Moving towards stronger gender pay legislation

Change on the horizon

Pay inequity with regard to gender has long been a pervasive issue in the workplace. While the fight for equal pay for equal work has persisted for decades, progress has been slow. However, recent developments, such as the European Parliament’s adoption of the EU Directive on Pay Transparency at the end of March 2023, indicate that change may be on the horizon.

As legislation and companies globally shift towards greater pay transparency, it is more important than ever to have a comprehensive overview of gender pay gap legislation worldwide. We are happy to announce the third major update to our Global Gender Pay Compass, which now covers 89 territories across the world. In this article, we explore the impact of the EU Directive and reflect on the broader global trend toward stronger gender pay legislation.

EU Pay Transparency Directive

On 30 March2023, the European Parliament approved the European Commission's legislative proposal to introduce pay transparency requirements and enforcement mechanisms to reinforce the implementation of equal pay for equal work or work of similar value between men and women. Companies that are located in an EU member state with at least 100 employees will need to comply.

Although gender-based pay discrimination is already prohibited, it has persisted due to insufficient implementation, in part because of the lack of transparency in pay structures. The resulting EU Directive on Pay Transparency could play a crucial role in addressing this issue.

Here are some of the most important consequences for employers as well as employees:

Gender pay gap reporting

Companies with over 100 workers must report pay gap information, and those with a pay gap of 5% or more must conduct joint pay assessments in cooperation with workers’ representatives. The timeline for reporting depends on the size of the company: employers with over 150 workers will need to do so within one year after the date of implementation, whereas those with 100-149 employees will need to do so within five years after the date of implementation.

Recruitment

Employers must provide pay information prior to employment and are prohibited from asking candidates about their pay history to avoid inheriting gender pay gaps.

Approach and philosophy to pay

Employers must provide transparency regarding pay levels, career progression, and workers' right to pay information.

Average pay levels

Workers will have the right to request information on the average pay level of workers doing similar work to them, broken down by gender. This must be provided within two months of request.

Remedies and enforcement

The Pay Transparency Directive provides remedies and enforcement mechanisms, such as compensation, shift of burden of proof, protection against victimisation, and penalties for non-compliance.

Strengthening the Swiss Equality Act

Switzerland is one country that has reinforced its constitutional right to gender equality in terms of equal pay for equal work. New amendments to strengthen the existing Swiss Equality Act require companies with over 100 employees to publish a gender pay gap analysis audited by a qualified specialist and communicate the results to employees. This came into force in July 2020.

Regulations around the world – Global Gender Pay Compass

This trend is not limited to European Economic Area; several countries around the world have introduced or strengthened regulations around gender pay equity over the past three years.

For instance, Israel, Japan, and Moldova require companies to analyse and report their gender pay gap on a regular basis. The legislation in Israel and Japan apply to companies of a certain size, at least 100 employees and at least 300 employees, respectively. In Israel and Moldova, employers with a gap of 5% or greater must take action to either further assess the situation or make remediations. The Philippines, on the other hand, has introduced sanctions in the form of a fine or imprisonment if companies fail to comply with the law prohibiting gender discrimination in salary, development opportunities, and termination decisions. In the US, states, including California, New York, and Colorado, are increasingly moving towards pay transparency laws that require employers to disclose salary ranges either directly on job advertisements or upon the request of applicants. Many states have also passed legislation in the past five years prohibiting asking for or relying on applicants’ salary history when determining pay.

As the world moves towards stronger gender pay legislation, companies need to take appropriate action to ensure they are compliant. The Global Gender Pay Compass is a valuable tool for companies to keep updated on legislative developments worldwide.

Implications for companies

The EU Pay Transparency Directive will impact all employers active in the EU and there are implications throughout the employee lifecycle. Companies should follow several steps, including defining scope and related risks, conducting gender pay gap analyses, evaluating pay systems and policies, and implementing policy, system, and behavioural improvements to prevent future pay gaps. Regular re-runs of gender pay gap analyses should be performed to track progress and ensure compliance.

Our approach to the EU Pay Transparency Act

Questions companies should ask themselves:

Do you currently monitor and understand your pay equity risks across the world?
Do you have a grading structure that will allow you to report by category of worker?
Do you have and are you ready to share pay ranges and approaches?
Are your systems and data able to report in line with the requirements?

Looking forward

The trend towards stronger gender pay legislation is gaining momentum globally.
Companies must be proactive in ensuring they are compliant with the relevant legislation in their jurisdictions.
The Global Gender Pay Compass is an excellent resource to keep companies informed of legislative developments worldwide.
By taking appropriate action, companies can promote gender pay equity and strengthen their ESG credentials.

EQUAL-SALARY certification

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