Can you pay more for experience?
After last week's much publicised European Court of Justice judgement in Cadman v Health and Safety Executive, the answer is yes and no.
The European Court of Justice (ECJ) held that pay based on length of service does not amount to discrimination. This hasn't stopped both sides in the case claiming victory and many e
mployers have been left confused.
The ECJ has ruled that rewarding experience that "enables a worker to perform his duties better" constitutes a legitimate objective of pay policy, and does not amount to sex discrimination.
The important point for employers encouraged by this ruling is that there are limits:
As the Equal Opportunities Commission has said: 'Contrary to media speculation, this decision puts it beyond question that employers can be challenged by women who can provide evidence that casts serious doubt that longer service does actually lead to better performance.'
'This is because evidence shows that women tend to accrue shorter length of service because they've taken career breaks to look after children or are relatively new entrants into traditionally male dominated professions. Employers should therefore err on the side of caution and ensure that length of service is only used in pay where it can legitimately be justified.'
Not so widely reported is that the ECJ went on to say that employees may now challenge its experience justification where greater length of service does not actually enable job holders to perform their duties better, and the employer will be required to provide justification in detail. This is an important point. Having long pay scales in jobs which can effectively be mastered within a few months/years of starting, such as unskilled and semi skilled work, will be open to challenge and will have to be justified in detail. Also, employees will also now be able to challenge the use of very long pay scales in more complex jobs where the scale goes beyond the point where the tasks are effectively mastered.
Taken with the new Age Discrimination legislation, which says that differences in pay have to be justified by fulfilling a business need if they are in a structure which maintains differences after five years service, employers with pay structures that have differences based on service or experience could be open to challenge on either Sex or Age Discrimination counts. The bottom line: if it can be argued that an employee has, after a certain number of years' work, acquired all the experience and expertise that is possible to acquire for a particular job, it will be hard to justify paying different amounts to different incumbents.
If you have concerns about your pay structures, contact
October 2006
