In a recent case, the Court of Appeal held that saving on costs alone would not be a legitimate aim to justify indirect discrimination. However, if an employer needs to save on costs but also reduce its expenditure such as, costs in relation to staff and to balance its books, this would constitute a legitimate aim and would not have a discriminatory effect.
In the case of Heskett v Secretary of State for Justice, the Ministry of Justice adopted a progression policy in relation to the pay structure which affected the Claimant, a probation officer. This resulted in the Claimant earning less than his older, longer serving colleagues. The Claimant argued that this was a form of indirect age discrimination and that saving on costs would not be a legitimate aim to justify the indirect age discrimination.
The Court of Appeal decided that if the sole reason for the change in policy was to save on costs, this would not be a legitimate aim in justifying discrimination. However, if it was coupled with another reason such as the employer being under financial pressure and the 'employer's need to reduce its expenditure, and specifically its staff costs, in order to balance its books', this can constitute a legitimate aim.
This case is fact specific, but it provides important points for employers to consider when drafting new policies. Where the sole aim of a policy is to reduce costs, an employer cannot discriminate simply to save costs. However, where there are other factors as well as financial constraints, an employer may be able to justify a policy which produces a discriminatory effect.