EU: Companies will have to disclose how they pay employees to make pay gaps visible
4 min read
Women in the European Union (EU) still earn lower wages compared to men. This disparity exists not only because women often occupy lower-paying positions but also because, within the same sector and performing the same work, women earn less on average than their male counterparts. In many cases, women are unaware of the extent to which they are underpaid due to the lack of transparency regarding wages. However, a new development is set to address this issue. The EU Pay Transparency Directive now mandates that companies must reveal their employee compensation practices. This directive aims to expose and prevent any potential gender pay gap.
On 30 March, the EU Parliament approved new guidelines to address the issue of wage disparities between genders. The rules require companies in the EU to provide clear information about salaries. Going forward, all salaries paid by a company must be made public. This will enable employees to compare their wages and identify any discrepancies.
In the EU, women still earn on average 13 per cent less per hour than men. However, the gender pay gap varies greatly from country to country: while it is less than 4 per cent in Slovenia, Romania and Luxembourg, the pay gap is highest in Estonia and Latvia, at around 22 per cent. Austria and Germany are right behind with 18.9 and 18.1 percent respectively.
The primary reasons for the gender pay gap are primarily rooted in structural factors.
The gender pay gap is primarily caused by structural factors. In the EU, women are more frequently employed part-time and are less likely to hold managerial positions. Additionally, they often perform unpaid care work. Occupations that are predominantly female, like nursing, tend to have lower salaries. However, even when disregarding these structural factors, the gender pay gap persists. In Germany, for instance, women with similar qualifications in the same field earn an average of six percent less than their male counterparts.
Companies with more than 100 employees must disclose salaries
The new pay transparency guidelines aim to eliminate the wage disparity between women and men. These guidelines require all salaries within a company to be made public. If the pay gap between women and men exceeds 5 percent in companies with over 100 employees, they will be obligated to find a resolution to ensure salary equality going forward.
Recruiters are not allowed to inquire about an applicant’s current salary according to the guidelines on Pay Transparency in the EU. This measure aims to avoid the occurrence of salary disparities.
The enforcement of the guidelines will involve a greater participation of social partners. Fines will be imposed on companies that fail to adhere to the wage transparency guidelines. Evelyn Regner, the chief negotiator of the S&D group, highlights that this is the sole method to guarantee adherence to the regulations.
The Pay Transparency Directive of the European Union emphasizes the significance of transparency.
Regner, member of the Committee on Women’s Rights and Gender Equality and Vice-President of the European Parliament, identifies in a dispatch the crucial importance of transparency for an equal society:
“I cannot reword.”
Regner states that all employees will have the ability to openly discuss their salary both within and outside the organization. This implies a complete prohibition on non-disclosure agreements. Additionally, she emphasizes the importance of shifting the burden of proof for wage discrimination cases from women to companies, requiring the latter to demonstrate the absence of discrimination.
Wage discrimination is a systematic problem, not an individual one. Therefore, it should also be tackled systematically.
