New Swiss equal pay law – how does it fit into today’s global landscape of gender pay legislation?

Alexander Skumiewski Manager, People & Organisation, PwC Switzerland 18 Jun 2020

We are proud to announce the second major update to our Global Gender Pay Compass. Since it was first published in 2018, the Compass has grown to include 89 territories worldwide. As Swiss businesses prepare for the new equal pay law, we reflect on the place of this new law in the global trend towards stronger gender pay legislation.

How has the global landscape actually changed since 2018? Iceland’s strong new gender pay regulation came into force in January 2018 and was closely followed by Germany’s new Pay Transparency Act in February and the United Kingdom’s Gender Pay Gap Reporting requirements in April of the same year. Back in early 2018, it seemed these could be just the first in a wave of new regulations requiring employers to take proactive steps towards reducing the gender pay gap.

Following a debate that took more than a decade, Switzerland decided to reinforce the constitutional right to gender equality when it comes to equal pay for equal work. In an effort to strengthen the existing Swiss Equality Act, the new amendments coming into force in July 2020 require companies to publish a gender pay gap analysis audited by a qualified specialist and to communicate the results to employees.

Switzerland is not alone in making changes to their gender pay law recently. As of May 2020, three other European countries have passed major new legislation relating to gender pay equality, namely Portugal, France and Spain. The People’s Republic of China and Japan have also taken policy steps towards improving gender equality. In addition, at least six territories are currently considering proposed legislation that would aim to advance gender pay equality.

Countries with developments in gender pay equality legislation since mid-2018
What trends are emerging in gender pay legislation?

Including the four countries with new legislation, we now count thirteen countries - compared to six prior to 2018 - with legislation that requires employers to take proactive steps towards reducing the gender pay gap.

The common thread across all thirteen is that a reporting obligation of some kind is in place, though the reported information is not always made public. Three countries – Iceland, Sweden and Switzerland – can be said to require an "external audit" of gender pay equality. Where Switzerland differs from the majority of these thirteen countries is that Swiss companies will not face financial sanctions for non-compliance. However, Swiss public procurement law requires companies bidding for tenders to comply with equal pay requirements (FAPP Art 8, para 1, c). Therefore, companies with an excessive gender pay gap may still encounter financial consequences as a result of non-compliance. 

In addition, a number of territories have legislation in place that prohibits gender pay discrimination but places the burden of identifying non-compliance on employee representative bodies or on individual employees. This is broadly true for Austria, Belgium, Cyprus and Luxembourg, for example.

What should we know about the new legislation since 2018?

An interesting trend so far is that there does not seem to be one dominant model of “best-practice” gender pay legislation. Each country’s legislation contains its own idiosyncrasies, as can be seen if we look at each new law in more detail:

  • Switzerland - As of July 2020, companies with 100+ employees are obligated to publish a gender pay gap analysis audited by a qualified specialist and communicate the results of the analysis to employees and shareholders. If the analysis reveals any unexplainable gender pay gaps, the employer must repeat the analysis, but only every 4 years. 
  • Portugal - New legislation to address the gender pay gap took effect in February 2019. Employers with 250+ employees must implement a detailed annual assessment on their gender pay gap, providing evidence that salary differences are justified. The results are submitted for review by the Labour Inspectorate which may require further interventions to reduce gaps. Employers with 50+ employees will be covered from 2022. 
  • France - New legislation took effect in March 2019. Companies with 50+ employees must publish their global score against a ‘gender equality index’ out of a total of 100 points on their website. The index criteria are:
    1. Average earning of women and men in the company
    2. Percentage of women and men with pay increases in the year
    3. Promotion of women and men in the year
    4. Adjustment of pay for women returning from maternity leave
    5. Gender balance among the ten highest paid employees
  • Spain - As of March 2020, companies with 150+ employees must prepare and publish an Equality Plan. Employers must keep a register with average pay levels and measure the gender wage gap. If the average pay of one sex is more than 25% higher than the other, the employer must include a justification that this is objectively fair. Employers with 50+ employees will be covered from 2022.
  • China - In February 2019, China’s Ministry of Human Resources and Social Security published the Circular on Further Regulating Recruitment Activities to Promote Equal Employment for Women. This policy document is designed to prohibit and introduce sanctions for gender-discriminatory hiring practices. 
  • Japan - To address gender inequalities due to differences in treatment between regular and non-regular employees, a new law on "equal pay for equal work" for regular and non-regular employees came into effect in April 2020. This new law rejects any unreasonable differences in the remuneration of full-time employees compared to fixed-term/temporary employees working for the same company.
  • Mauritius - The Worker's Rights Act 2019 places a new statutory obligation on employers to ensure equal remuneration for equal work regardless of gender, including between employees and job contractors carrying out work of equal value. It also provides a list of criteria to determine whether discrimination exists, which applies also to gender discrimination.
What legislation could be coming up in the near future?

In terms of possible developments in Switzerland, we are yet to see what effect the new measures will have. We do know, however, that the new requirements of the amended Equality Act only apply to companies with at least 100 employees. While this covers 46% of the Swiss workforce, only around 1% of all Swiss employers are affected. As it was the Federal Council’s initial intention to include companies with at least 50 employees in scope, it is possible that the threshold for applicability could yet be lowered in the future.

Looking beyond the Swiss borders, it is worth noting that the President of the European Commission has committed to table a project to introduce binding pay transparency measures for EU member states. These measures will be intended to help EU countries implement the equal pay principle more effectively by improving workers’ access to information on pay levels. The project is under public consultation until 28 May 2020.

However, the impact of COVID-19 introduces additional uncertainty to any predictions about future legislation. The annual Gender Pay Gap reporting requirement in the United Kingdom has already been postponed due to the pandemic, for example. It is also becoming increasingly clear that the economic impact of COVID-19 is gendered. According to UN figures, the volume of women’s unpaid work (which was already unequally distributed before the health crisis) is set to increase. Social distancing measures resulting in school closures and increased domestic chores mean that women take on disproportionately more household responsibilities.

Failure to rewrite the “couples’ contract” may lead to some women having no other choice than to leave the labour market or opt for part-time work, which given the economic implications of this crisis can be a huge financial setback. As the consequences of the virus bring to light some of the gender biases and gaps that we thought we had closed, it remains to be seen what COVID-19 might reveal about the perceived urgency of progress towards gender pay equality.

That being said, it is worth keeping track of the potential legislation being considered in these three countries:

  • Canada - The Pay Transparency Act was scheduled to come into force in the province of Ontario in 2019. However, its enactment was indefinitely delayed due to further public consultation. The Act would require employers of a certain size to track and report compensation gaps based on gender and other prescribed characteristics on an annual basis, and provide a pay transparency report to the Government and for online publication.
  • Netherlands - In March 2019, an equal salary bill "Act on Equal Pay of Women and Men" was submitted. The proposed bill would require companies with 50+ employees to obtain a certificate proving that there is equal pay between men and women for equal work and to provide figures on the salary of employees every three years.
  • Republic of Ireland - In 2019, the government published The Gender Pay Gap Information Bill 2019. If enacted, employers will be required to publish information relating to the mean and median pay of their employees by gender on a central website. Designated officers may be appointed to ensure that the gender pay gap information published by employers is accurate.
Looking beyond equal pay

Although the wave of emerging legislation has maintained “equal pay for equal work” as something of a hot topic, it is important to remember that the gender pay gap is affected by another component: gender inequalities in opportunities to develop your career and access better-paying jobs. For this reason, this summer we will implement a new Global Parental Leave Compass to investigate how becoming a parent may affect women’s and men’s careers around the world. We are also looking forward to releasing a follow-up article where we present the global leaders in gender-sensitive parental leave – and what the others can learn from them.

Summary
  • Although the wave of emerging legislation has maintained “equal pay for equal work”, one must keep in mind that gender pay gap is also affected by gender inequalities in opportunities to develop your career and access better-paying jobs.
  • The impact of COVID-19 introduces additional uncertainty to any predictions about future legislation. It is also becoming increasingly clear that the economic impact of COVID-19 is gendered. According to UN figures, the volume of women’s unpaid work is set to increase.

Contact us

Jasmin Danzeisen

Jasmin Danzeisen

Senior Manager, People and Organisation, PwC Switzerland

Tel: +41 58 792 98 27

Johannes (Joop) Smits

Johannes (Joop) Smits

Partner, People and Organisation, PwC Switzerland

Tel: +41 58 792 91 64

Alexander Skumiewski

Alexander Skumiewski

Manager, People & Organisation, PwC Switzerland

Tel: 058 792 92 94