Europe’s equal pay laws are broken – pay transparency could be the key

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The right to equal pay for work of equal value has existed for many years. One of the first countries in Europe to enact equal pay laws for women was Iceland in 1961, and other countries followed suit.

Despite this, women’s incomes across Europe are still much lower than men’s. As of 2022, the gender pay gap in the EU was 12.7%. This means that for every 100 euros a man earns, a woman earns her 87.30 euros.

The persistent gender pay gap has even given rise to the concept of a “female payday.” This is the day on which the average woman symbolically stops working for free each year based on salary comparisons to the average man. In 2024, in the UK, that day was February 21st.

In some parts of the world, the gender pay gap is even deeper, so this symbolic date could be even later this year.

If there are existing laws to prevent the gender pay gap, why can’t those laws protect women’s pay?

The answer lies within the law itself

If a woman wants to exercise her rights under the Equal Pay Act, she must take her employer to court.

Lawsuits against employers are difficult to win because wages can be kept secret. Additionally, there is a risk that the employer will retaliate against the employee.

Merely implementing labor laws that make equal pay legally binding is not enough to achieve equal pay in practice.

For example, between 1996 and 2007, there were only 31 equal pay cases in Germany, 16 in France, and one in Poland. This shows how difficult it is for employees to ensure that their employers comply with equal pay laws. Having rights and realizing them are two completely different things.

One example of the limitations of enforcement mechanisms comes from Switzerland. In 1996, Swiss lawmakers passed the Gender Equality Act, protecting the principle of equal pay for work of equal value for men and women. In 1999, similar measures were implemented for immigrant workers, abolishing unequal legal treatment of workers of different nationalities.

Both legally enshrine the principle of equal pay for women and migrant workers, but required very different enforcement mechanisms.

Enforcement of laws protecting equal pay for men and women relied on litigation, requiring individual plaintiffs to navigate the court system.

For temporary employees

However, enforcement of equal pay for so-called “assigned workers” according to host country standards does not depend on court proceedings.

A “temporary worker” is an employee who is sent by an employer to temporarily carry out work in another EU member state or in a country associated with the EU single market (such as Switzerland).

Instead, Swiss trade unions, employer organizations and local authorities have the right to carry out compulsory audits of companies’ payrolls. It also has the right to impose penalties outside the court system and exclude companies from public tenders if they do not compensate temporary workers in accordance with local standards.

This allows overseas workers who are victims of wage discrimination to report directly to their unions without fear of retaliation from their employers.

Swiss social partners and local authorities check the payroll statements of tens of thousands of companies each year to enforce equal pay by nationality, but Swiss courts only hear about 100 gender-related pay discrimination cases. Only cases.

In 2020, Switzerland’s gender equality law was amended, requiring companies to analyze the gender pay gap through an independent organization and communicate the results to employees.

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Nevertheless, the so-called “lateral measures” on equal pay for Swiss agency workers mentioned above provide a better remedy for enforcing equal pay based on nationality compared to one based on gender.

What does it take to increase pay transparency?

Iceland was not only the first country to implement equal pay legislation, but also the first country in the world to legally enforce pay transparency for men and women.

Since 2018, all companies in Iceland with 25 or more staff have been required to have a certificate proving that they pay everyone in the same role equally. Countries across the EU will now follow similar standards.

In 2023, the European Parliament and the Council adopted a new EU directive reinforcing the principle of equal pay for equal work or work of equal value for men and women.

The new law will force EU member states to harmonize their national pay equality laws, increasing pay transparency and enforcement of equal pay.

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Once introduced, all employees will have the right to know the average wage of all employees doing comparable work in the same company. All companies with 100 or more employees will also be required to regularly report on their gender pay gap.

Women are often unaware of pay discrimination at work because companies can keep pay secrets. Pay transparency under this Directive will not only enable women to be aware of their internal pay and take necessary action in case of pay disparity, but also to properly assess the reasons behind the pay disparity. It will be.

Furthermore, EU member states will in future be allowed to compile and publish company-specific wage information themselves, based on data provided by employers to tax and social security authorities.

If the pay gap exceeds 5% and cannot be objectively justified, companies must agree remedial measures with trade unions or other employee representative bodies, such as works councils, in accordance with national labor law.

Other measures, such as lowering the burden of proof and increasing protections for plaintiffs against acts of revenge, would also strengthen pay protections and equal pay for women.

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The directive will enter into force in June 2023, and member states have three years to transpose it into national law. The clock is ticking.

Roland Arne is Professor of European Integration and Industrial Relations at UCD Business School in Dublin.

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