The principle of equal pay was enshrined in the 1957 Treaty of Rome which founded the then European Economic Community, now European Union (‘EU’). It was bolstered by Directives introduced in the 1970s and more recently. However, 60 years later, a gender pay gap continues to exist across all EU countries.
Various national and EU measures are being directed at closing this gap. In particular, the UK is introducing mandatory gender pay gap reporting by private and voluntary sector employers employing 250 or more employees (read our briefing for further information). This new duty has had a mixed reception; some employers are concerned that it will do little to advance equality in practice and it may even be counterproductive (where raw statistics can mislead without a contextual explanation) while also adding to bureaucracy.
However, the UK is not alone is demanding greater pay transparency from employers; other member states have also taken action in this area. In this briefing, we consider the EU gender pay gap and related gender pay duties in some other EU states.
What is the EU gender pay gap?
According to official EU statistics, women's gross hourly earnings are on average 16.4% below those of men across the EU states and this figure varies by 26.7 percentage points, ranging from 3.2% in Slovenia to 29.9% in Estonia.
After Estonia, the countries with the largest gender pay gaps are Austria, Czech Republic, Germany, Slovakia and the UK, in that order. The smallest gaps are in Slovenia, Malta, Poland and Italy.
When the EU gender pay gap is interrogated further, the statistics show that it is generally:
- lower for younger employees and tends to widen with age;
- higher for part-time workers;
- higher in the private sector than in the public sector.
Pay transparency measures in the EU
According to the EU’s Gender Equality Directive 2006, member states should encourage employers to provide regular gender pay information to employees/their representatives which may include: “an overview of the proportions of men and women at different levels of the organisation; their pay and pay differentials; and possible measures to improve the situation in cooperation with employees' representatives.” Pay transparency measures are also a preferred tool of the current EU Commission to tackle the gender pay gap.
Several member states encourage employers, usually larger organisations, to regularly assess pay practices and pay differences and draw up an action plan for equal pay, for example, Belgium, France, Finland and Sweden. A failure to comply may be subject to financial sanctions, as in France. Some states, including Finland and Sweden, also require employers to conduct gender pay surveys, while others, such as Denmark, require employers to gather employment-related statistical data based on gender. In some member states, employers must periodically provide employees’ representatives with a gender equality report which includes pay; this is the case in, for example, Austria, France, Denmark. We consider some of these in more detail below:
Alarmed at its gender pay gap (23.7% in 2011), over the last four years Austria has phased in a duty which now applies to all companies with more than 150 employees and requires the preparation of an annual gender pay report setting out the number of men and women in different pay groups together with average pay, adjusted for working time, by gender in those groups. The report must be provided to the central works council which may decide to inform employees. There is no official information available on the impact of this measure in practice. However, reports from works councils and the Ombudsman for Equal Treatment suggest little has changed in that few employers are complying and many works councils are ignorant of the new duty (the latest pay gap is 23%). There are currently no fines applying for non-compliance.
Since 2007, Denmark has required companies to conduct a gender audit to compare salaries of women and men and publish annual statistics. Those statistics must then be the subject of discussion between management and employees. This duty was recently extended to all companies with 10 or more employees, where at least three are men and three are women. A failure to comply is subject to a fine and may result in criminal action. However, according to the Danish Ministry of Employment and the Confederation of Danish Employers there are, as yet, no known cases of fines for non-compliance. The pay gap remains 16.4%, having closed by 1.3% since 2007.
Companies with more than 50 employees are required to negotiate a collective agreement with measures aimed at closing the gender pay gap, or, draw up an annual gender pay action plan based on an analysis of inequality in their workplaces (such analysis to include gender pay and career development gaps by age, qualifications and seniority). Those companies failing to comply risk a financial penalty of up to 1% of the total remuneration paid in the periods during which no collective agreement or action plan was implemented and several companies have recently been the subject of enforcement action. However, the pay gap has remained between 15% and 16% for ten years.
Since 2009, employers in both the public and private sectors have been required to carry out, but not publish, a pay survey every three years in order to detect, remedy and prevent unjustifiable gender pay differences. Where there are such pay differences, employers are required to address them within three years. There is also a requirement for employers with 25 employees or more to prepare an action plan for equal pay, containing a cost computation and a timetable for the pay adjustments. Sweden’s Equality Ombudsman is responsible for supervising employer compliance and a financial penalty for non-compliance applies, the amount being set on a case by case assessment.
The Ombudsman reports that pay surveys have resulted in pay adjustments both for individuals and for groups in female-dominated occupations. Our experience is that larger companies are tending to comply, some as a result of pressure from the Ombudsman, and there have been no reports of significant cases involving non-compliance. The gender pay gap has reduced by 0.5% over the last four years.
The impending UK duty for mandatory gender pay gap reporting is not new when compared to existing and comparable measures in other EU states. However, questions are being raised about its effectiveness in practice when balanced against the additional costs to be incurred by companies. None of the countries outlined above has experienced a step-change improvement in gender pay equality associated with pay transparency measures.
This is, in part, because the gender pay gap has complex reasons and there is no ‘magic bullet’ solution – be it more pay transparency or otherwise. There is a concern that focusing on gender pay disclosure by companies, particularly if made public and accompanied by unbalanced media reporting, may divert attention away from the continuing need for a multi-pronged approach involving the state, employers, schools, families and other key players.