January 21, 2011
Bankers’ bonuses have again hit the headlines amidst new disclosure rules for pay and bonuses in the financial sector. The recently implemented Capital Requirements Directive requires financial services firms to produce an annual disclosure of their pay and bonus policies. However, it is not only banks that need to consider whether their current pay policies will stand up to scrutiny. Although proposals to include a widespread ban on pay secrecy or ‘gagging clauses’ in Equality Act 2006 were dismissed, the Act does contain a more limited provision for employees and workers to be able to find out about pay discrepancies if they believe them to be connected with any of the other discrimination heads covered by the Act. Many commentators are in favour of a general duty of pay disclosure requiring employers to justify discrepancies in accordance with objective, merit-based criteria. As well as helping to equalise the gender pay gap, they argue that this could increase trust and encourage harder work amongst employees. Even in the absence of a general duty of pay disclosure, employers should consider whether their current policies and practices would stand up to scrutiny if an employee requested a relevant pay disclosure under the Equality Act. In other words, employers need to undertake regular pay structure reviews and accurately document the reasons behind any pay increases or bonuses to be able to prove that any differences in pay are not founded on a discriminatory ground covered by the Act.