Equal Pay: New Supreme Court Decision Clarifies Key Issues
A recent decision by the Supreme Court has provided important clarification on the application of the equal pay principle under Section 110(1) of the Labour Code.
A) Comparing Pay Across Time
The Court confirmed that it is not necessary for employees to perform work concurrently in order to assess compliance with equal pay for equal work or work of equal value. This allows for comparisons to be made between an employee and their predecessor or successor in the same role.
This interpretation aligns with the established case law of the Court of Justice of the European Union (notably Macarthys Ltd v Smith), which recognises that equal pay obligations apply even in the absence of temporal overlap between the employees concerned.
However, it remains essential to consider whether any pay differences can be objectively justified by legitimate, non-discriminatory reasons.
B) Discretionary Wage Components and Unequal Treatment
Pay inequality may arise not only in basic wages but also in the allocation of discretionary or incentive-based components. Such inequality can result from:
- Deficiencies in internal policies setting conditions for the award of these components, or
- Inconsistent application of those conditions in individual cases.
A breach of the equal pay principle may occur if, for example, an incentive payment is denied to one employee on the basis of unmet criteria, while the same criteria are disregarded for others in similar circumstances.
It is therefore essential to assess whether all employees meeting the stated conditions received comparable remuneration, regardless of when the work was performed.
Practical Implications for Employers
In a competitive labour market, it is understandable that employers seek to attract talent with competitive compensation. However, this must be done within a framework that ensures transparency, consistency, and compliance with equal pay obligations.
Recommended actions:
- Review and, where necessary, revise remuneration policies.
- Make sure that both fixed and discretionary components of pay are governed by clear, objective, and consistently applied criteria.
- Maintain proper documentation of remuneration decisions to support fair and lawful treatment of all employees.
For further guidance on compliance with equal pay rules or to discuss your remuneration policies, please contact our employment law team.