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Length of service related pay schemes

As a result of the decision of the Court of Appeal handed down on 20 October 2009 in the case of Wilson v Health & Safety Executive, any business that operates pay scales based upon length of service should be warned that the risk of these being challenged as being discriminatory has now increased.

The Court of Appeal’s decision makes clear that both the adoption and use of a length of service criterion is open to challenge by an employee. Whilst that employee continues to be required to establish that there are ‘serious doubts’ about the appropriateness of the criterion, the Court of Appeal said this was “merely a sensible evidential requirement to ensure that the complaint has some prospect of success” and crucially clarified that these challenges could be made under the existing equal pay and sex discrimination legislation.

In consequence, the likelihood of an employer facing such a challenge is greatly enhanced. Employers will still have the opportunity to objectively justify their use of incremental pay schemes, but they should consider carefully whether that use is proportionate to the value of the additional experience which employees with longer service have.

If they are not comfortable that this can clearly be justified then they should consider revising the pay structure within their businesses.