In 2010, in response to the government’s austerity programme, the probation service introduced a pay policy which resulted in a significant slowing of pay progression. This had a disproportionate impact on younger employees who would take much longer to reach the top of the pay band than older and more experienced employees.
Broadly, the position has been that the saving of costs on its own is not a legitimate aim capable of providing the basis of a justification defence in an indirect discrimination claim, but it may be where the aim described by the employer also involves elements other than cost.
The Court of Appeal held that the need to reduce staff costs to balance the probation service’s books during a public sector pay freeze was a legitimate aim capable of justifying indirect age discrimination. The Court found that the tribunal had been right to draw a distinction between an employer that is merely trying to save costs and one that needs to reduce staffing costs so as to “live within its means”. This did not conflict with the rule that discrimination cannot be justified where the reason is solely in order to save costs. In addition, the Court found that when considering proportionality, the tribunal was entitled to take account of the fact that the pay policy was introduced as a temporary measure.
This decision confirms that in indirect discrimination claims, while employers seeking to show justification may not rely solely on saving costs as a legitimate aim, they may rely on the need to reduce expenditure (and specifically their staff costs) in order to balance their books. If the cost reduction measures are temporary, this may also assist in establishing that the means of achieving the legitimate aim were proportionate.
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