Birmingham city council has reached an agreement to settle historical equal pay claims that left the authority with liabilities estimated at £760m and pushed it into effective bankruptcy.
Union leaders called it a “historic outcome” for women at the council that brought “pay justice within touching distance”, after the announcement on Tuesday morning.
The full terms of the framework agreement with employees of the council and Birmingham Children’s Trust will remain confidential, and will be formally approved at a cabinet committee meeting next week, the council said.
The cost of the settlement falls within the limit of the exceptional financial support package agreed with the previous government in January, it added.
Birmingham city council issued a section 114 notice, declaring itself effectively bankrupt, in September 2023, citing the £760m bill for equal pay claims as a key reason for its financial distress.
Major problems installing a new IT system across the organisation were also blamed, and the council was later criticised for potentially overstating its financial problems due to an inability to access accurate accounts.
In March, the council approved what were thought to be the biggest budget cuts in local authority history, as well as a 10% council tax increase for residents, and a further £150m of cuts are planned for next year.
The leader of the council, John Cotton, said the pay agreement “marked the end of an intense period of dialogue between the council and its unions”.
“It is an important step on the council’s improvement journey,” he said. “I was appointed as leader to end the failings within this council that led to the equal pay liability and this framework agreement is intended to mark the start of a new era of productive and progressive industrial relations built on trust and mutual respect.”
The industrial dispute was brought by two unions, GMB and Unison, and related to council workers in female-dominated roles, such as cleaners and catering staff, historically being paid less than those in male-dominated roles, such as waste collection.
The GMB organiser, Alice Reynolds, said: “The women of Birmingham city council have delivered an historic outcome today. In schools, offices and workplaces across our city, GMB members have led the fight for equal pay. Now this framework agreement sets out a cast-iron plan to settle our members’ claims and pay back their wages after years of discrimination.
“Pay justice for Birmingham’s women workers is something that our union has long led the fight for; today this framework agreement brings that within touching distance.”
The Unison West Midlands head of organising, Claire Campbell, said: “This is a good day for low-paid women who work at the council. They will at last get the pay justice they deserve.
“This agreement will show what can be achieved when the council negotiates constructively and in good faith. This will hopefully be the much-needed turning point for staff, services and local communities across the city.”
Cotton said the council was still “facing unprecedented challenges”.
“The next phase of the equal pay programme will be to deliver a new pay and grading model and job evaluation scheme so that pay inequality at the city council can end once and for all,” he said.
