The starting point for this discussion is that beyond paying the National Minimum Wage, employers are generally entitled to pay employees whatever they choose, with market factors playing a significant role in this decision. Employment contracts do though have a number of terms which have been implied into the contract by the courts and employment tribunals. The Employment Appeal Tribunal (the "EAT") has decided in the past that in most employment contracts there will be an implied term that the employer will not act "arbitrarily, capriciously or inequitably in matters of remuneration" (F C Gardner Ltd v Beresford  IRLR 63). This does not mean that there is an implied term in every employment contract that employees are entitled to regular pay increases (Murco Petroleum v Forge  I.C.R. 282). More recently, the Court of Appeal held that the implied term to not act "arbitrarily, capriciously or inequitably in matters of remuneration" was "simply one part of the more general obligation not to destroy the mutual trust and confidence between employer and employee" (Glendale Managed Services v Graham and others  IRLR 465 (EWCA). The term of mutual trust and confidence is implied into every employment contract. A breach of this term will always amount to a material breach of the contract entitling the employee to resign and claim constructive unfair dismissal in the employment tribunal.
This leaves us with the position that, as part of the implied term of mutual trust and confidence, an employer should treat employees fairly and equally in matters of remuneration. There will, of course, be situations where it appears this is not being done but the key is that the reason for this should not be capricious or arbitrary. In Transco plc v O'Brien  ICR 721 all employees, aside from Mr O'Brien, had been offered enhanced redundancy terms. The Court of Appeal held that this amounted to a breach of the mutual term of trust and confidence. Lord Justice Pill stated, "to single out an employee on capricious grounds and refuse to offer him the same terms as are offered to the rest of the workforce is in my judgment a breach of the implied term of trust and confidence".
The reality is that most employees who are of the view that their pay should be increased, would prefer not to go down the route of an Employment Tribunal claim. Employees who believe they have a good case in support of a pay increase may wish to consider having an informal discussion about this with their line manager in the first instance or raising it at their appraisal. If this is not successful, the employee could choose to raise a formal grievance. If the employee is seriously considering resigning and claiming constructive dismissal (and advice should be taken before they do), they would be wise to go through their internal grievance process first to avoid any potential reduction in any compensation awarded by an Employment Tribunal.