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Transparency in wage setting, the European Commission's proposal for a new directive

Pay Gap

Transparency in wage setting, the European Commission's proposal for a new directive

10 Aug, 2021

A new far-reaching proposal for an EU directive for Gender pay gap - transparency on pay for men and women, proposes increased requirements for companies regarding transparency and routines to ensure equal pay for equal work between men and women.

 

Gender discrimination is one of the reasons why women in the EU on average earn 16 percent less than men and the Commission wants to create the conditions for change. However, the directive goes far beyond how we have structured the work in Sweden, where we have achieved significantly more than in most countries in the EU. In Sweden, for example, the corresponding percentage is between 4-5%. The initiative may significantly change the salary structure.

This is what the initiative is about:

The Directive in points:

 

  1. introduce binding measures for wage transparency

  2. make pay systems more transparent

  3. improve the public's understanding of relevant legal concepts

  4. strengthen implementation mechanisms

In summary, the new requirements for companies include:

 Establish routines for defining and classifying work:
Companies must establish tools or methods to assess and compare the value of work in line with a set of objective criteria that include education, vocational and training requirements, skills, effort and responsibilities, work performed and the nature of the tasks involved.

o   Salary transparency:
The right of employees to receive information about salary when the person in question applies for an advertised position,

The employer may not ask about employees' salary history from previous employment,

Employees have the right to request information from their employer about their individual wage level and about the average wage levels, broken down by gender, for categories of workers who perform the same work or work of the same value.

o   Reporting and publishing of wage differences in companies with 250 employees or more: 
Employers with at least 250 employees must publish information related to the pay gap between female and male workers in their organization, including other or variable components in addition to the basic salary.

o   Annual salary survey:
If the wage reporting shows a difference in average wages between female and male workers in the organization of at least 5 percent in any category, who perform the same work or work of the same value, which has not been justified by objective and gender-neutral factors, the employer concerned shall be obliged to make a salary assessment.

The directive is currently open for feedback on the European Commission's website and it has not yet been decided that the proposal will enter into force in its current form. Through wage transparency, the European Commission believes that workers should be able to detect and prove possible discrimination based on gender. It also highlights gender shifts in pay systems and job classification that do not value women's and men's work equally and in a gender - neutral way.

Wage transparency is an important tool for eliminating issues of equal pay between women and men and for supporting the elimination of gender gaps in wage practices. In addition to simple compliance with the principle of equal pay, it can also be a triggering factor for examining gender equality policy more generally at company level and supporting closer cooperation between employers and employee representatives.

The proposal for the new directive aims to address the continuing inadequate application of the fundamental right to equal pay and to ensure that this right is upheld throughout the EU by introducing wage transparency standards, giving workers the right to demand equal pay. The proposed directive pursues these objectives by establishing wage transparency within organizations, facilitating the application of key concepts of equal pay, including "pay" and "work of equal value", and strengthening enforcement mechanisms.

 

General information on the purpose and content of the Directive

Many of these principles are recognized in Swedish law in the provisions of the Discrimination Act (2008: 567) on the employer's obligation to carry out annual salary surveys, which are regulated in Chapter 3. of the Discrimination Act. On the other hand, some of the new regulations are extremely foreign and to some extent anti-corporate as they require transparency in operations and finances far beyond current requirements.

In response to the consultation, the Discrimination Ombudsman has, among other things, made the following comments on the proposal for a new directive (see link to the consultation response below).

 

“Article 1 states that the Directive refers to minimum requirements, in particular as regards wage transparency and enhanced enforcement mechanisms, to strengthen the principle of equal pay for women and men in equal or equivalent work and the prohibition of wage discrimination in the Equal Treatment Directive. The DO welcomes the increased level of ambition for the implementation of the equal pay principle that the directive entails, but notes that the directive is thus not aimed at achieving equal pay in general by reducing the so-called gender pay gap in the labour market as a whole.

 

At the same time, it must be emphasized that a final position on the submitted material requires comprehensive coverage and a careful analysis of how the proposals relate to the Swedish legal system and Swedish conditions. There is therefore in several cases a certain degree of uncertainty as to what individual articles exactly require of the Member States and, as a result, also an uncertainty as to the extent to which the requirements under an article go beyond or otherwise deviate from what follows from the Swedish the regulation in the Discrimination Act (2008: 567, DL). ”

Conclusion from Heartpace

We at Heartpace note that Sweden has a better position than that of the EU in general. The parties in the labour market have had better cooperation on issues of equal pay. However, this does not mean that all issues are resolved, we still have homework to do. However, as we see it, the issues are best resolved through continued development and negotiation and not in court proceedings.

At Heartpace, we are determined to contribute through our tool that easily and efficiently ensures that you get a thorough analysis of any possible gender pay gap. Through clear reports based on salary review automation, you get a qualitative analysis. Heartpace Pay is a module in our commitment-driven HR system, which assists with salary mapping and analysis. This module delivers according to DO´s requirements and minimizes subjectivity, which saves time!

 

Read more about our system solution for Salary Survey with Heartpace

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