Why is the European Commission putting forward the pay transparency legislative proposal?

The Malta Independent on Sunday speaks to the European Commissioner for Equality, HELENA DALLI, on how pay transparency can help tackle the root causes of the gender pay gap, which remains an issue and has only decreased slightly over the past years

“The principle that women and men should receive equal pay for the same work or work of equal value has been enshrined in the European Treaties since 1957. Nonetheless, despite the adoption of a body of gender equality legislation since then, gender pay discrimination and discrepancies persist all across the Union.

A specific Commission recommendation on pay transparency supplemented existing gender equality legislation in 2014. Yet, we remain far from equal pay in the European Union, as the gender pay gap stands at 14.1% and has only decreased minimally over the last decade.

The lack of pay transparency is one of the key obstacles in the enforcement of the principle of equal pay. This is because it creates a grey zone favouring the perpetuation of gender bias in pay. When employees do not know how their pay compares to that of their colleagues of a different sex, they may not know that they are being discriminated against in pay and will be unable to address it.

In addition, pay systems and job grading may unintentionally omit valuation of relevant skills and hence fail to value the work of women and men equally. Research shows that pay systems often fail to eliminate bias when they are not examined for genderneutrality. Hence the reason why the proposal also defines the concept of equal pay for equal work or work of equal value.”

How does this fit into the bigger picture on tackling the gender pay gap?

“The proposal is in fact part of a broader package of measures and initiatives that focus on tackling the root causes of the gender pay gap. These include the adoption and implementation of the WorkLife Balance Directive, sectoral initiatives fighting stereotypes and combatting segregation in the labour market, the proposed directive on improving gender balance on company boards of large EU listed companies and closing the gender employment gap as part of the Social Pillar Action Plan. As you can see, the gender pay gap needs to be tackled from multiple angles and this is exactly what we are doing.”

How does pay transparency help achieve equal pay?

“Organisations’ or employers’ pay structures do not always place an equal value on the work of women and men through objective and gender-neutral criteria. This results in direct or indirect gender pay discrimination. In many cases, discrimination or bias is not the result of deliberate discriminatory behaviour but rather of a failure to grasp in practice what it means to pay men and women equally for the same work or for work of equal value.

The only way for a worker, who believes that they are victims of pay discrimination, to challenge this is to have the necessary information on the average pay levels of their male and female colleagues and compare the level with their own. Women, who earn less than their male colleagues despite doing the same work or work of equal value, may not be aware of it because of the lack of pay transparency. Landmark court cases where women have succeeded in their claims are only the tip of the iceberg. The vast majority concerns women who cannot enforce their right to equal pay due to a lack of, or access to information on pay. The lack of transparency prevents pay discrimination from coming to light and allows for the perpetration of discriminatory pay structures.

Whereas transparency regarding pay will allow workers to detect pay discrimination and claim their rights, it will uncover unconscious gender bias in pay structures at company level. It will also help pave the way to change employers’ mind-set when it comes to pay transparency. Action can only be taken when such bias is brought to light.”

Will all member states be able to implement it despite national differences?

“Our proposal gives member states the flexibility to implement the new rights and obligations the way they think most appropriate. It takes into account different features of national social dialogue and collective bargaining systems as well as the autonomy of social partners and their contractual freedom. It also recognises the important role of social partners in addressing gender pay inequalities, including through pay transparency.”

What is in the proposal?

“The proposal will introduce binding pay transparency measures encompassing four main rights. These are:

• the right to information on pay prior to employment, which aims to empower workers in negotiations on pay when they are hired;

• the right to request information on pay so that workers can compare their salary with their colleagues’ salaries themselves, at any time during the employment relationship, (between co-workers of the other sex carrying out equal work or work of equal value);

• pay reporting on the pay gap between female and male workers for employers with at least 250 employees; and

• joint pay assessment in case of statistically relevant indications of pay inequalities.

The proposal will also clarify the concept of “work of equal value” and will improve access to justice and strengthen enforcement mechanisms.”

What do you say to people who have concerns about this proposal?

“It is understandable that people have concerns when there are changes. Some businesses highlighted the possible difficulty of applying the concept of ‘work of equal value’. That is why the proposal clarifies how this concept should be understood and ensures that tools are put in place to facilitate the application in practice.

Businesses were also worried that the proposal might limit their discretion in salary negotiations. However, this is not the case: the measure only requires employers to share information, on an indicative basis, on the starting salary offer and does not constrain the negotiating power of either employer or worker. The purpose of this measure is only to allow workers to come to the negotiating table better informed and the proposal is not about pay settings.”

How will people’s personal data be protected?

“The new rules will of course uphold EU data protection rules, notably the EU General Data Protection Regulation (GDPR). As a general rule, the processing of private data is allowed if it is under a legal obligation with a legitimate aim – here the enforcement of the equal pay principle. The proposal makes it clear that any information obtained may only be used for the purposes of making a claim relating to equal pay. The proposal also includes safeguards to avoid the disclosure of personal data of an identifiable person. The culture of pay secrecy varies from one member state to another, and for this reason, they will have the option for the information to be made available through a third party, such as an equality body, bound to maintain the confidentiality of the data.”

How do you think employees will adapt to these changes?

“Some employers fear that granting access to information on pay could result in disgruntlement among workers who may find out that they are paid unfairly or that there will be an upward pressure on wages. While these effects are possible, we do not anticipate them being a problem in organisations that respect the existing rules. Studies show that, in the long run, workers are more satisfied when they know what they earn through open and honest discussions about pay. This highlights the importance of uncovering gender-based pay differences, of establishing effective communication on what justifies these differences or of taking remedial measures for those that cannot be justified by genderneutral factors. Moreover, member states will be able to assist employers in establishing tools and methodologies to assess and compare the value of work based on objective criteria.”

Why is now the right time for this proposal?

Why is it not? The principle of pay equality is entrenched in the treaty. It is clear in the Equality for Men and Women Act. We know though, that pay differentials for people doing the same work or work of equal value exist. The European Parliament and the Council have repeatedly called for action in this area. In June 2019, the Council called on the Commission to develop concrete measures to increase pay transparency. We must act to counter any further regression and ensure that women receive the pay for the work they do. This is the right thing to do.”

The European Commission Representation in Malta is organising a webinar in collaboration with The Malta Independent on International Women’s Day - Tomorrow Monday 8 March 2021 at 09:30am. The subject chosen for the discussion is the forthcoming Commission proposal on Pay Transparency. The event will include the participation of The European Commissioner for Equality Helena Dalli, a panel debate and a Q&A session.