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By Caroline Pryce, Reward Consultant, Turning Point
Pay equity and pay equality are often used interchangeably, but they mean different things – and understanding the distinction is key to navigating today’s push for pay transparency.
Equality is treating everyone the same regardless of their individual circumstances or background. The focus is on consistent and fair inputs – for example, having pay policies that are gender-neutral and apply consistent rules to everyone.
Equity, on the other hand, is making adaptations that recognise differences in individual circumstances or backgrounds. The focus is on consistent and fair outputs - such as monitoring pay gaps or disparities in career progression and taking targeted action to address them.
For many years, responsible employers have taken steps to ensure their reward strategies are built on consistent and fair inputs. The Equality Act 2010 sets out the protected characteristics that must be considered when designing people policies and underpins any compliant reward strategy. In recent years, however, attention has increasingly shifted towards consistent and fair outputs - particularly achieving equity in pay.
A move towards focusing on pay equity
The introduction of gender pay gap reporting in 2017 was one of the first significant steps in the UK towards viewing pay arrangements with an equity lens, rather than focussing solely on equality.
An employer could have scrupulously fair reward policies and excellent manager training, yet still have a significant gender pay gap. The key to understanding this is that, before joining that employer, many women’s pay had already been influenced by factors such as part-time working, career breaks, and possibly less assertiveness in salary negotiations. Applying the same reward strategy equally to everyone was not addressing these existing differences.
Another contributing factor to gender pay gaps has been historical differences in how society has valued female-dominated versus male-dominated roles. A company whose lowest quartile consists of male-dominated roles will often show a smaller gender pay gap than one with female-dominated roles at this level, even if the gender make-up in the higher quartiles remains the same. So, what lies behind this difference in value assigned to male- and female-dominated roles?
The role of job evaluation and market data
Employers commonly look at market data when setting pay scales, and this is widely acknowledged to be a data-led and robust approach. However, some recent equal pay claims have highlighted the risks of relying on market data in isolation - when not underpinned by a job evaluation scheme that considers the full scope of a role and how it compares to others within the organisation.
In 2024, the fashion retailer Next lost an equal pay claim after it was argued that staff in female-dominated roles were paid less on average than those in male-dominated roles. When defending the claim, Next argued that the difference in pay rates was in response to labour market demands, and pointed to market data to support this. While Next’s approach was acknowledged to reflect market conditions, the tribunal considered the roles in question to be of equal value. As a result, the difference in pay was deemed gender discrimination.
Other high-profile cases, such as Birmingham City Council’s £760 million settlement, reinforce the same point. These cases highlighted that “different” does not necessarily mean “unequal in value”, and that failing to assess roles through a gender-neutral, analytical lens can expose employers to significant legal and financial risk.
This reflects a shift from focusing on consistent inputs to judging fairness by consistent outputs. While Next may have been using the same pay inputs - job evaluation and market data - for both types of roles, they failed to consider the resulting outputs, and whether these could be legally justified.
Pay equality - the foundation for fairness
Whilst we have focused on the need to consider pay equity, it should not be seen as oppositional to pay equality. It remains essential that your pay inputs are fair and applied consistently to everyone, with pay equity building on this to round out the picture.
Our tips when thinking about pay equality:
Review reward documentation (including policies, job descriptions, and incentive schemes) to ensure it is gender-neutral and does not disadvantage individuals with any protected characteristic.
Consider how AI is used in your reward processes. It can be a useful proof-reader to ensure wording does not unintentionally exclude or disadvantage certain groups. However, remember that AI systems learn from past data, which may itself reflect unfair practices.
Communicate clearly how your pay framework operates. Make sure people understand how pay is set, how it can be progressed, and how they can ask questions.
Review how pay progression and bonus schemes are linked to performance. Ensure that people from different groups who perform at the same level have equal opportunities to achieve targets and objectives. For example, consider whether sales targets are adjusted for part-time staff (who are more likely to be women), or whether absence rates are fairly assessed for staff with disabilities.
Create career pathways to show employees how they can progress in your organisation
In summary
As the focus continues to shift towards pay equity, employers must consider how best to respond and prepare for upcoming changes.
By combining transparent reward practices with a critical, robust evaluation of roles and outputs, employers can move beyond compliance to create workplaces that are genuinely fair and inclusive. The challenge is significant, but so too is the opportunity: organisations that embrace pay equity not only reduce legal and financial risk, they also strengthen trust, attract diverse talent, and build a more sustainable future of work.
About Turning Point
Our data and insight help organisations build the best reward strategy for their business and people. We offer comprehensive reward consulting services as well as our Orbit™ software suite, empowering organisations to stay at the forefront of competitive, equitable, and transparent pay and reward.
