The “gender pay gap” refers to the difference between the average gross wage levels paid by an employer to female and male workers, expressed as a percentage of the average remuneration level of male workers. We have already had the opportunity to discuss this issue in an article dated in February 2023, but now the approval of the European Directive 2023/970 and the publication of the Bank of Italy Report entitled ‘Women, labour markets and economic growth’ of June 2023 justify a (glad) update.
As stated in the eleventh recital of the Directive, “it has emerged that the application of the principle of equal remuneration is inhibited by a lack of transparency in remuneration systems, by a shortage of legal clarity on the work concept of equal value and by procedural obstacles faced by victims of discrimination”.
Following an in-depth evaluation of the existing gender pay gap framework and a consultation process, the Commission, in its Communication on 5th March 2020 “A Union of Equality: the strategy for gender equality 2020-2025”, announced that it would propose binding measures on pay transparency. The 2020 review of the provisions of Directive 2006/54/CE (the so-called Equal Opportunities Directive) proved that the implementation of the principle of equal pay is hampered by procedural problems for victims of such discrimination, non-transparent remuneration systems and a lack of legal certainty on the work concept of equal value. In fact, as an outcome of the analysis, it emerged that workers did not have the necessary information to file a successful equal pay claim, nor information on the workers pay levels when they carry out the same work or jobs of equal value. A greater transparency would reveal gender bias and discrimination in the remuneration structures of an organization or a company.
The same considerations are prompted by the Bank of Italy Report, for which company policies oriented towards diversity enhancement can improve women’s career development and lead to a significant decrease in the gender pay gap. The report delves into the literature on the topic, supporting it with its own analysis, with the aim of identifying the policies that can have the greatest impact. From this analysis, on which the second chapter of the report focuses, emerges as particularly useful, first of all:
- “Family-friendly” work organization tools. More flexibility in the place and time of work enables a better allocation of women between and within companies;
- Diversity training programs for managers and mentoring for younger female workers;
- Company welfare policies;
- Positive discrimination policies, i.e. policies that provide for unequal treatment in favour of those belonging to a weaker category, aimed at balancing the injurious situation suffered, they are particularly effective even in the short period, especially if they are also applied to intermediate levels and not only to the leadership positions, which have proven to be more effective in the long run;
- Instruments that increase transparency on company choices both in terms of organisation and salary policies, providing conciliation tools between work and private life (such as, among others, flexible entry and exit, agile working or other forms of remote working) that can reduce the salary differential and facilitate women’s career development.
Notably on this last point, several studies show how increasing transparency concerning wages and gender differences in remuneration reduces the gender gap. This allows:
- women to improve their bargaining power in companies, and
- employers to become aware of the differences in their remuneration schemes.
Precisely it is in this perspective that the European Directive 2023/970 was published on 10 May 2023, as it aims at strengthening the application of the principle of equal pay for men and women for an equal work or a work of equal value through remuneration transparency. First directive of its kind, although it presents some critical issues, the directive seeks to introduce different innovations in the Member States’ legal systems:
- Pay neutrality
The directive requires that remuneration is based on gender neutral criteria, both in the private and public sector. The European Institute for Gender Equity (EIGE) defined this measure as the “milestone for gender equality”: for the first time, intersectional discrimination, i.e. discrimination based on a combination of multiple forms of unfairness or inequality, where the employee belongs to one or more groups protected against discrimination based on gender, on one hand, ethnic origin, religion or belief, disability, age or sexual orientation on the other, has been included in the field of application of the new rules.
- Access to information (so called prohibition of wage secrecy)
Employers will be mandatorily required to provide job candidates with information on the starting remuneration of the positions for which they are recruiting, either by including this information in job advertisements or, in any case, by communicating it before the job interview. In addition, employers will not be allowed to ask for information on wages received in current or previous employment relationships.
Once they have been recruited, male and female workers will be able to employers for information on the average salary levels, divided by gender, of job categories performing the same job or jobs of equal value.
- Reporting duty for companies
For companies counting more than 250 employees, it will be mandatory to send communications annually to appropriate monitoring bodies regarding the gender pay gap within their organisation. For smaller companies (those with more than 150 employees), instead, the reporting requirement will be every three years.
If the reported datas reveal a pay gap of more than 5%, companies will have to carry out a collective remuneration evaluation in collaboration with workers’ representatives.
- Access to justice (right to compensation and reversal of the burden of proof)
Male and female workers who have suffered gender pay discrimination will be able to obtain compensation and full recovery of outstanding remuneration.
A Directive news is that it will be up to the employer to prove before the court that it has not been violated the rules on equal and transparent pay.
In the event that the company violates these rules, the sanctions must be effective and proportionate. Such fines will have to be introduced by Member States for employers who do not respect the rules.
Directive 970 will be applied starting from June 7, 2026 and it is not without its critical aspects. Specifically, according to the new rules, EU companies will only be required to provide information on remuneration and take action only if the gender pay gap exceeds 5% and it cannot be justified on the basis of objective, gender neutral criteria. The 5% threshold, whose determination may appear arbitrary, leaves many companies outside the field of application of the directive.
According to the World Economic Forum, globally it will take 267.6 years to achieve gender equality in terms of participation and economic opportunities.
Despite this discouraging data, it is to hoped that initiatives such as the Directive under review and the Gender Certification under the PNRR will allow, at least in Italy, an acceleration towards a more equal and closer future.