And speaking of asking for payment brings me neatly to the case of Next Retail Ltd v Thandi, the Employment Appeal Tribunal had to determine whether an employer could rely on the “material factor” defence under the Equality Act 2010 to justify paying its mostly female retail staff less than its predominantly male warehouse staff for work that had already been found to be of equal value.

The claims were brought by 3,540 retail sales consultants working in Next’s shops, who compared themselves with operatives in Next’s warehouses. An earlier Employment Tribunal decision had already ruled, bindingly, that the two roles were of equal value. Over the relevant period, 77.5% of retail consultants were female, whereas the warehouse workforce was more evenly split, averaging around 47% female and 53% male.

The difference in basic hourly pay was 92 pence in 2012, falling to 38 pence by 2023. Next said the higher warehouse rates reflected market forces and the need to recruit and retain warehouse labour, pressures that did not arise in the retail jobs market.

Because the work was of equal value, the law automatically gave the claimants the right to the same pay unless Next could show the difference was genuinely due to a “material factor” that had nothing to do with sex. The ET accepted that there was no deliberate sex discrimination, but found that the pay gap still put women at a particular disadvantage. It then rejected Next’s defence on basic pay and several other terms, holding that the real driver was simply saving cost, which is not a legitimate aim.

Next appealed the rejection of its material factor defence, arguing that higher warehouse pay was necessary to recruit and retain staff, rather than merely to save costs. It maintained that the ET had wrongly focused on its ability to afford equal pay instead of the business reasons for the differential. Next argued that those reasons did not apply to retail staff and objectively justified the difference, without challenging the earlier finding that the work was of equal value.

The claimants also cross-appealed on the direct discrimination finding, arguing that the ET had wrongly confined its analysis to Next’s motivations rather than whether the market rates themselves were tainted by sex discrimination.

The EAT allowed Next’s appeal on the central points. It agreed that the claimants had shown particular disadvantage through the statistics and surrounding evidence. But it held that the ET had asked the wrong question on justification. Instead of focusing on why Next paid the warehouse staff more, the ET had concentrated on why it did not pay the retail staff more, and on whether Next could afford to close the gap. The correct approach was to characterise the employer’s aim fairly and as a whole.

The EAT also rejected the idea that market forces could only ever justify a pay gap where there was a “more compelling business reason”. Paying more to one group for genuine recruitment reasons is very different from simply following a going rate that happens to favour men. The fact that Next could have afforded to level up pay did not make the difference unjustified.

The cross-appeal failed: The EAT rejected the argument that reliance on market forces automatically amounted to direct discrimination unless the employer proved those forces were free from disadvantage based on sex. It also confirmed that there was a sufficient evidential basis for the ET’s findings despite the absence of Board-member testimony and documents stating the reasons.

Overall, the EAT held that the basic-pay difference was objectively justified by genuine warehouse recruitment and retention needs, overturning the ET’s decision on that issue. The case is a significant and welcome clarification for employers, but it is not a green light to pay different groups differently without thought. The distinction the EAT drew is a fine one, and employers who get it wrong remain exposed to very large equal pay liabilities.

This case shows that paying different rates to different groups can be defensible where the difference is genuinely explained by market, recruitment or operational needs, rather than by a simple wish to keep costs down.

The practical lessons for employers and HR professionals are these:

• Be clear, in advance, about why the higher-paid group is paid more, and record that reasoning at the time rather than reconstructing it later.
   
• Make sure the rationale for higher pay genuinely does not apply to the lower-paid group.
   
• Do not assume that affordability is the right argument; affordability is not the test, and a tribunal will look at the real reason for the gap.
   
• Treat pure cost-saving as a danger sign: removing or withholding a benefit “solely about cost” is unlikely to be justified.
   
• Where roles of equal value attract different pay, carry out and document an equal pay audit, so that any differential can be explained by evidence if it is ever challenged.