Equal pay: Recruitment and retention needs can justify pay differences

Authors: Stephen Miller, Sophie Jackson and Charlotte Stern

An Employment Appeal Tribunal decision provides insights into when market forces may objectively justify pay differences between groups carrying out work of equal value. 

In Next Retail Ltd and another v Thandi and others, predominantly female retail sales consultants brought equal pay claims because they were paid less than warehouse operatives, despite carrying out work of equal value. The Employment Tribunal found that the difference particularly disadvantaged the retail workers and rejected Next’s explanation that it needed to pay higher rates to recruit and retain warehouse staff. 

The EAT upheld Next’s appeal in relation to basic pay and certain benefits. It found that the Tribunal had taken too narrow an approach: the higher warehouse rates were intended to ensure that Next could recruit and retain enough staff to maintain its warehouse service. That was a legitimate business aim, not simply a cost-saving measure. As the Tribunal had found that reducing warehouse pay would jeopardise the service, the pay difference was a proportionate way of achieving that aim. However, Next did not successfully justify differences relating to night-time premiums and paid rest breaks, which were found to be cost-saving measures. 

The EAT also rejected the argument that Next had directly discriminated against the retail workers because of their sex. The Tribunal had found that sex played no part in Next’s pay decisions. The question was instead whether the pay difference placed women at a disadvantage and, if so, whether Next could objectively justify it, which in this case it could. 

Key Action Points for Human Resources and In-house Counsel 

A pay difference between groups carrying out work of equal value may be justified where there is evidence of genuine, role-specific recruitment and retention pressures, according to this decision. However, this may not be the end of the story as both parties have indicated an intention to appeal. A useful takeaway is that employers should clearly identify and document the reason for any pay difference, keep the supporting evidence under review and distinguish genuine recruitment needs from measures that are simply intended to reduce costs. 

Next Retail Ltd and another v Thandi and others [2026] EAT 130