Equal pay disputes are not limited to employees doing the same job. A worker may be able to compare their pay with someone carrying out a completely different role if the two jobs are nevertheless regarded as being of equal value.
The recent Employment Appeal Tribunal decision in Next Retail Limited and Next Distribution Limited v Miss M Thandi and others [2026] EAT 130 provides an important reminder of how these rules work in practice, particularly where different parts of a workforce are paid different rates because of recruitment pressures, market conditions or operational requirements.
Next succeeded in overturning an earlier finding that it could not justify the difference in basic pay between its retail sales consultants and warehouse operatives. However, the Next equal pay appeal case does not establish that employers are free to pay different rates simply by referring to “market forces”.
The employer must still be able to identify and evidence the genuine reason for the difference and, where the difference puts one sex at a particular disadvantage, show that the arrangement is objectively justified.
Written by Peggy Lim, Solicitor
What happened in the Next case?
The claims were brought by thousands of Next retail sales consultants, most of whom were women. They compared themselves with warehouse operatives who received higher rates of basic pay.
An earlier Employment Tribunal decision had already determined that the work performed by the relevant retail employees was of equal value to the work performed by the warehouse comparators. That finding was not overturned on appeal.
The later dispute was therefore about whether Next could lawfully justify paying the warehouse employees more.
Next relied on a number of factors, including market rates, difficulties recruiting and retaining warehouse staff, the operational demands of its warehouses and wider business considerations. The Employment Appeal Tribunal concluded that, in relation to basic pay, the evidence showed that Next had paid higher rates in the warehouses because it needed to do so to recruit and retain sufficient staff. Those particular pressures did not apply in the same way to the retail workforce.
The important point is that the decision turned on the actual reason for the higher pay and the evidence supporting that reason.
What does “equal pay” mean?
The equal pay provisions are principally contained in the Equality Act 2010.
The law provides protection where a person is receiving less favourable contractual terms than a comparator of the opposite sex who is performing equal work.
Equal work can include:
- Like work – where the jobs are the same or broadly similar and any differences are not practically important.
- Work rated as equivalent – where the jobs have been rated as equivalent under an analytical job evaluation scheme.
- Work of equal value – where the jobs may be different but nevertheless place equal demands on the workers by reference to matters such as effort, skill and decision-making.
This means that different job titles do not necessarily prevent an equal pay claim.
A shop-floor employee, administrator, cleaner, warehouse operative or other worker could potentially compare their role with a very different job if the demands of the two roles are shown to be equivalent.
The assessment is concerned with the work actually carried out, rather than simply the wording of a job title or contract.
When can an employer lawfully pay different rates?
Equal work does not automatically mean that every difference in pay is unlawful.
Under section 69 of the Equality Act 2010, an employer may rely on the material factor defence where it can show that the difference is caused by a genuine factor which is not direct sex discrimination.
Depending on the circumstances, this may include recruitment and retention difficulties, genuine market-rate differences, particular skills or qualifications, geographical location, unsocial hours, additional responsibilities, productivity requirements, collective bargaining arrangements or historical contractual protections.
Where the factor places one sex at a particular disadvantage, the employer may also need to show that relying on it is a proportionate means of achieving a legitimate aim.
The Next decision confirms that a genuine need to attract and retain sufficient workers can justify higher pay. However, the employer must be able to show that those pressures actually existed. Simply referring to “market rates” will not necessarily be enough without evidence explaining why the higher rate was required.
What should employers do when there are differences in pay?
The Next decision is a useful reminder that employers should be able to explain how pay differences arose, why they continue to exist and whether they remain justified.
- Review the full remuneration package
Employers should look beyond headline salary and compare basic pay, overtime, bonuses, allowances, shift premiums, paid breaks and other contractual benefits. A relatively small difference in one element of pay can become significant when applied across a large workforce over several years.
- Identify and document the genuine reason for the difference
Where one group is paid more, the employer should be able to explain why. If the reason is recruitment difficulties, a skills shortage or market benchmarking, supporting evidence should be retained.
Useful evidence may include vacancy data, numbers of applicants, staff turnover, agency worker usage, competitor salary information and records showing that candidates were rejecting offers or employees were leaving because of pay. This was important in the Next case, where different recruitment and retention pressures in the warehouse workforce formed part of the justification for the higher pay.
- Review pay differentials regularly
A difference that was justified when it was introduced may not remain justified indefinitely. For example, a premium introduced because of serious recruitment difficulties may require reconsideration if those difficulties later disappear.
Employers should therefore periodically review whether the original reason for a pay differential still applies, rather than allowing historic arrangements to continue automatically.
- Consider gender patterns and equal pay reviews
Particular care should be taken where a lower-paid group is predominantly female and a higher-paid comparator group has a materially different gender profile. A statistical disparity does not automatically establish unlawful discrimination, but it may require the employer to objectively justify the relevant pay practice.
Employers may also wish to carry out an equal pay audit or job evaluation exercise to identify unexplained differences, assess whether roles may be comparable and address potential risks before they develop into formal disputes or litigation.
What should employees do if they believe they are being paid less?
Employees should first identify the precise difference.
Rather than simply asking whether another employee “earns more”, it is useful to establish:
- what contractual term is different;
- who the comparator is;
- whether the comparator is of the opposite sex;
- what work each person actually performs;
- whether the jobs are the same, broadly similar or potentially of equal value; and
- what explanation the employer gives for the difference.
Employees should retain payslips, contracts, job descriptions, bonus information, correspondence relating to pay and any information showing what work they and their comparator actually perform.
Where the roles are different, an equal value claim can become technically complex and may require expert evidence.
Can an employer simply say that it cannot afford to equalise pay?
The Next appeal also provides useful guidance on this point.
The relevant question is not simply whether the employer could afford to increase the pay of the lower-paid group.
The focus is on the reason why the comparator group receives the higher rate and whether reliance on that reason is legally justified.
In Next, the fact that the company might have been able to afford higher retail wages did not by itself defeat its defence. The relevant issue was whether there was a genuine business need to pay the higher warehouse rate.
This does not mean that cost is irrelevant in every equal pay case. Rather, affordability should not be confused with the underlying reason for the difference in treatment.
Does the Next decision mean that “market forces” will always justify different pay?
No. The decision does not create a general rule that market forces automatically justify paying one group more than another.
A bare assertion that one job “normally pays more” may itself reproduce historic inequalities in the labour market.
What mattered in Next was that there were specific recruitment and retention reasons for paying the warehouse employees more, supported by the factual findings in the case.
Employers relying on market forces should therefore be prepared to show what market pressure existed, how it affected the particular role and why the resulting difference in pay was reasonably necessary.
How can we help?
Our Litigation team advises both employers and employees on equal pay and workplace discrimination issues.
For employers, we can assist with reviewing salary and benefit structures, identifying potential equal pay risks, considering whether existing pay differentials can be justified, reviewing employment contracts and policies, and responding to grievances or Employment Tribunal claims.
For employees, we can advise on whether a difference in salary, bonus, overtime, allowances or other contractual benefits may amount to an equal pay issue, identify an appropriate comparator and advise on the evidence and procedure required to pursue a claim.
Obtaining advice at an early stage can often help identify whether there is a genuine legal issue and, where appropriate, allow the parties to address the position before a dispute develops into lengthy and expensive litigation.
Final thoughts
The lesson from the Next equal pay appeal decision is not that employers must always pay every employee performing work of equal value exactly the same amount.
Nor is it that an employer can simply refer to “market forces” and avoid the equal pay provisions.
The more useful lesson is this: where there is a difference in pay, employers should know why that difference exists and be able to prove it.
For employees, different job titles or different departments should not automatically prevent further enquiry. Equal pay law looks beyond labels and examines the real value and demands of the work being performed.
Clear pay structures, proper record keeping and regular review can prevent relatively ordinary salary differences from developing into major equal pay litigation.
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