Employers may need to offer higher pay to recruit and retain people in hard-to-fill roles. A recent Employment Appeal Tribunal (EAT) decision involving Next shows when that may justify a difference in basic pay, even where the jobs being compared are of equal value. It also highlights the need to look carefully at every part of a pay package.
What happened in the Next case?
More than 3,500 Next shop workers brought equal pay claims after an employment tribunal found that their work was of equal value to that of warehouse operatives, who received higher basic pay. Over the period examined by the tribunal, 77.5% of the retail workers were women, while around 53% of the warehouse workers were men.
The employment tribunal found that the difference in basic pay placed the predominantly female retail group at a particular disadvantage and that Next had not justified it. It found no direct sex discrimination in the way Next had set pay.
In its judgment of 7 September 2026, the EAT upheld the finding of particular disadvantage but overturned the decision on basic pay. The employment tribunal had focused too heavily on the fact that Next could afford to increase retail pay. The relevant question was why Next paid warehouse workers more.
The employment tribunal had found specific recruitment and retention pressures in the warehouse labour market that did not apply to shop staff. On those findings, the EAT concluded that the higher basic rate was a proportionate way of meeting a legitimate business aim.
Karen Cole, Partner and Head of Employment at RIAA Barker Gillette, said:
“This is an important decision for employers because it recognises that businesses operate in real-world labour markets.”
Why does equal pay risk remain?
The decision does not mean that a reference to the ‘market rate’ will, by itself, justify a pay difference. An employer relying on recruitment or retention pressures needs to be able to explain the pressures it faced, why they applied to a particular role and why the difference in pay was justified. Where a pay practice puts employees of one sex at a particular disadvantage, the employer must show that it is a proportionate means of achieving a legitimate aim.
Nor did Next succeed on every aspect of its appeal. The EAT left in place the employment tribunal’s conclusions on differences involving night-time pay, overtime premiums and paid rest breaks. Some of those terms had been changed for retail staff to save costs, and the EAT considered them separately from the basic pay decision. It invited further submissions on the consequences of its judgment.
Karen added:
“The EAT’s decision turned on specific evidence around Next’s unique recruitment and retention pressures and how the pay difference was justified.”
What should employers do now?
Businesses that pay different rates across teams or locations should review the reasons for those differences, including where job titles and duties differ. Work can be of equal value even when the roles are quite different.
In particular, employers should consider whether they can:
- identify the recruitment or retention pressures behind any higher rates and keep the supporting evidence;
- explain how the rate was set and review whether the original pressures still apply;
- assess bonuses, shift premiums, overtime and paid breaks separately from basic pay; and
- check whether older pay decisions were based only on cost savings or assumptions about particular roles.
Karen said:
“This reinforces why it’s important to document any reasons behind pay differences and to keep a clear record of the evidence supporting them. If challenged, being able to demonstrate that a pay decision was driven by a genuine business need, rather than assumptions about the people doing the job, could make all the difference.”
If your business is reviewing its salary structure or the reasons for differences in pay, RIAA Barker Gillette’s Employment team can advise on equal pay risks and practical steps to address them.
Next Retail Ltd and Next Distribution Ltd v Miss M Thandi and others [2026] EAT 130.
About the author
Karen Cole is a Partner and Head of the Employment team at RIAA Barker Gillette. She has a range of expertise based on her employment law, dispute resolution and litigation background. Karen provides employment law advice to businesses and individuals, whether contentious or not. She is a member of the Employment Lawyers Association and the Association of Regulatory and Disciplinary Lawyers.