Search

How can we help?

Icon

New ruling lends helping hand to employers balancing budgets

2020 is likely to be a year of financial constraints and balancing budgets for many businesses. Therefore, the recent Court of Appeal decision in Heskett v Secretary of State for Justice [2020] could be good news for employers seeking to justify indirect discrimination as a biproduct of a short-term balancing budgets and need to reduce expenditure.

Mr Heskett (the Claimant and subsequent Appellant) had been employed since 2006 at the National Offender Management Service (NOMS), part of the Ministry of Justice. Following the economic recession in 2010, the Treasury introduced a pay-limiting policy, the result of which was that NOMS introduced its own pay progression scheme. At the time the Claimant joined the company, it would have taken him 8 years to progress to the top of his pay band. However, under the new policy, this timeframe increased to a period of 23 years. The Claimant brought proceedings against the agency citing that the new policy put those under 50 at a significant disadvantage.

Whilst the tribunal agreed that the new policy was indirectly discriminatory and that the Treasury’s aim was purely to save costs, NOMS had changed its policy in order to operate within its means. The tribunal therefore agreed that it was a proportionate short-term response to the decrease in funds.

The ‘cost-plus’ approach is now so acutely entrenched in UK law, it is unlikely to be repealed.

On appeal the EAT agreed with the Tribunal’s conclusions, as did the Court of Appeal. Arriving at their decision, the CoA considered what is now commonly known as the ‘cost plus’ method, often used by employers attempting to justify indirect discrimination. ‘Costs plus’ has its roots in three major precedents. In 1998 the European Court of Justice held that ‘an employer cannot justify discrimination…solely on the ground that avoidance of such discrimination would involve increased costs’.

In 2005, the EAT stated that ‘economic (which includes cost) grounds can properly be a factor justifying indirect discrimination, if combined with other reasons’. Later in 2012, the CoA elaborated further, concluding that ‘considerations of cost must be admissible in considering whether a provision criterion or practice which has a discriminatory impact may nevertheless be justified’.

Employers should therefore take some comfort that the decision in Heskett v Secretary of State for Justice [2020] appears to justify a book balancing approach by employers even though the results are discriminatory. Furthermore, the ‘cost-plus’ approach is now so acutely entrenched in UK law, it is unlikely to be repealed. However, this is not an opportunity to throw caution to the wind. All decisions will be circumstantial. Employee engagement and an understanding of the impact policies or balancing budgets may have on all employees will be key to taking a reasonable and justifiable approach.

Disclaimer
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

Author profile

About this article

Read, listen and watch our latest insights

art
  • 28 October 2025
  • Immigration

Supplementary Employment: When is it Allowed under UK Immigration Rules?

This article provides a guidance to understanding the rules on supplementary employment in the UK.

art
  • 24 October 2025
  • Commercial Real Estate

Navigating the building regulations regime in commercial property transactions

Building control is said to be one of the earliest forms of local government in England, with the modern building regulations progressing in the aftermath of the Great Fire of London.

art
  • 23 October 2025
  • Employment Rights Bill

Government launches Employment Rights Bill consultations – key changes employers need to know

The Employment Rights Bill is a draft law set to significantly expand workers’ rights. The Government has now launched the first round of consultations.

art
  • 23 October 2025
  • Privacy and Data Protection

AI and Data Protection – Is Fair and Transparent Privacy Possible?

We live in a digital world. Every facet of daily life is governed to some degree by phone, web or some form of connected technology.

art
  • 16 October 2025

Chambers and Partners 2026: Clarkslegal’s continued commitment to excellence

Clarkslegal is delighted to announce that we have once again been recognised by Chambers and Partners as a leading firm in their 2026 guide.

art
  • 15 October 2025
  • Immigration

Registering a child as a British Citizen: A guide to section 3(1) applications

This article explains the process of registering a child as a British citizen under section 3(1), including the eligibility criteria, the Home Office approach, and key factors that influence whether an application is approved.