An employer’s guide to fair promotions and grading

Clear pathways and opportunities for promotion together with increasing pay grades can help to improve employee performance, keep staff motivated and help with retaining talent. A fair and consistent practice should also reduce the risks of discrimination and equal pay claims when promoting staff and rewarding employees with increased pay grades. There are some legal risks that may arise in promotions and increasing grading, and we take a look at these below.

Discrimination risks

Unlike most claims for unfair dismissal, employees do not need two years’ service to bring a discrimination claim. Where conscious or unconscious bias is at play in deciding who to promote, employers may be at risk of a claim for direct discrimination. For example, if the stronger female candidate is passed over for a more senior management role because the manager believes the team will respond better to a male manager, the woman may be able to establish a claim for direct discrimination.

Employers can also be exposed to discrimination claims if they do not consider part-time employees for a more senior role unless they can justify that decision.

Employers need to be careful that decisions about promotions and increases in pay grades are not influenced by factors such as an employee taking family-friendly leave, asserting their employment rights, whistleblowing, or being pregnant. A decision based upon these reasons could lead to a tribunal claim and having to pay compensation, along with reputational damage.

Hybrid and remote employees

Hybrid and remote working may have an impact on decisions to promote. Employees who are physically in the company of their manager may be more likely to have their work recognised and have more opportunity to build rapport with their manager. Remote workers may end up being less prominent in the mind of their manager when promotion opportunities come round.

As a result, indirect discrimination may occur if remote workers are more likely to be disabled employees or female employees who are primary carers. Similarly, employers must not forget about employees on family leave when considering promotions.

Equality of opportunity

Affording equality of opportunity is not just about the decision regarding who to promote. This principle should inform day-to-day decisions like the allocation of work, training opportunities, access to clients, and allocation of corporate entertainment budgets. These can be crucial opportunities to allow employees to shine and stand out as suitable for promotion or increased pay grades. 

Equal pay

Men and women alike are entitled to receive equal pay for equal work. Although most equal pay claims involve public-sector workers, other sectors are not immune particularly when the gender pay gap receives media attention.

Where an employee can compare themselves with a current or former employee of the opposite gender who is doing equal work but for better pay or benefits, the employer is at risk of an equal pay claim. Employers may be able to defend the claim on the basis that there is a non-discriminatory material factor that accounts for the differences. This could be due to seniority, past performance, recent experience, or a skills shortage.

Employment tribunals do sometimes accept market forces as a sound reason for differences in pay. However, this is unlikely to stretch to cover the explanation: ‘I paid him more because he asked for more, but she was willing to do the work for less’.

Finding and addressing pay inequality

Employers who are committed to rooting out and correcting unequal pay can introduce a job evaluation scheme. Jobs are assessed and allocated to a salary band, depending on factors such as the level of skill, qualifications, and responsibility that each job entails. Pay scales are then introduced for the different bands.

Transparent pay structures are commonplace in the public sector, but employers in other sectors may decide that the benefits are outweighed by the inflexibility of a pay structure.

Employers, with less than 250 employees, who are not required to publish gender pay gap data may consider that this route could bring pay inequalities to the surface and worry that this could increase the risk of equal pay claims in the short term. A more light-touch option is to carry out an equal pay audit and then have the option to take steps to address unjustifiable differences in pay. This has the advantage of being carried out behind the scenes.

Keeping pay confidential

Employment contracts often used to include a clause prohibiting employees from discussing pay at all. A change in the law meant that these pay secrecy clauses became unenforceable where they stop an employee from sharing information about pay with colleagues to unearth unlawful pay differences. Now, where these clauses are included in contracts, they are usually carefully drafted to allow employees to discuss pay only for this purpose. Employees who do engage in these discussions are protected from victimisation, such as being excluded from meetings they would usually attend or being denied promotion opportunities.

Reducing risks

Employers should aim for consistency across the business to avoid damage to employee morale. Using robust well-documented and fair assessment and decision-making processes should reduce the risk of a legal claim.

How we can help

We can help you navigate all aspects of these challenges, as well as other considerations on promotion such as changing terms, drafting restrictive covenants and remuneration packages. If you would like to discuss this further, please contact Linda Wilson, Partner and Head of Employment at MacDonald Oates Solicitors.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.