EU directive for wage transparency: Brussels intends to enforce equal pay for women.

 Employers will be required to disclose gender pay gap information.

EU directive for wage transparency: Brussels intends to enforce equal pay for women.

The Czech EU Presidency and the European Parliament reached a provisional agreement in mid-December regarding regulations to eliminate the gender pay gap. Accordingly, women receiving lower pay shall be entitled to compensation for damages.

The gender pay gap: 18 percent in Germany, 13 percent in the EU

The current figures from the Federal Statistical Office indicate that the gender pay gap, namely the income difference between men and women, is 18 percent in Germany and women earn 13 percent less on average throughout the EU. This is due to a number of reasons: the employment biographies of women and men often differ due to maternity leave, for example. In addition, many women work in lower-paying professions such as care or education. As another reason Brussels points out the “glass ceiling” that prevents women from accessing top positions. In some cases, women are also discriminated against, in that they earn less than their male counterparts for the same or equivalent work. The EU sees a need for action beyond just equal rights, as the gender pay gap also has a long-term impact on women’s risk of poverty. The gender pension gap is approximately 30 percent. To counteract this, the EU is tackling several aspects which will have far-reaching consequences for employers:

  1. Greater pay transparency – also for candidates
    In the future, companies will have to ensure that their employees are given easy access to the objective and gender-neutral criteria which the company uses to determine both pay and also possible pay raises. The EU also intends to stipulate a right to information regarding the average pay for colleagues with the same or equivalent jobs, broken down by gender. Both employees and employee representatives will be entitled to exercise this right. Changes also lie ahead for recruiting: Employers will also be required to inform candidates of the initial pay or pay range.
  2. Enforcement mechanisms
    Companies with more than 100 employees will have to provide information regarding the gender pay gap not only for employees, staff and the works council. The responsible authorities in the member states must also be informed – either annually or every three years, depending on the size of the company.
    If the gender pay gap exceeds five percent and the company cannot justify this difference on the basis of objective and gender-neutral criteria, employers will be required to carry out a pay analysis in cooperation with the works council and develop measures to rectify the pay gap.
  3. Sanctions in the event of violations
    The EU directive proposal will also require member states to define sanctions such as fines if companies violate regulations governing the implementation of the pay transparency directive.
  4. Claims for damages and rights of action
    If companies fail to fulfill these obligations, Brussels plans to provide employees with the right to claim compensation. Courts may instruct an employer to cease the violation and implement measures to rectify the situation. Associations such as equality bodies or employee representatives will be authorized to enforce the principle of equal pay for equal work on behalf of individual or multiple employees.

The EU directive exceeds the scope of national regulations

Today, the General Act on Equal Treatment already governs the protection against discrimination in labor law. In addition, the Act to Promote Transparency in Wage Structures came into force in 2017. The plans for the EU directive now go even further: For example, the Act to Promote Transparency in Wage Structures states that a right to information only exists in companies with more than 200 employees.

The preliminary agreement reached by the negotiators still needs to be officially ratified by the EU Council of Ministers and the European Parliament. HR managers need to monitor the further proceedings. Implementing the new requirements enables HR managers to kill several birds with one stone: The Corporate Sustainability Reporting Directive passed by the EU Parliament in November expands the reporting obligations for companies to include equal opportunity and equal rights issues. We have already examined this in greater detail in the blog. In addition, the EU taxonomy for sustainable financial investments focuses on social criteria. Last but not least, in times shaped by a shortage of skilled workers, employers stand to benefit by providing transparency regarding wages and salaries as a means of overcoming a gender pay gap.