Next Retail v Thandi: What the Equal Pay Appeal Means for Employers

In September 2026, the Employment Appeal Tribunal handed down its decision in Next Retail Ltd and Next Distribution Ltd v Thandi and others [2026] EAT 130, one of the most closely watched equal pay cases in years. Next succeeded in overturning much of an earlier tribunal ruling against it, but the decision is more nuanced than the "Next wins" headlines suggest and it carries important lessons for any employer paying different rates to comparable groups of staff.

The Background

The case was brought by 3,540 predominantly female retail sales consultants at Next, whose roles had already been found in an earlier ruling (that wasn't challenged on appeal), to be of equal value to those of the company's predominantly male warehouse operatives. Once work is found to be of equal value, an employer must pay the same rate unless it can point to a genuine "material factor" that explains the difference and doesn't involve direct sex discrimination.

In 2024, the Leeds Employment Tribunal found that Next had failed to justify a number of pay differences, most significantly in basic pay and it characterised Next's reasoning for the difference as amounting to little more than a desire to save costs. Cost alone cannot justify a pay difference that puts one sex at a particular disadvantage.

What the EAT Decided in Next Retail v Thandi

Next appealed and the claimants cross-appealed. The EAT dismissed the cross-appeal in full, and upheld the tribunal's original finding that the pay arrangements placed women at a particular disadvantage. That part of the earlier decision stands.

However, allowing Next's appeal in part, the EAT held that the tribunal should have considered Next's aims as a whole when deciding whether they were legitimate and proportionate, rather than isolating cost-saving as the sole driver. Next's aim in paying higher basic pay to warehouse operatives included paying the market rate necessary to recruit and retain sufficient warehouse staff, recruitment and retention pressures that simply didn't apply to retail roles. The EAT held that was a legitimate aim.

The EAT also found the tribunal had asked itself the wrong question. Rather than asking why Next had not increased retail pay, it should have asked whether paying warehouse staff more was a proportionate means of meeting Next's recruitment and retention aim. On the tribunal's own findings, Next had paid warehouse workers what was necessary for sound business reasons. Crucially, the EAT also confirmed that Next's ability to afford equalised pay across the two groups did not, on its own, undermine that justification.

The appeal succeeded on basic pay and certain other pay elements. But the tribunal's decision in favour of the retail sales consultants stood on other elements, including paid rest breaks, overtime premium, and night-time working premiums, where the EAT agreed the tribunal had been entitled to find those differences were driven by cost-saving alone.

What This Means for Employers

This is genuinely useful clarification, but it isn't a green light to rely on "market forces" as a blanket justification for unequal pay. The EAT's decision confirms that recruitment and retention pressures can form part of a legitimate aim, but only where an employer can properly evidence that those pressures are real, specific, and genuinely explain the pay difference, rather than functioning as a convenient label for what is ultimately still a cost-saving decision. The decision also confirms that simply being able to afford to equalise pay doesn't, on its own, defeat an otherwise genuine justification, an important point for larger or more profitable employers who might otherwise assume affordability works against them.

Employers should also note what the decision doesn't change. The finding that the retail and warehouse roles were of equal value stands. The finding of particular disadvantage stands where other parts of the original ruling against Next, on premiums and rest breaks, were upheld. This is a partial, fact-specific win, not a wholesale reset of equal pay law.

Frequently Asked Questions

Does Next Retail v Thandi mean employers can rely on market forces to justify unequal pay? Not automatically. The EAT confirmed that recruitment and retention pressures can form part of a legitimate aim, but only where the employer can properly evidence that those pressures are genuine and specific, rather than simply relabelling a cost-saving decision.

What is the material factor defence in equal pay claims? Under section 69 of the Equality Act 2010, where two roles are of equal value, an employer must pay the same rate unless it can point to a genuine factor explaining the difference that doesn't involve direct sex discrimination, and, where the factor puts one sex at a disadvantage, show the arrangement is objectively justified.

Does being able to afford equal pay affect an employer's justification defence? No, not on its own. The EAT confirmed that an employer's ability to afford equalising pay does not, by itself, undermine an otherwise genuine justification for a pay difference.

How Impact Can Help

Equal pay claims are complex, high-value, and increasingly common. This decision shows just how much turns on the detail of how an employer's justification is evidenced and characterised. We help employers audit pay structures across comparable roles, understand where equal value risk may exist and build a properly evidenced case for any pay differences that genuinely reflect recruitment, retention, or other legitimate business needs, rather than cost alone. As always with employment law, evidence is key.

If your business operates different pay scales across comparable roles, particularly where those roles split along gender lines, now is a sensible time to review your position. Get in touch with Oliver to discuss:

Contact Oliver Tasker: 📞 Call: 01522 776270 ✉️ Email: oliver@impactemploymentlaw.co.uk

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