Equal pay: Commission proposal on pay transparency receives both praise and criticism

Equal pay for men and women or for work of equal value is one of the fundamental rights and principles of the EU, but on average women are still paid 14% less per hour than men, with pay differences present in all sectors and widening with age. Although welcomed as a much-needed step to close the gender pay gap, the Commission's proposal on pay transparency is receiving a mixed response, an EESC hearing found.

On 5 May, the European Economic and Social Committee (EESC) held a hearing on the Commission's recently proposed Directive on pay transparency, aimed at ensuring that women and men are equally paid for equal work of work of equal value in the EU.

Equal pay remains far from being achieved. The EESC has called on the Commission to urgently proceed with the proposal to introduce binding measures on gender pay transparency, said the EESC's Pekka Ristelä, opening the hearing.

The hearing on Pay transparency – the next step to end the gender pay gap brought together representatives from EU institutions, the social partners, civil society and academia. The results from the hearing will feed into the opinion that the EESC is drawing up on the Commission's proposal for a directive on pay transparency and for which Mr Ristelä is the rapporteur.

The Commission proposal for a directive was presented by Karen Vandekerckhove, Head of Gender Equality Unit, DG JUST, European Commission.

In Ms Vanderkerckhove's words, although the pay gap between men and women looms large at 14%, it is often difficult to prove, making it difficult to measure pay discrimination. This is why the Commission proposes to take action where employers are concerned, to increase awareness about pay conditions within a company and to better equip both workers and employers to tackle pay discrimination at work.

The proposed pay transparency measures would, among other things, allow job-seekers to request information about pay at the job interview and give employees the right to know average pay levels for workers doing the same work. Employees would have the right to full compensation for gender pay discrimination for equal work. Employers with more than 250 employees would be obliged to report publicly on pay differences between men and women in the same category.

Ms Vanderkerckhove pointed out that the directive would not require paying the same salary to all workers, making individual salaries public or making it impossible to reward outstanding performance.

At the hearing, the Commission's proposal was met with both praise and criticism.

For Carlien Scheele, Director at the European Institute of Gender Equality, there is no doubt that the declared pay transparency measures were much needed and justified, given the current figures, which reveal pay and work discrimination that disadvantages women across the EU.

Data shows that women hold less than 10% of CEO positions in the EU's larger companies, despite making up the majority of university graduates in most countries of the EU. The gender pay gap widens the older the women get and women are paid less than men in every single sector in the EU, Ms Scheele stressed.

An example of how pay transparency could work in practice was given by Saana Rossi, Chief People and Success Officer at Vincit, a Finnish company that decided to implement an open salary model in order to secure more fair and transparent salaries.

As the company grew, fewer employees were willing to share their salary information. The company also had to determine whether those willing to share such information preferred to share it with the entire organisation or with a smaller group. Despite that, it seems that employee satisfaction increases when people have a better understanding of how their salaries are determined, Ms Rossi explained.

Other participants in the hearing, while welcoming the directive, said it required fine-tuning and had to be improved on a number of fronts before it could become a game-changer for gender equality in the EU.

The right to pay information is at the core of this directive. It can give us some clearly defined tools and measures that can guide Member States and trade unions in creating fair pay structures. Still, there are aspects to improve. We need to make sure this directive can actually work, said MEP Kira Marie Peter-Hansen, adding that the directive should be more precise when referring to workers' representation.

Joanna Maycock, Secretary General of the European Women's Lobby (EWL), shared the view that the proposal could be strengthened in some areas. She particularly objected to the provision that states that only companies with more than 250 employees would be required to publish information about their situation regarding pay equality.

Our role will be to ensure that this directive responds adequately to women's real-life concerns regarding pay, trade union representation and closing the pay gap. Achieving equal pay should not be associated with the size of the companies and therefore, should apply to all, regardless of size, Ms Maycock said.

The European Trade Union Confederation (ETUC) also sees room for improving the directive. Apart from requiring from all companies, and not only the larger ones, to report on pay differences between their female and male employees, ETUC would also like to see all restrictions on discussing pay removed. Another priority is to oblige employers to negotiate the measures aimed at closing the gender pay gap with their employees.

In its current form, the directive makes it very difficult for women to be able to secure the type of changes needed to close the gender pay gap within an enterprise. Importantly, what's needed is the right to negotiate the type of measures that are needed through the trade unions, stressed ETUC's Deputy General Secretary, Esther Lynch.

Other speakers at the hearing warned against extending the directive to companies with fewer than 250 employees, arguing that such pay transparency measures would place a disproportionate burden on smaller companies and SMEs.

Edel Karlsson Håål from the Confederation of Swedish Enterprise, expressed concern at the current proposal, as it failed to take proper account of the different realities on the ground, which could – in the case of her country – "create legal uncertainty" that would harm the Swedish road to equal pay.

In her presentation, Ms Karlsson Håål pointed out that in Sweden, pay transparency is already regulated by the Swedish Discrimination Act, which covers all employers, regardless of their size and focuses on the social partners at company level. Implementing the directive in its current form would turn the Swedish Discrimination Act into a  patchwork of rules that will be extremely difficult to apply.

The proposal has to be adjusted. It fails to consider the national conditions for wage formation and is not designed to take account of the labour market traditions established in Member States, including national laws, collective agreements and the role and autonomy of the social partners, Ms Karlsson Håål concluded.

However, according to the results of national case-studies of pay transparency measures, presented at the hearing by Sara Benedi Lahuerta from University College Dublin and conducted in France and Sweden, legislation in those two countries did not fully cover the key elements of the Commission proposal for equal pay.

For example, it did not provide for the right to information for individual workers. There was no clear methodology or guidance obligation on how to asses work of equal value.