Pay decisions can seem straightforward from a business perspective. One role is harder to recruit for, another requires different working hours, and some employees may receive higher rates to help keep operations running smoothly.
But what happens when employees doing work of equal value are paid differently?
A recent ruling involving retailer Next has brought this question back into focus, highlighting the relationship between equal pay, recruitment pressures and employers’ legal responsibilities.
For small and medium-sized businesses, it is a useful reminder that pay decisions should be considered carefully, particularly when different groups of employees receive different rates for their work.
What happened in the Next equal pay case?
The case involved thousands of current and former Next retail employees, predominantly women, who argued that they were paid less than warehouse employees, predominantly men, despite their work being assessed as having equal value.
In August 2024, an Employment Tribunal found in favour of the retail workers on a number of issues relating to pay and benefits.
Next appealed. On 7 September 2026, the Employment Appeal Tribunal issued its judgment, overturning a key part of the earlier decision concerning basic hourly pay.
The appeal tribunal accepted that Next had legitimate business reasons for paying warehouse employees higher basic rates. These included difficulties recruiting and retaining sufficient warehouse staff and the need to maintain an effective warehouse operation.
However, the ruling did not resolve every aspect of the dispute in Next’s favour. The tribunal upheld findings concerning certain differences in night-time and overtime premiums and paid rest breaks, while the issue of Sunday premium payments remained to be determined.
The case demonstrates that different pay arrangements can require separate consideration, even within the same organisation.
What does equal pay mean under UK law?
Under the Equality Act 2010, men and women are entitled to equal pay for equal work, subject to the relevant legal provisions.
Equal work can include:
Like work: Employees carry out the same or broadly similar work.
Work rated as equivalent: Their jobs have been assessed as equivalent under a valid job evaluation scheme.
Work of equal value: Their jobs may involve different tasks but are equal in terms of demands such as skill, effort, decision-making and responsibility.
The roles do not have to be identical for an equal pay issue to arise.
Where employees of different sexes are doing equal work but receive different pay, an employer may need to establish a lawful explanation for the difference. In some circumstances, this involves demonstrating that the difference is due to a material factor that is not sex discriminatory, with additional requirements where the factor puts one sex at a particular disadvantage.
The legal assessment depends on the circumstances and the evidence available.
Can an employer pay different rates for the same value of work?
There can be legitimate reasons for differences in pay.
For example, a business might need to offer higher wages for a role where recruitment is particularly difficult, specialist skills are required or employees must work less attractive shifts.
However, simply stating that one role commands a higher market rate does not automatically settle every equal pay question.
Employers need to consider the actual reasons for the difference, whether those reasons are supported by evidence and whether the relevant legal requirements are met.
The Next judgment illustrates this distinction. The appeal tribunal accepted the recruitment and retention rationale for the difference in basic pay, while other pay arrangements were assessed differently.
The key point is that each pay difference needs to be considered in its own context. A justification for one element of remuneration does not necessarily explain every other difference.
Why should SMEs pay attention to their pay decisions?
Although the Next case involves a large retailer, the underlying issue is relevant to businesses of all sizes.
SMEs may set pay rates informally, particularly when they are growing, recruiting urgently or trying to retain key employees.
Over time, different arrangements can develop across teams. One employee may negotiate a higher salary, another may receive a shift premium, and a new starter may be offered more than an existing member of staff because of current recruitment pressures.
These differences are not automatically unlawful. However, problems can arise when employers cannot clearly explain why the differences exist or when their decisions create unjustified inequalities.
A business should be able to understand how its pay arrangements developed and whether they remain appropriate.
What should employers review?
Employers can take a closer look at their existing arrangements by considering the following areas.
1. How are pay rates decided?
Review whether pay is based on consistent criteria, such as responsibilities, skills, experience, working conditions or evidenced recruitment and retention needs.
2. Are different roles being assessed fairly?
Job titles alone do not establish whether work is equal. Consider the duties, demands and responsibilities involved rather than relying solely on departmental differences.
3. Can the business explain its pay differences?
Where employees receive different rates, identify the reasons and retain appropriate records supporting those decisions. Recruitment data, vacancy information and staff turnover figures may be relevant where market conditions are relied upon.
4. Are additional payments being applied consistently?
Basic salary is only one part of remuneration. Shift premiums, overtime rates, bonuses and other benefits can also be relevant when reviewing equal pay risks.
5. Are pay arrangements reviewed as the business changes?
Recruitment difficulties and operational requirements can change over time. Reviewing pay periodically helps employers understand whether existing differences remain justified.
These steps will not guarantee that a pay arrangement is lawful, but they can help businesses identify issues that may otherwise go unnoticed.
