Pay transparency yes, but we need more for equal pay

The gender pay gap is stubborn because several factors underpin it. Action is needed on all of them.

After a series of trilogues, shortly before the holiday the European Commission, European Parliament and Council of the EU reached provisional agreement on a directive to strengthen implementation of the principle of equal pay between men and women, through pay-transparency and enforcement mechanisms.

The new legislation was tabled by the commission in March 2021. It addresses longstanding barriers to effective realisation of the right to equal pay—a foundational principle of the European Union since the 1957 Treaty of Rome. The agreement on the new rules has already been approved by member states’ deputy permanent representatives and the consent of the parliament will now be sought.

Persistent gap

The compromise text leaves room for improvement. But if adopted the legislation would without doubt be a win for women workers and for the trade unions and women’s organisations which have been pressing for pay transparency for many years. Still, further measures are needed to close the persistent gender pay gap, which stood at 13 per cent across the EU in 2020.

One of the main barriers to proper application of the principle of equal pay—prohibiting pay discrimination on the basis of sex for equal work or work of equal value, which almost exclusively affects women—is the fact that workers are often not aware of what their colleagues earn. Some may be contractually obliged, via a pay-secrecy clause, not to disclose their pay to others.

The new measures would prohibit such clauses and oblige employers to disclose to job applicants the initial pay or pay range for a position. Employers would have to report on gender pay gaps within the enterprise and across categories of workers doing work of equal value and conduct a joint pay assessment with workers’ representatives where the report reveals a gender pay gap of more than 5 per cent—and remedy the situation.

In the commission proposal, reporting and pay-assessment obligations were limited to employers with more than 250 workers. This would have left out around two-thirds of the workforce and 99 per cent of all employers in the EU. The compromise reached would oblige employers with more than 250 to report on pay gaps annually, and employers with 150 to 249 workers only every three years, starting a year after transposition of the directive into national law; the latter would also apply to employers with 100 to 149 workers, but with a five-year stay.

The period for transposition by member states will be three years, so some medium-sized enterprises would not need to issue their first reports for eight years. Enterprises with under 100 employees will still not be required to report on and address pay gaps. So a large part of the workforce will still not benefit—at least not for a long time—from one of the most important pay-transparency measures.

Encourage bargaining

The directive addresses further difficulties faced by victims in bringing equal-pay claims, such as expensive and lengthy proceedings, short limitation periods or limited access to evidence—all of which can be burdensome for an individual worker. Some of the more ambitious commission proposals have however not been included in the agreement—for example, to ensure that equality bodies and workers’ representatives can represent several workers at once.

Further provisions should contribute to addressing pay discrimination and pay gaps, without the need for workers to bring individual claims. These concern penalties for non-compliant employers, as well as requirements to provide adequate resources to equality bodies and to designate a monitoring body to support the implementation of equal-pay legislation.

The commission’s proposal lacked substantive measures to promote social dialogue and collective bargaining as key tools to address pay discrimination—which, again, do not leave the onus on individual workers to uncover discrimination and take action against their employer. While the compromise text does not depart radically from the original in this respect, there is one positive addition: under article 11, member states will have to take steps to promote the role of social partners and encourage exercise of the right to collective bargaining on measures to tackle pay discrimination.

The language is cautious: ‘encourage’ is not ‘guarantee’. But, together with the requirement on states to promote collective bargaining and produce action plans to increase bargaining coverage where it is under 80 per cent under the minimum-wages directive, this signals growing recognition in EU social legislation of the need to protect and promote the right to collective bargaining. While a moderate step at this stage, it is a precedent which future legislation can build upon.

Long and complex

These are only some features of a quite long and complex piece of legislation. Another positive addition is allowing comparison with how a worker ‘would’ be treated in a comparable situation where no real comparator can be established. This will help workers in underpaid, female-dominated jobs to bring equal-pay claims.

On the other hand, important measures proposed by the parliament to strengthen the directive—such as gender action plans and further obligations to consult or co-operate with social partners—were not included in the agreement struck with the council. It will also be at least three years before workers benefit from the new rules and there is an urgent need to promote equal pay in the wake of the pandemic, with its setbacks for gender equality.

The directive on pay transparency covers only a fraction of the measures essential to tackle the gender pay gap. These include well-paid parental leave and paternity leave of sufficient duration, and addressing gender stereotypes at work and occupational segregation. Adequate and affordable care services and decent pay for care workers are crucial too.