UK Retail Equal Pay Cases: Transferable Lessons For EU Employers Ahead Of Pay Transparency

With the EU Pay Transparency Directive due to become law by 7th June 2026, many employers are trying to work out what to expect. The UK has seen a slew of recent equal pay claims across the retail sector, presenting a great learning opportunity for EU employers. In this article, we identify the lessons we can learn from these cases ahead of new pay transparency laws. 

But First, a Little Context

In the UK, to win an equal pay claim, claimants must be successful in three areas, each of which comprises one stage in the legal proceedings: 

1. Comparability - for an equal pay claim to be brought, a claimant must be able to compare themselves to a valid comparator - a current or previous worker - of another gender. This must be a real person employed by the same, or an associated, employer. 

2. Equal value - the claimant must establish that they and the comparator are employed in like work, in jobs of equal value, or in jobs rated as equivalent as per the Equality Act 2010. 

3. Material factor defence - if the court rules in the claimant’s favour for points one and two, it’s up to the employer to show the reason for the inequality is due to a material factor - this cannot be the difference in the comparators’ sex. If the employer cannot demonstrate this, the claimant wins.

All three of these elements will also apply under articles 18 and 19 of the new EU Pay Transparency Directive.

One retail sector equal pay case that’s recently completed all three stages is the Thandi and others v Next Retail Ltd case. So let’s dive into the details.

Next Shop Workers Win Equal Pay Battle

The situation

3,500 predominantly female Next store workers claimed they were being paid lower wages than the mainly male warehouse workforce between 2012 and 2023. Next argued that market forces explained the pay difference and that the sex of staff did not come into how they set the pay. 

The ruling

The Employment Tribunal ruled that Next:

• Failed to show that the pay inequity was not sex discrimination. 

• Could not rely on market forces as a material defence factor when those material defence factors are indirectly discriminatory themselves.

This left cost saving as Next’s only defence, which was not considered to be sufficient justification for the pay inequities. 

The outcome

Each claimant has lost more than £6,000 on average and is entitled to up to six years’ back pay. With a total cost of as much as £30m, unsurprisingly, Next plans to appeal the ruling.

Implications of the Next Ruling for Supermarkets 

The Next case is important because it sets the scene for a number of similar equal pay claims against supermarket chains Asda, Tesco, Morrison’s, Sainsbury’s and the Co-Op. All the claims centre around people in shop floor roles (who are mostly female) being paid less than people (who are mostly male) in warehouse or distribution centre roles . 

In all the cases, claimants have passed the comparability hurdle. Asda claimants must prove the roles are of equal value while the equal value rulings are due for Morrisons and the Co-Op at the end of 2024. 

The most interesting legal findings are:

1. Tesco

The European Court of Justice ruled claimants can compare their roles to higher-paid distribution workers, even though the comparators were in different establishments. This is because the employer was deemed to be a single source with the power to correct the pay difference.  

2. Sainsbury’s

Sainsbury’s conceded stage one, comparability. But only after trying to have the case thrown out on the basis of a technicality (relating to some claimants’ names and addresses being omitted from early conciliation forms). However, the judge ruled in the claimants’ favour, saying: “It has been repeatedly stated that employment tribunals should do their best not to place artificial barriers in the way of genuine claims.”

Implications for EU Employers in Relation to the EU Pay Transparency Directive

So what can we learn from these UK retail cases?

1. Trying to fight a legal case on the basis of a technicality might not work. UK judges understand the spirit of current equal pay laws and European judges could well apply the same principles to future pay equity cases under the Directive. This makes robust pay practises a vital part of your HR strategy.

2. Equal pay cases are extremely time consuming and resource intensive. Making an equal pay claim a major business risk. In the case of the UK supermarkets’ equal pay claims, the total cost could be as much as £8bn in back pay alone. Not to mention the cost of legal fees and the time and resources expended internally to boot. Doing the work now to reduce your company’s pay transparency risk is likely to be a sound return on investment.

3. Employees can compare their pay to others even if they don’t work for the same employer.  The EU Pay Transparency Directive will apply the single source test which means employees will be able to compare their pay to others’ even if they don't work for the same employer - as long as the pay conditions are set centrally for more than one employer.

4. Using market rates as your sole equal pay defence won’t cut it. The new pay transparency legislation requires any pay gap between roles of equal value to be 5% or less. Trying to justify larger gaps than this, on the basis of market rates, won’t be successful. Instead, you need to be able to prove objective differences between roles, like skill, effort, responsibility and working conditions. A job levelling framework is a good way to do this.

5. When employers shoulder the burden of proof, it can be more difficult to win cases.

Under the Pay Transparency Directive, you must be able to show the reason for a pay inequality is due to a material factor that’s not the difference in sex. Again, this means pay differentials must be based on objective criteria. Employer burden of proof also makes it easier, and therefore more likely, that more employees will make claims. In the UK retail cases, tens of thousands of employees have claimed, resulting in the substantial costs mentioned earlier.

Adopting a Pay Equity Strategy

It’s clear - as an EU employer, ensuring watertight pay practices is absolutely vital. Something you can achieve by taking a strategic and thorough approach to pay.  Our team of experts recommends tackling four key areas of activity to prepare for the upcoming pay transparency legislation:

1. Assess and adapt your pay practices.

2. Prepare to be far more open about sharing pay information internally and when you hire.

3. Get ready for new external reporting requirements.

4. Act now to reduce risks if a claim is filed.

We go into much more detail about each of these activities in our pay transparency preparedness checklist. It’s been designed to help you spot the gaps in your pay practices. So you can easily identify what you need to do to prepare for the upcoming pay transparency legislation and reduce your risk of a costly equal pay claim in future. 

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