The hot topic on all newsfeeds at the moment is the cost of living, strikes for more than inflation rises and general discontent, especially within public sector employees.

It may not be possible for you to award double-figure pay raises for all your team, but you may want to do “something” to ease the burden and foster goodwill.

With the average wage rise being 4.7% between April and June 2022,. However, the real value of pay has fallen by 3% as it’s being outpaced by high inflation. This may result in employees submitting individual pay raise requests in addition to any business-wide salary review exercises. How should you respond?

One-Off Payments

What may be affordable is a smaller-than-inflation pay rise plus a one-off payment to ease the current cost of living burden. This is possible, and ideally, you would have a provision to do this in your contract of employment. If your contract does not have this clause, then you will need to ensure that you make it clear, in writing, that this is a one-off occurrence to support them this year only and that it does not mean that this will reoccur next year. If you decide to award a one-off payment, it will have to be put through payroll and be subject to normal HMRC deductions.

Individual Pay rises

Provided you are paying your employees the applicable national minimum or national living wage rate (or above), then pay is a contractual consideration. This means that you can generally agree with an employee what their salary is.

The Equality Act 2010 gives women (or men) a right to equal pay for equal work by giving them the right to equality in the terms of their employment contracts. Legislation makes it unlawful to offer different pay and contractual terms and conditions where women and men are doing the same or broadly similar work, work that’s been rated as equivalent or work that’s of equal value in the same or associated employment. If you grant an individual pay increase and other employees find out about it, an employee of the opposite sex who is doing broadly similar work or work of equal value to the employee you have just given a rise could claim that you’ve breached legislation.

However, if you can show that the difference in pay is because of a material factor, that doesn’t amount to sex discrimination, and that factor is a material difference between the two employees’ wages. If you can demonstrate, with evidence, that the pay rise awarded was because of the rewarded employee’s qualifications, skills, extra efforts, or achievements, and this does not apply to the other employee, then that should be a sufficient defence.

It won’t be enough of a justification that you’ve simply awarded a pay raise because the employee asked for it. Let us not forget that employees can also allege pay discrimination under the Equality Act 2010 based on other protected characteristics, e.g., race, age, disability, etc.

If you do award an individual pay raise, be aware that you cannot prevent employees from disclosing pay information, even if you ask the rewarded employee to keep the matter confidential.

As usual, if in doubt, please give us a call.

May we take this opportunity to wish all our clients a HAPPY CHRISTMAS and a Prosperous New Year