The European Union (EU) has long had pay equity laws since its founding by the Treaty of Rome in 1957. A 2006 Directive (Directive 2006/54/EC) on equal treatment of women and men in matters of employment and occupation requires employers to ensure equal pay for equal work or work of equal value between women and men. It was complemented in 2014 by a European Commission Recommendation on pay transparency. As of March 2021, according to the latest Eurostat findings, the gender pay gap in the EU remains at 14.1%.
The Commission has proposed a new directive on pay transparency. If adopted, it would impose an array of new obligations on employers with 250 or more employees, including:
- Requiring public reporting of the gender pay gap,
- Mandating internal reporting on pay differences among female and male workers in the same category,
- Creating the right for employees to request pay information concerning other workers performing work of similar value,
- Prohibiting employers from asking about pay history,
- Requiring employers to disclose salary ranges to job applicants, even prior to an interview,
- Completely shifting the burden of proof to employers. Specifically, according to the same press release, the proposed directive “sets out that in case of gender pay discrimination where the employer did not comply with its pay transparency obligations, the worker will not even have to bring evidence of discrimination. It will be up to the employer to prove that there is no discrimination,” and
- Compelling a pay equity audit (called a “joint pay assessment”) in cases where the gender gap in the same category of workers is more than 5% and not justifiable based on objective, gender-neutral factors.
The equal pay audit is expected to be comprehensive. The directive specifies that they must include the following:
- An analysis of the proportion of female and male workers in each category of workers
- Detailed information on average female and male workers’ pay levels
- Identification of any differences in pay levels between female and male workers in each category of workers
- The gender-neutral justifications for pay differences between female and male workers performing the same work/work of equal value
- Measures to address the gender pay gap if pay differences are not justified based on objective, gender-neutral criteria
- A report on the effectiveness of any measures taken as a result of previous pay equity audits
The Commission stated that lack of pay transparency is one of the key obstacles to enforcing pay equity. The Commission explains that the lack of pay transparency stops workers from knowing how their pay, on average, compares to that of their colleagues of the other sex doing equal work or work of equal value. This lack of knowledge, the Commission believes, puts them in a position on whether they are remunerated in accordance with the right to equal pay. Further, the Commission asserts that by failing to have transparency, employers do not have the checks and balances to review their compensation systems to find disparities and the practices that cause it.
Currently, the European Commission is soliciting feedback on the proposed directive. The law firm Baker McKenzie estimates that this proposal, if adopted, would be implemented sometime in 2024.
These requirements are sounding much like the changes in Canada for pay equity reporting as well as the burgeoning requirements by the various U.S. states starting with California, Colorado, and Illinois. If you have operations in Europe, it would be a good proactive step to conduct pay disparity analysis, not just of workers in the country employed but across the region. Yes, it is complicated, but if this proposal is adopted, the cost could be greater if found noncompliant.
Additional ASE Resources
Compensation Consulting - When effectively planned and executed, a comprehensive compensation program can provide a clear understanding of how pay is administered within the organization and what are proper and improper pay practices. ASE can help you design a compensation program that ensures pay discrimination and internal inequity are avoided. ASE can also help you evaluate your current compensation to highlight potential pay disparities. For more information, contact Kevin Marrs.
Source: Trusaic 6/9/21, European Commission March 21, 2021