When recruiting to a vacancy can an employer offer a better salary than that offered to existing employees in order to attract candidates?
It is not inherently unlawful for an employer to offer a better salary than that offered to existing employees in order to attract candidates, but it creates a risk of an equal pay claim under the "equality of terms" provisions of the Equality Act 2010, from colleagues of the opposite sex who perform the same work for lower pay. There may also be a risk of claims from opposite-sex employees carrying out different work where their job has been rated as equivalent with the post in question, or they claim that they carry out work of equal value.
In the case of a successful like work, work rated as equivalent or equal value claim, the salary differential will be lawful only if the employer is able to establish that the reason for implementing it amounts to a material factor within the meaning of s.69 of the Equality Act 2010. Further, if the pay arrangement is indirectly discriminatory (for example, if it is found that the existing employees on the lower salary are mainly women, whereas those recruited on the higher salary are mainly men) the employer may also need to establish that its actions were objectively justified in that the pay differential was an appropriate and necessary measure to adopt in response to a real business need. In those circumstances, the tribunal will enquire as to whether or not any less discriminatory measures could have been adopted.
An employer that is considering this exceptional course of action must have objective evidence of a recruitment problem with regard to the post in question that can be addressed effectively only by offering new recruits a higher salary. In considering the salary issue, employers need to guard against importing and perpetuating pay discrimination in the guise of "market forces". Male applicants may already be earning more than female applicants, as a result of the existing pay gap between men and women, but an employer's legal duty within its own organisation is to offer equal pay and not to match previous salaries.
Any premium that is paid to a new recruit in these circumstances should be clearly identified as a temporary market supplement that is not intended to be consolidated into the basic salary. The employer should review the supplement after an agreed period and, if it is no longer justifiable, should remove it in accordance with a previously agreed process.
Many employers in such a situation have a policy of extending any market supplement to existing employees in the same job, including to part-timers on a pro-rata basis. This will assist in retaining good morale among the existing workforce and avoiding further problems in terms of retention caused by any sense of unfairness if new recruits are being paid more than existing staff. This removes the possibility of a successful like work claim based on the particular differential, although it does not eradicate the possibility of successful work rated as equivalent or equal value claims, in respect of which the employer would still need to make out a "market forces" defence under s.69 of the Equality Act 2010.