Equality may come at a cost for both public and private sectors

THE UK government's Equality Bill could be the biggest overhaul of employment law in recent times.

The government wants to harmonise discrimination legislation and strengthen the protection offered against discrimination. But what does the shake-up mean for businesses already struggling to cope with the burden of the economic downturn?

One of the changes for business is the surprise inclusion of a power to force private sector organisations with more than 250 employees to publish details of pay rates.

With the Equalities and Human Rights Commission (EHRC) putting the pay gap between male and female full-time employees at 21.7 per cent in the private sector, the government is hoping that this will encourage greater transparency.

For the time being, the reporting will not be mandatory, as the government has promised not to introduce this power until 2013. Some may say it is unlikely that the current government will be in a position to introduce the provisions in 2013 and, therefore, it is unlikely that they will be introduced at all – the Conservatives have indicated that they would require employers to report on their pay rates only where they have lost an equal pay claim at a tribunal.

However, assuming we still have a Labour government in 2013, ministers have said that if businesses publish sufficient information, the reporting provision will not be activated at all. It is unclear what information the government will require business to disclose before 2013 to avoid the introduction of compulsory reporting. This is to be determined by the EHRC at a later date.

The bill has also introduced controversial "positive discrimination" provisions that will allow an employer to recruit or promote an individual from an under-represented group, where that individual is at least as qualified as their competitor.

This provision can only apply in those genuine tie-breaker situations, and the two candidates in question must be "as qualified". This means, for example, that an employer cannot choose a woman over a man where the man in question is better qualified.

It is not clear what the term "as qualified" means and, as positions become more senior, the more subjective the evaluation will be required to be. It will be a risky call for employers and one they may not be prepared to take for fear of a claim.

This provision does not require businesses to take positive action, and a person cannot take action against an employer for not doing so. On the other hand, this does not mean a business is free from the threat of litigation from vexed applicants and employees. Employers will need much further guidance and, while confusion remains, businesses are likely to be cautious.

Additional equality duties have also been placed upon public bodies, which will impact upon businesses in the private sector. There are specific procurement duties that will affect those businesses that compete for public sector contracts, as they will need to ensure that they meet new guidelines setting out requirements on contracting authorities.

Again, it is not yet clear how far the public body equality duty will extend to potential suppliers.

One suggestion made by the government is, where a local authority is putting a building contract out to tender as part of a social regeneration project, one of the terms of the contract would be that the successful bidder must employ female plumbers and electricians from the surrounding area if women in the area are at a particular disadvantage. It may mean that small businesses will be put at a disadvantage and therefore unable to compete with large corporations better placed to deal with these demands.

A lack of clarity seems to be a consistent thread and, as much detail is yet to be added to the new provisions, it is impossible to tell how onerous the burden for businesses and local authorities will be.

With uncertainty in the economy, many businesses will be hoping for a delay in legislative change and the inevitable financial burdens that they will incur.

• Morag Hutchison is a senior associate at Pinsent Masons.