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25th Oct 2021

EU wants large firms to report on gender pay-gap or face fines

  • EU Commission vice-president Věra Jourová (on screen) and equality commissioner Helena Dalli (r) presenting the draft rules - remotely (Photo: European Commission)

Larger EU companies may face fines if they don't provide data on how they pay women and men, under a new EU Commission proposal aimed at providing better pay transparency.

The draft proposal, unveiled on Thursday (4 March) wants to expose gaps in pay and equip women with better tools to tackle pay discrimination.

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In the EU, women earn 14.1 percent less than men across the bloc, even though they have the right to equal pay since 1957. The gender pension gap is at 30 percent.

An EU rule from 2006 already requires employers to ensure equal pay for equal work or work of equal value for men and women.

The commission argued that one of the key obstacles to enforcing equal pay is the lack of pay transparency.

"We cannot keep pretending that the gender pay gap only stems from women choosing childbearing over a career, that they prefer working in lesser-paid jobs, or that they are simply less interested in moving up on the career ladder," commission vice-president Věra Jourová said.

"We know that there is a discrimination of women in pay-setting mechanisms and evaluation of women's work. In addition, lack of pay transparency has so far made it impossible for workers to know how much other workers doing the same earn," Jourová added.

Jourová also said studies show that "women tend to be more humble when negotiating a salary because they often don't know how much they can ask for".

Over 250 employees

Under the draft proposal, companies with more than 250 employees need to provide data about their gender pay gap and are required to do internal reporting on pay differences among female and male workers.

If data shows a high risk of unjustified pay inequalities, employers and workers' representatives need to work out a solution.

National authorities can set the level of penalties, including fines on firms breaking the equal pay principle.

Workers will have the right to ask about pay-level at job interviews and will have no obligation to disclose their previous pay history, according to the proposal - which argues that taking into account previous pay often reproduces the inequality.

Workers will also have the right to information on average pay levels for the same work at their firm, and will also have a right to full compensation for gender pay-discrimination, including back payments and legal fees.

Equality bodies and workers' representatives will be authorised to act on behalf of those who experience pay discrimination and there could be collective claims on equal pay.

The draft also proposes a shift on the burden of proof in cases of discrimination.

If the employer does not comply with its pay transparency obligations, it will be up to the employer to prove that there is no such discrimination - and not up to the worker to prove the existence of discrimination.

Up to governments

Currently, 13 member states have some form of binding pay-transparency in national law or policy.

But the commission's draft proposal could face opposition by member states who dislike binding rules on pay transparency.

Legislation first put forward in 2012 aimed at bringing female participation on corporate boards to at least 40 percent has been stuck in the council for nine years because of opposition by some member states.

Only seven percent of chief executive officers in the EU are female, with women taking just 17 percent of executive posts, according to the European Institute for Gender Equality, an EU agency in charge of the matter.

Jourová said she hoped this proposal would not face the same pushback, as "this is heavily needed".

"We have strong, sufficient evidence that we need to have binding rules on that, and not only to rely on social responsibility of companies, because we see it that it doesn't lead anywhere," she said, adding that the pay gap has only shrunk by two percent the last five years.

Women are also disproportionately affected by the Covid-19 pandemic.

Their over-representation in lower-paid jobs, such as hospitality, retail, or personal services, has made them particularly vulnerable in the pandemic.

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