The Pay Transparency Directive: One small step for womankind

The Pay Transparency Directive is a welcome step towards achieving gender pay parity. But without progress on the provision of decent living wages; proper recognition of women’s roles in non-paid care and the implementation of the Work-Life Balance Directive; and much more systematic use of gender impact assessments and gender mainstreaming, this only represents one small step.

With the EU gender pay gap at 14.1%, even pre-COVID-19, the need for action is undeniable. Impacting women disproportionately worldwide, the pandemic has heightened the urgency of these measures further: it has impacted women’s income more than men’s and “could widen gender gaps in the labour market and possibly wipe out the progress made over the past few years.” Pre-existing pay inequalities have worsened as women have been harder hit by job losses and reduced working hours. If it were not for wage subsidies, women in 28 European countries would have lost 8.1% of their wages in the second quarter of 2020, compared to 5.4% lost by men.

These numbers do not support a year’s delay in presenting legislative proposals. European Commission President Ursula von der Leyen was correct to prioritise this issue upon her appointment in December 2019. She pledged to “table measures to introduce binding pay-transparency measures” to tackle the EU’s gender pay gap within the first 100 days of her mandate. Now closer to 500 days than 100, the delay has allowed an already unacceptable situation to worsen further, without any clear benefit in return.

The well-overdue Directive

The legislative proposal presented last week aims to tackle “the persisting inadequate enforcement of the fundamental right to equal pay”. The proposed Directive centres on measures to ensure pay transparency for workers and employers, as well as better access to justice for victims of pay discrimination. The initiative will require employers to provide information about the initial pay level to prospective employees and prohibit them from asking applicants about their pay history.

Employers with at least 250 employees must publish information on the pay gap between female and male workers in their organisation. In cases where there is a gap of at least 5%, and the employer cannot justify it on objective, gender-neutral factors, employers will have to carry out a pay assessment in cooperation with workers’ representatives.

The right of employees to request information from their employer on individual and average pay levels, broken down by sex, for categories of workers doing the same work or of equal value is also stipulated in the proposal.

Nevertheless, much of the proposal’s language is couched in terms of “burdens” and “flexibility”. This calls into question the degree to which the European Commission truly prioritises the pursuit of gender equality, if and when it comes at the expense of extra demands on business.

Much work to be done

The principle of equal pay has been enshrined in EU treaties since 1957, yet gender inequalities persist. On average, women’s gross hourly earnings are 14.1% below those of men. Across member states, the gender pay gap varies by 20.4 percentage points, ranging from 1.3% in Luxembourg to nearly 21.7% in Estonia. In 2013, the European Commission identified the lack of transparency in pay systems as one of the main obstacles to effectively implementing the equal pay principle. In a 2020 evaluation of the application and enforcement of equal pay legislation across the EU, the Commission found that 13 member states had no pay transparency measures, 2 were considering introducing legislation and 11 had introduced mandatory measures.

Such findings make clear that regulatory discrepancies exist. With research indicating that a lack of transparency results in pay discrimination (which often goes undetected), the necessity of this Pay Transparency Directive is and always was evident. It is now crucial that the European Parliament and Council swiftly adopt this proposed Directive. In turn, member states must prioritise its transposition into national law.

But transparency alone will not achieve parity

This Directive should result in a reduction of pay discrimination and a narrowing of the gender pay gap. With that said, pay transparency alone will not eradicate the EU’s gap. The overall impact of this Directive in some low-paid sectors which are already dominated by women is potentially limited. Transparency in low-paid, female-dominated jobs is less of an issue than chronically low wage levels and subsequent in-work poverty. The consistent undervaluing of the work carried out in these sectors contributes to the overall pay gap between men and women across the EU. As such, in order to fully address the gender pay gap, pay transparency must be accompanied by decent living wages

Furthermore, while the Pay Transparency Directive would reduce pay discrimination, attention must also be given to other factors which contribute to the gender pay gap;  for example, the role of women in non-paid care roles, such as childcare and elderly care. The impact of the COVID-19 crisis has amplified this issue, with school closures and stay-at-home mandates resulting in women taking on greater care responsibilities. This has had ramifications for women’s ability to undertake employment during the pandemic, forcing many women to reduce or leave employment. Not only does this have immediate implications, but it will also have a long-term impact in terms of social protection coverage and pension payments.  

As a first step, the Commission must ensure the implementation of the Work-Life Balance Directive 2019/1158 across all member states. Additionally, as we move towards a phase of COVID-19 recovery, we must ensure that current gender inequalities within the labour market are not exacerbated. Gender impact assessments and gender mainstreaming should become common practices for both EU and member state policymakers.

A step in the right direction

The proposed pay transparency measures are undoubtedly a step in the right direction. They endeavour to address pay discrimination, a key contributing factor to the gap in earnings between women and men across the EU. But while the impact of the Directive should not be underestimated, it should also not be overstated. More action is still required to address the persistent gender pay gap fully. Legislative delays have only allowed the gap to widen further.

Gender equality is a critical component of economic growth. As we move towards recovery, the Commission and member states must demonstrate their full and speedy commitment to the principle of fair and equal pay for equal work.

Danielle Brady is Programme Assistant for the Social Europe and Well-Being programme.

Laura Rayner is a Policy Analyst in the Social Europe and Well-Being programme.

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