Fair Pay Management Circle on 13 December 2018 at the German Ministry of Family Affairs
The right to information for employees has been in place since January 2018 and the evaluation is in full swing. But how would the German Law on pay transparency be implemented? What has the Law achieved within companies? Is transparency enough to ensure equality? Or does it still need entirely different strategies? One year after our first Fair Pay Management Circle at the German Ministry of Family Affairs, Senior Citizens, Women and Youth, it was high time to take stock of the outcome!
At our Circle-Premiere at the end of November 2017, entry into force of the German Law on pay transparency was under consideration - along with various other questions. Nobody knew how to assess the number of requests for information to expect from January and how costly this would turn out to be. A good year later, on 13 December 2018, we carried out the first review: Once again it was at the same German Ministry with the theme of “Pay transparency”, focusing this time on “from Law to implementation”.
A right to information has little impact on its own. “A Law on its own changes nothing, but it provides an incentive to change,” as Christine Morgenstern points out to the decision-makers and managers for industry, science and politics in her opening comments. At Fair Pay, says the head of department at this German Ministry, the focus was on much more than “only” pay, extending this into an integrated management strategy.
Change only happens quickly backwards
Prof Dr Martina Schraudner also knows how difficult change processes are. The director of the Fraunhofer Centre for Responsible Research and Innovation is a member of the board at Acatech, the German Academy for Technical Sciences (a registered association).
Schraudner also stresses immediately that laws are needed for change, not only to get them started but also to apportion accountability. From her point of view as a change expert, the biggest problem in business practice is that “Change only ever happens quickly backwards - it’s very easy to fall back into old patterns. In companies things only ever change very slowly.”
Clearly the process can be accelerated, if the change is wanted and controlled from above - most of the attendees saw pay transparency as a management task. As a result, some had instigated it during the previous year and were reporting in retrospect: The expense was overestimated - only a few employees have used the right to information. But a small number of information requests in no way guarantees that all is okay and that employees are satisfied with the salary structure. Quite the contrary: A small number of requests can also be an indication that the courage to ensure transparency is lacking not only in management, but throughout the hierarchy. Fair pay, it emerges once again, is above all a matter of business culture.
Salary adjustments were also the exception. Also requiring rectification are the lack of leverage and the unjust fee structures in Germany, which were repeatedly condemned and overpaid colleagues were downgraded. The fact that adjustments only know one direction, namely upwards, is an enormous cost factor for companies - and remain hard to achieve.
The consensus around the table was that the Law alone is woefully inadequate for tackling the existing injustices in the world. The companies were called upon to create their own transparent structures. And this would indeed be in their own interests: “Nothing is as demotivating as unfair pay”, says one of the pay experts present. She understands keenly the influence pay strategies have on employee motivation and their relationship with the company and pleads for more transparency. “More encouragement and reporting are clearly needed for the German Law on pay transparency to be used.
Good outlook for transparency in 2019
The evaluation of the Law is in full swing and the results of its implementation and improvement remain to be seen. The preliminary results, which are expected at the beginning of January, should establish a good basis to speed up the process of change in 2019. Fair pay benefits everyone in the end: “Innovation ensures diversity”, says Christine Morgenstern, “and equal opportunities can become a hallmark of the German economy.”
As at every Fair Pay Management Circle participation was exclusively by personal invitation; the event itself was subject to Chatham House Rules – the best prerequisite for an open and constructive dialogue. We therefore relay nothing that would allow it to be traced back to the people involved or guests, or to their companies or organisations – unless they have explicitly agreed to be identified.
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 ...