Women often remain unaware of pay discrimination in their work, due to companies being able to keep salaries a secret. Pay transparency would fix this, Prof Roland Erne writes.
ADVERTISEMENTThe right to equal pay for work of equal value has been in place for years. One of the earliest countries in Europe to implement equal pay laws for women was Iceland in 1961, with other countries following suit.
Despite this, women throughout Europe still earn much less than men: in 2022, the gender pay gap was 12.7% in the EU, which means women were earning €87.30 for every €100 earned by men.
The persisting gender pay gap has even led to the concept of Women’s Pay Day — a day each year on which the average woman symbolically stops working for free based on salary comparison to the average man. In 2024, for the UK, that day was 21 February.
In some parts of the world, the gender pay gap is much worse, so this symbolic date could fall even later in the year.
If there are existing laws to prevent gender pay disparity, why are the laws failing to uphold wage protection for women?
The answer lies in the laws themselves
If women want to enforce the rights stated in equal pay laws, they have to take their employers to court.
Lawsuits against an employer are not easy to win as they can keep wages secret. Additionally, there is the risk of retaliation by employers against employees.
Adopting labour laws that make equal pay legally binding is not sufficient enough to actually achieve equal pay.
Between 1996 and 2007, for example, there were only 31 equal pay lawsuits in Germany, 16 in France, and one in Poland, indicating how difficult it can be for employees to ensure equal pay laws are upheld by employers. Having a right and getting it implemented are two very different things.
An example of the limits 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, they also enforced similar measures for migrant workers, ending unequal legal treatment of workers of different nationalities.
While both legally enshrined the equal pay principle for women and migrant workers, they required very different enforcement mechanisms.
Enforcement of the law protecting equal pay for men and women relied on litigation: individual plaintiffs had to go through the court system.
The case of posted workers
However, enforcement of equal pay for so-called “posted workers” according to host country standards does not rely on court proceedings.
A "posted worker" is an employee sent by their employer to carry out a service in another EU member state or country associated with the EU’s single market (like Switzerland) on a temporary basis.
Instead, Swiss trade unions, employer associations, and regional authorities have the right to conduct mandatory audits of a company’s payroll. They also have the right to issue penalties outside the court system or exclude companies from public tenders if they fail to compensate posted workers according to local standards.
This allows posted workers from abroad who are victims of pay discrimination to alert a union directly without having to fear any retaliation from employers.
Annually, Swiss social partners and regional authorities check the payroll accounts of tens of thousands of companies to enforce equal pay by nationality, while Swiss courts only examine around 100 gender-related pay discrimination cases.
In 2020, a revised Swiss Gender Equality Act now requires companies to analyse their gender pay gap through an independent body and to communicate results to employees.
ADVERTISEMENTEven so, the so-called “flanking measures” on equal pay for posted workers sent to Switzerland described above still provide better remedies to enforce equal pay by national origin compared to those by gender.
What would greater pay transparency entail?
Not just one of the first to implement equal pay laws, Iceland also became the first country in the world to legally enforce pay transparency for men and women.
Since 2018, every firm in Iceland with 25 or more staff has required a certificate showing they pay everyone in the same roles equally. Countries throughout the EU will now be held to similar standards.
In 2023, the European Parliament and the European Council adopted a new EU directive to strengthen the principle of equal pay for men and women for equal work or work of equal value.
This new law forces EU member states to adjust their national pay equality laws, strengthening pay transparency and the enforcement of equal pay.
ADVERTISEMENTOnce adopted, every employee will have the right to know the average wage of all employees doing equivalent work in the same company. Every company with more than 100 employees will also be required to report regularly on the gender pay gap.
Women often remain unaware of pay discrimination in their work, due to companies being able to keep salaries a secret. Pay transparency through this directive will not only allow women to be made aware of salaries in their company so they can take necessary steps if there is a pay gap but also allow a proper assessment of the reasons behind pay inequalities.
In addition, EU member states will be allowed to compile and publish company-specific wage information themselves in the future, based on data provided by employers to the tax and social security authorities.
If the wage gap is more than 5% and cannot be objectively justified, the company must agree on remedial measures with its trade union or another employee representative body, such as a works council, in accordance to national labour law.
Other measures such as easing the burden of proof or better protection against acts of revenge for plaintiffs also strengthen wage protection for women and equal pay.
ADVERTISEMENTThis directive entered into force in June 2023 and member states have three years to transpose it into national law. The clock is ticking.
Roland Erne is Professor of European Integration and Industrial Relations at UCD College of Business in Dublin.
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