practice of applying a lower starting salary and benefits is either directly or indirectly discriminatory. The fairness of an organisation’s policies on pay and remuneration may also be particularly relevant. Especially where the employer recruits a graduate or any other person who has limited or no practical work experience.
Case of Fairlead Maritime Ltd v Parsoya (UKEAT/0275/15)
This situation was the background to a recent decision of the Employment Appeal Tribunal (EAT). In the case of Fairlead Maritime Ltd v Parsoya (UKEAT/0275/15). Mr Parsoya was an Indian national who required a visa to work in the UK. He started working for his employer from 2011 as a Naval Architect. When he applied for the position, it was advertised as paying an annual salary of £30,000 to £40,000.
However, until June 2013, Mr Parsoya was paid at a starting rate of just £25,000 per annum. According to the evidence brought before the EAT, this was because the employer operated a provision, criterion or practice (“PCP”) of offering employment contracts to graduates, on the basis that their salary will be reviewed regularly to reflect their “employability status, performance and career development.” Although his salary was eventually increased to the correct level after Mr Parsoya was granted a long term work visa. The shortfall in pay going back to his date of commencement in 2011 remained unpaid. He therefore brought a claim against his employer for the outstanding amount.
The EAT upheld the original decision of the Employment Tribunal. It found that the practice of under-paying any member of staff less because of any “employability issues” was discriminatory. Although the employer had updated its policies before the Tribunal hearing, they found that Mr Parsoya remained at a disadvantage. This was because of the company’s continuing failure to reimburse him fully before he eventually left his employment with them.
In their own words, the EAT held that;
“…..the Claimant had been subjected to a continuing act because the Respondent had failed to pay him the correct wages up to his departure. The promise in respect of the shortfall was a continuation of the discrimination: it was a continuing application of the policy of not paying the Claimant the £30,000 he would have been paid had it not been for the application of the PCP of his having no visa restrictions….”
Discriminatory elements may therefore be inadvertently applied by employers who are unaware of the legal principles attached to salary structures. This lack of awareness can also be evident in relation to the long established law on the principle of equal pay for work of equal value.
Owing the large numbers of employees who may have been paid less over many years, equal value claims can be extremely consequential. A claim on this issue is currently being brought by more than 7,000 former and current ASDA employees against the supermarket giant.
The vast majority of these employees are female workers who are/were employed in hourly paid roles at ASDA’s retail stores. In essence, the claimants allege that the value of the work that they carry out week in and week out is equal to that of employees working in Asda’s distribution centres across the UK. These warehouse workers are predominantly male. Claims relating to discrimination and equal pay can be very costly. Quest can help you to develop a reward strategy. One that complies fully with all aspects of the law and is fair to male and female employees, new starters and longer serving employees. Contact us now for further information on this important issue.
