By Emanuela Nespoli, Firm: Toffoletto De Luca Tamajo e Soci
The gender pay gap is an issue common to workplaces across the world, but methods of tackling it vary widely. This article, first published by Bloomberg Law, reports the result of a multijurisdictional survey on gender pay gap reporting obligations conducted by Ius Laboris.
The gender pay gap is one of the most significant issues in the world of work today and can be the result of many issues that may not always derive from deliberate discrimination but may instead be due to a range of different circumstances that disadvantage women in comparison with men. For example, women very often have more difficulty with career progression and with obtaining the corresponding salary increase due to time off taken for maternity leave or as a result of the responsibility they bear in caring for children. It has, therefore, become essential to monitor workplaces continuously for gender pay gap issues, not only for the reasons described above, but also because of an increase in media attention on the topic and an increase in the number of countries introducing gender pay gap reporting legislation or gender pay equality regulations.
Throughout Europe, legislation setting out gender pay gap reporting rules has been introduced or will be introduced. In the Netherlands, a legislative proposal for the Equal Payment (Men and Women) Act is pending approval. The proposal contains a provision pursuant to which larger companies (i.e. those that are required to publish an annual report) will be obliged to report on differences in pay between men and women, with regard to all aspects of remuneration. Furthermore, companies will be required to inform the Works Council on differences in pay between men and women in similar positions at least once a year.
The legislative trend has most recently been confirmed by Ireland, where on April 4th of this year, the government proposed the Gender Pay Gap Information Bill 2019. If implemented, it would require both private and public sector employers with 250 employees or more to report on gender pay gaps. Alongside the information on differences between women and men relating to hourly pay, bonuses, and benefits, the Irish bill proposes requiring employers to publish a statement setting out the reasons for any pay gap reported and the measures, if any, they are taking to eliminate or reduce that gap. In addition, in the past few months Spain and France have introduced new rules imposing reporting obligations on employers.
Ius Laboris conducted a recent multijurisdictional survey on gender pay gap reporting obligations and developed an interactive map that shows the different level of obligations introduced in various countries around the world.
Direct Reporting Obligations
From the analysis carried out, it emerged that direct obligations are in place in most European countries, although significant differences exist.
In some cases, local provisions only concern ‘relevant employers’, that is, companies with a significant headcount. This is the case in the United Kingdom where there has been an obligation to report gender pay differences since 2017 for employers in the private sector with 250 or more employees. In Germany this threshold is even higher: only companies employing over 500 employees are required to prepare a report on the average total number of employees and number of full-time and part-time employees broken down by sex. While in Italy an obligation to report on gender pay differences is provided for employers with more than 100 employees, and in France and Norway the threshold is fixed at 50 employees. Conversely, other European countries apply gender pay gap reporting legislation to all employers, as in the case of Spain and Portugal. The type of information that must be included in the report varies according to the regulations implemented in each country. However, in general terms, all companies must create a record of the average salaries, salary supplements and non-salary amounts paid to their workforce, split by gender and, in some cases, separated by professional category. In fact, as the analysis aims to show the pay difference between men and women, reports usually consider all elements that may be part of an employee’s salary, including benefits such as company cars, housing or travel benefits, or bonus schemes.
It’s interesting to highlight that specific instructions are provided for in the French Freedom to Choose a Professional Future Law of September 2018, which requires organisations to measure gender pay gaps according to a scale from zero to 40 points, based on a pay gap percentage calculated on the average remuneration of men and women within the same age group and job categories. The law also imposes an obligation on companies to measure four other indicators:
- the individual salary increase rate gap between women and men;
- the promotion rate gap between women and men;
- the percentage of women benefiting from a salary increase in the year following their return from maternity leave;
- the number of employees of the under-represented sex among the 10 highest paid employees.
Generally, all of the above-mentioned data must be collected during a specified time frame. Most of the legislation requires the report to be prepared annually, such as in Croatia, Denmark, France, Norway, Portugal and Sweden. While in Italy and Belgium, for instance, companies are required to collect gender pay gap figures for two-year periods. The time frame in Germany is longer: five years for employers subject to collective bargaining agreements and three years for all other employers.
Unions, are often involved in the process. In some countries gender pay gap reporting regulations provide for employee representatives to be addressees of the information, including Belgium, Spain and Italy. In France, work councils must be provided with any information that is necessary for their understanding of the methodology applied to the report. In other countries, unions have to be involved in the process of drafting the report itself, such as in Norway where there is an obligation to consult and cooperate with employee representatives, and in Denmark where employers must ensure that the works council and employees are given the report and are given the opportunity to discuss it.
Further, employers may not only be required to report but also publish the results of the data collected, for example on the organisation’s website (France and UK) or in the annual report (Norway) and, in some cases, even in specific national legal publications (such as the Federal Law Gazette in Germany). Conversely, in Denmark, for example, the report is only shared internally with employees, while in Italy, Croatia and Portugal it has to be shared with the competent public authorities.
It’s not only European countries that have introduced obligations to report on gender pay differences. Among the countries involved in the Ius Laboris survey, Colombia introduced an obligation in 2011, requiring organisations to determine salaries on the basis of work value, and to keep records of profiles and salaries per position. The records of these figures must be organised by sex, duties, and contract type. The law does not impose any specific timeframe within which the above data must be collected, however the data must be kept up to date and available in case of an audit of the Colombian Ministry of Labour.
In the US, employers with 100 or more employees and government contractors with 50 or more employees are required to file an annual EEO-1 report with the Equal Employment Opportunity Commission, which discloses data regarding race and gender of employees by job classification.
Recently, in March 2019, a U.S. District Court ruling expanded employers’ EEO-1 reporting requirements and obliged them to also report race and gender data broken down by 12 different pay bands and hours worked. The Department of Justice has appealed this ruling, but the filing of the appeal does not stay the reporting obligations and the EEOC is expected to begin collecting wage and hour data in mid-July.
No or Indirect Reporting Obligations
Conversely, other countries, both in Europe and beyond, provide for a general principle of equal pay but without requiring a direct and specific report. In Mexico, for example, the Federal Labor Law provides (as a general rule, not specifically linked to any discrimination grounds) that equal work performed under the same conditions (in terms of position, schedule, and efficiency), must receive equal pay. However there is no statute providing for an obligation to report on gender pay gaps.
Further examples include Russia, where under the Russian Labor Code, all employers are required to provide employees with equal pay for work of equal value, under a general principle that is not specifically linked to discriminatory grounds. In Japan, the Labor Standards Act stipulates equality of pay between genders and the Act on the Promotion of Women's Participation and Advancement in the Workplace 2016 requires employers with over 300 regularly employed workers to establish a General Employers Action Plan aimed at implementing measures for the promotion of women's participation and advancement in the workplace. This is an indication of how gender pay gap is just one criterion for understanding and analysing circumstances in the workplace for women.
In some cases, there is no specific obligation to report on gender pay gaps, but companies are required to collect data on employees’ salary and income. In Austria, there is an obligation for employers of more than 150 people to prepare an internal income report every other year that reports on the average income of all employees in the organisation in various employment groups, and by years of service. The employer must provide this report to the works council or, in organisations without a works council the report must be kept in a room accessible to employees. On the basis of the report, the organisation or works council (if there is one) can check how comparable jobs are paid.
Hungarian employers have to report employee salary details (including gender) to the Central Statistical Office on a regular basis. The report does not specifically focus on gender pay differences, but the authority may reach such a conclusion from the data. In Luxembourg, as part of a general obligation to inform and consult the staff delegation on the workforce situation in the organisation, employers must also provide the staff delegation and the equality delegate with sex disaggregated statistics on employees’ remuneration every six months.
Legislation on gender pay gap reporting obligations and equal pay for women and men may sometimes requires companies to take positive action to eliminate existing discrimination. In Spain, for example, organisations with more than 250 employees, or those which are obliged by the applicable collective bargaining agreement, are required to draft an Equality Plan, which is a set of measures adopted after identification of a problematic situation. The Equality Plan aims to achieve equal treatment and opportunities between women and men in the organisation and to eliminate discrimination on the grounds of gender. In Portugal and in Italy, should discrimination be found, the competent public authority that is the recipient of the report can ask the employer to implement a plan to reduce the gender pay gap. France’s new rules provide that organisations in which labor union representatives have been appointed must negotiate on gender equality and quality of life at work. If an agreement is not reached with the labor unions, the organisation must draw up and implement an action plan that sets out specific actions and progress targets measured by indicators on defined topics (such as hiring, promotion, training, working conditions, remuneration, and work-life balance).
Penalties and Claims
Failing to comply with the obligations described above can lead to sanctions. In most cases, employers will have to deal with administrative fines, but in some countries legislation also provides for criminal fines for noncompliance with reporting when it is mandatory, such as in Belgium (EUR 400 to EUR 4,000 per person involved) and in Croatia (approximately EUR 270 to EUR 1,350).
In addition, employees may be entitled to file a claim before the competent authorities with the aim of obtaining compensation for discrimination. Generally, the results of the report do not give employees direct grounds for filing a claim but they may be used as key evidence to prove that discrimination took place; this is the case in Italy, for example. In Spain, when the data collected in the record shows a difference of 25% or more in total payroll costs or in the average amounts paid to men and women, the salary record must state that this difference is not due to reasons relating to gender. If such a statement is not included in the gender report, it could give the employee grounds for a claim. In Portugal, employee’ representatives, are entitled, at any time, and regardless of the gender pay differences report, to request a binding opinion on the existence of gender pay gap discrimination from the local competent authority of equal opportunities for men and women (CITE).
Issues relating to gender pay gaps are expected to become more widespread, potentially becoming a real issue for employers in terms of possible claims arising from individual employees, unions, or even possible class actions. Therefore, it is crucial that all employers conduct audits to check their compliance with any existing regulation mandating equal pay and reporting gender pay differences, take action where necessary to disclose reasons for the differences, and introduce measures to reduce the organisation’s gender pay gap.