Pay equity legislation in Germany, Great Britain, France, and Iceland
by Henrike von Platen
As gender gaps in both voting rates and political representation gained significant attention during the recent EU election period, the gender pay gap continued to be a hot ticket item. How the new Parliament will tackle the EU average pay gap of 17% remains to be seen, but meanwhile, wage justice is on the rise among many nation states.
In Germany, employees have the right to be provided with the median wage of a group of at least six people in their company as a method of practicing pay transparency without betraying confidentiality. In Great Britain, the disclosure of internal gender pay gaps is now mandatory, while in Iceland and France, companies who do not practice fair pay and gender equality are punished.
The implementation of the new law on pay transparency has caused quite a commotion. German business magazines and the daily press agree: the law is of no use at all, it is a toothless tiger, an ineffective monster of bureaucracy, and, well, administrative hell. The German magazine Wirtschaftswoche even featured a headline suggesting that fair pay is a merely a utopia.
The scale of this criticism is a very good sign. Resistance to the law is solely the last resort of individuals who do not want to admit that labor is transforming and that change is inevitable. These status quo advocates and wage gap deniers refuse to acknowledge that New Work is much more than just another management buzzword. The digitization of labor is the perfect accomplice in realizing wage equity and equal opportunity. In this new structure, employees have access to more flexible models of working hours, location, and many other aspects that allow for greater compatibility and enable companies to tap into a much larger talent pool than ever before.
Yet, even if change is inevitable, such a process requires clear guidelines that companies and organizations can utilize to orient themselves in matters concerning fair pay.
New laws are being discussed and written all over the world. In Germany, the Act on Pay Transparency (Entgelttransparenzgesetz) came into force in July 2017. Since January 2018, it has empowered employees within companies with more than 200 staff with the right to information regarding pay. In addition, the Act mandates the implementation of company audit procedures in companies with more than 500 employees and requires these companies to disclose their equal treatment and fair practices.
The goal of "equal pay for equal work or work of equal value" is codified even more comprehensively in Great Britain. Since April 2017, companies with more than 250 employees have been required to report on their salaries based on gender. Approximately 11,000 companies with a total of 15 million staff have one year to publish data reflecting the company's internal gender pay gap. These include average pay, the median for total salary, and bonus payments; companies must further show how women fall within different income brackets. The results must be published on both the websites of the companies themselves and on that of the UK Government Equalities Office. The law also requires companies with a gender pay gap to develop a gender equality plan where appropriate, identifying the causes of the internal wage gap as well as strategies to eliminate it.
Since April 2018, the British wage gap has become visible to all. The results published demonstrate a clear trend: the more evenly women and men are distributed across career stages within a company, the smaller the internal gender pay gap. Transparency therefore not only makes the gender pay gap itself visible, but also allows conclusions to be drawn about the causes - which should make it much easier to remedy the situation.
Iceland: Unfair pay will not go unpunished
Transparency is also widespread in Northern Europe. Scandinavia has set a longstanding good example in terms of compatibility and fair pay. But no other European country has such ambitious goals in terms of wage equity as Iceland. The island state of Fair Pay is the first country in the world to declare this issue the responsibility of managers and to make unfair pay a punishable offense.
As early as 2012, the Icelandic government, employers, and trade unions jointly developed an Equal Pay Standard based on the ISO procedure in order to enable companies and organizations of all sizes, sectors, and composition of the workforce to introduce, evaluate, and continuously improve a fair system of remuneration. Last summer, this country with fewer than half a million inhabitants passed a globally unique law: as of 1 January 2018, companies with more than 25 staff have had to prove that they pay women and men equally and that they are certified according to the Equal Pay Standard every three years. Any entity that fails to comply will be must pay a fine for every day that they are not certified.
And in France, companies are subject to sanctions as well. Starting this year, companies with more than 50 employees are required calculate their own internal Gender Equality Index value and publish it annually. The total value is calculated on the basis of individual values relating to the company's internal wage gap, but is also based on questions relating to equality or the number of women in management. Here, too, they carry the risk of significant financial penalties if fewer than 75 out of 100 points are achieved.
This all clearly shows that, unlike some people in Germany, fair pay is not a utopia at all, nor is it even some far-off vision. Rather, it is nearly a reality. No company in the world will be able to resist this development, as Citi Bank in Germany with its one percent wage gap, the transparency requirements in Great Britain, or the ambitious Icelandic laws all evidently prove.
A clear legal position can speed up this process immensely. For example, Landsbanki Íslands will have to invest around 120,000 euros to meet all legal requirements. "If the law did not force us, we would continue as before and the wage gap would not be closed within ten years," says Baldur Jonsson, Human Resources Manager of Iceland's leading financial institution. It is a wise and forward-looking decision by the Icelandic government to hold companies accountable for investing in a future that could otherwise cost us all dearly. No country in the world will be able to afford to exclude women from the labor market in whole or in part in the future.
FPI - What we do
Why does the gender pay gap prove so intractable? What is standing in the way of fair pay for all? What do companies need to do in order to put sustainable pay strategies into practice?
Knowing about the pay gap and being willing to rid the world of the unjust state of affairs are evidently not enough to actually ensure fair pay. It is right here ...