March 30th will be remembered as a crucial day for Gender Equality in Europe. Indeed, on this day, the European Parliament voted in favor of the Directive on Pay Transparency, proposed by the Commission more than two years ago: on March 4th, 2021, as to ensure that women and men in the EU get equal pay for equal work or work of equal value. The right to equal pay between women and men for equal work or work of equal value has been a founding principle of the European Union since the Treaty of Rome in 1957. The requirement to ensure equal pay is set out in Article 157 TFEU.
The European Commission adopted a recommendation on strengthening the principle of equal pay between men and women through transparency in March 2014. Despite this, the effective implementation and enforcement of this principle in practice remain a major challenge in the EU Member States. The European Parliament and the Council have repeatedly called for action in this area. In June 2019, the Council called on the Commission to develop concrete measures to increase pay transparency; finally, from March 30th, equal pay for equal work will be a reality for EU citizens.
Let’s investigate the gender pay gap phenomenon and what the EU Directive proposes.
GENDER PAY GAP
The gender pay gap is the difference between the average gross hourly earnings of working men and women.
The gender pay gap in the EU stands at 12.7 % in 2021 and has only changed minimally over the last decade. It means that women earn 13.0 % on average less per hour than men.
The gender overall earnings gap - which measures the combined impact of the average hourly earnings, the monthly average of the number of hours paid (before any adjustment for part-time work), and the employment rate -, stood at 36.7% in 2018.
The gender employment gap stood at 10.8% in 2021, with 67.7 % of women across the EU being employed compared to 78.5% of men (EU27 data).
BUT WHY? WHY DO WOMEN EARN LESS?
Indeed, the gender pay gap measures a broader concept than pay discrimination, it comprehends a large number of inequalities women face in work’s access, progression and rewards.
Namely: sectoral segregation, the unequal share of paid and unpaid work in the family context, the glass ceiling, and of course, pay discrimination. Some of the aforementioned inequalities were more broadly discussed in a previous blog post: Why are there so few women in leadership and managing positions?
The largest part of the gender pay gap remains unexplained in the EU and cannot be linked to worker or workplace characteristics such as education, occupation, working time, or economic activity the person works for.
There are considerable differences between EU countries. The gender pay gap ranges from less than 5% in Luxembourg, Romania, Slovenia, Italy, and Poland to more than 18% in Germany, Austria, Estonia, and Latvia. In most countries, the gender pay gap has decreased over the last ten years but was not been completely solved as an issue.
However, a lower gender pay gap in certain countries does not necessarily mean that the labor market in that country is more gender equal. A lower gender pay gap can occur in countries with a lower employment rate of women, where mostly women with higher earning potential (e.g. better educated) enter the labor market.
More transparency in pay will help uncover unjustified gender-based pay differences for equal work or work of equal value and help victims of pay discrimination to seek redress and enforce their equal pay rights.
EU Directive on Pay Transparency
The new Directive aims to ensure the effective enforcement of equal pay for men and women; bring more transparency in setting of pay; and improve access to justice for those who suffered of pay discrimination. Before the voting procedure in the EP, from the Commission’s President Ursula von der Leyen states: “We work for Europe to remain a trailblazer in women’s rights. Equal work deserves equal pay. And for equal pay, you need transparency. Women must know whether their employers treat them fairly. And when this is not the case, they must have the power to fight back and get what they deserve.” Indeed, the initiative was an important element of the political guidelines of President von der Leyen from the very beginning of her mandate as she announced binding pay transparency measures as one of her political priorities for the Commission.
Vice-President for Values and Transparency, Věra Jourová said: “Women must know whether their employers treat and value them equally. For this to happen, we need more transparency on pay levels, starting already at job interviews. The new pay transparency rules will be a game changer for women in Europe.”
Finally, Commissioner for Equality Helena Dalli affirmed: “With the new rules in place, employers will have to explain the pay level for a new job right from the beginning. It cannot depend on the pay history of an applicant. Those that were discriminated should get their money back. It is a step towards a Europe, where women in all their diversity can thrive equally.”
Among its key elements, the Directive includes:
Pay transparency for job-seekers – Employers will have to disclose information about the initial pay level or its range in the job vacancy notice or before the job interview. Employers will not be allowed to ask prospective workers about their pay history.
Right to information for employees – Employees will have the right to request information from their employer on their individual pay level and on the average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value. This right will exist for all employees, irrespective of the size of the company.
Reporting on gender pay gap – Employers with at least 100 employees will have to publish information on the pay gap between female and male workers. In the first stage, employers with at least 250 employees will report every year and employers with between 150 and 249 employees will report every three years. As of five years after the transposition of the Directive, employers with between 100 and 149 employees will also have to report every three years.
Joint pay assessment – Where pay reporting reveals a gender pay gap of at least 5% and when the employer cannot justify the gap on basis of objective gender-neutral factors, employers will have to carry out a paid assessment, in cooperation with workers' representatives.
Compensation for workers – workers who have suffered gender pay discrimination can receive compensation, including full recovery of back pay and related bonuses or payments in kind.
The burden of proof on the employer – where the employer did not fulfill its transparency obligations, it will be for the employer, not the worker, to prove that there was no discrimination in relation to pay.
Sanctions will include fines – Member States should establish specific penalties for infringements of the equal pay rule, including fines.
Equality bodies and workers' representatives may act in legal or administrative proceedings on behalf of workers.
During the European Parliament’s plenary, 427 MEPs voted in favor of the directive, with 79 votes against it and 76 abstentions.
The political agreement reached by the European Parliament and the Council is now subject to formal approval by the co-legislators. Once agreed upon, the Directive will enter into force 20 days after publication in the Official Journal and the Member States will then need to transpose the new elements of the Directive into national law within three years.
What do you think about the new EU Directive?
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