EU AND NATIONAL LEGISLATORS AS AGENTS FOR THE REMOVAL OF THE GENDER PAY GAP
GENDER PAY GAP – THE GENERAL SITUATION
In Italy today, women earn 5% less than men for every hour worked. Considering the private sector alone, in relation to hours worked, the average gender pay gap rises to 24% and widens further as skills and specialisations increase: it is 33% among graduates against 10% among non-graduates.
According to the recent Istat statistics, The difference in hourly wages between men and women increases as the pay level rises: the value of the first decile for positions held by women is about 6% lower than for men, and the gap rises to 12% for the last step of the scale: with the same contractual classification, women are paid less than their male colleagues.
THE EUROPEAN FRAMEWORK
The right to equal pay for men and women is one of the fundamental principles of the Treaty of Rome, enshrined in Article 119. Moreover, Article 157(3) of the Treaty on the Functioning of the European Union (TFEU) provides that the European Union shall adopt measures to ensure the application of the principle of equal pay for women and men for equal work or work of equal value.
There have been many interventions at European level over the years to reaffirm this fundamental principle and ensure its proper implementation. Among the most relevant interventions is Directive 2006/54/EC, also known as the ‘Recast Directive’, on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation.
The 2006 ‘Recast Directive’ was later complemented in 2014 by the Commission Recommendation on remuneration transparency. The latter recommendation focused on how eliminating the phenomenon of non-transparency of pay conditions is the only way to effectively enforce the principle of equal pay of wage categories, identifying some key tools to make the legislation in principle effective, namely:
- workers’ right to access information on wage levels;
- wage reports;
- wage audits;
- collective bargaining;
- statistics and administrative data;
- concept of work of equal value;
- job evaluation and classification systems.
Despite this legal framework, the effective implementation and application of the identified principles in practice continues to be a challenge for the European Union: at European level, the gender pay gap continues to stand at around 14%, with major long-term repercussions on women’s quality of life, exposing them to a higher risk of poverty and a lower savings capacity than men, as well as fuelling the pension pay gap, which stands at 33%.
Driven by the European Parliament and the Council, which in June 2019 asked the Commission to develop concrete measures to improve pay transparency, the twenty principles of the European Pillar of Social Rights were developed. One of the pillars identified to foster ‘a Union of equality, which is fair, inclusive and rich in opportunities’ is gender equality, which is the subject of the ‘Strategy for Gender Equality 2020-2025’.
THE PROPOSAL FOR A DIRECTIVE ON STRENGTHENING THE PRINCIPLE OF EQUAL PAY FOR MEN AND WOMEN
It is precisely in the broader context of European measures and initiatives to address and remove the root causes of the gender pay gap and to promote women’s economic empowerment that the European Commission’s ‘Proposal for a directive to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms’ of 4 March 2021, currently submitted to the European Parliament and the European Council for approval . This proposal for a directive is intended to strengthen the application in companies operating in European countries of the principle of equal pay for men and women for equal work or work of equal value, as well as the transparency of salaries, even before recruitment and during the employment relationship. Transparency in pay, in its various forms including time, is instrumental in helping workers to identify possible gender-based discrimination.
The draft directive provides for the introduction by the Member States of judicial and extra-judicial measures that are easily accessible to workers who consider themselves wronged by the non-application of the principle of equal pay for equal work or work of equal value, in order to obtain compensation for damages and by placing the burden of proof on the defendant employer.
The initiative, moreover, also notes and proposes to address a more subtle aspect of the gender pay gap, the so-called ‘unexplained’ gender pay gap, i.e. discriminatory gender-based pay disparities that are unintentional and unconscious and that the employer can overcome precisely through the instrument of pay transparency.
In conclusion, the draft directive could respond to the critical issues that have emerged by establishing pay transparency rules to enable women workers to claim their rights through greater transparency within organisations, by facilitating the definition and application of key concepts of equal pay, such as ‘pay’ and ‘work of equal value’, while at the same time strengthening enforcement mechanisms, including judicial ones.
ITALIAN LEGISLATION ON GENDER PAY GAP
The first source of national legislation that provides for anti-discrimination provisions based on gender is the Italian Constitution. Article 3 of the Constitution states that: “all citizens have equal social dignity and are equal before the law, without distinction of sex, race, language, religion, political opinion, personal and social conditions. It is the duty of the Republic to remove obstacles of an economic and social nature, which, by limiting the freedom and equality of citizens, prevent the full development of the human person and the effective participation of all workers in the political, economic and social organisation of the country‘.
By virtue of this general provision in labour relations, the constitutional principle of professional equality among workers applies, which prohibits employers from discriminating (directly or indirectly) in the performance of work activities.
Article 37 of the Constitution is intended to provide specific guarantees: ‘a working woman shall have the same rights and, for equal work, the same remuneration as a worker […]’. This constitutional provision made possible the adoption of legislation to affirm full formal equality between male and female workers.
In particular, pursuant to Legislative Decree 198/2006 (the so-called Code of Equal Opportunities for Men and Women), any gender discrimination is prohibited with regard to:
- access to employment;
- pay conditions;
- employment levels, duties and career advancement; and
- supplementary social security benefits.
THE CURRENT SITUATION OF THE GENDER PAY GAP IN THE VARIOUS SECTORS IN ITALY 
- Manufacturing industry
The gender pay gap in the manufacturing sector is 13.2%.
Many companies in the metal-mechanical sector have initiated projects to increase the number of women in technical positions in the new organisational models.
In addition, the NCBA for the Metalworking Industry 5.2.2021 provides that in companies with more than 1,000 employees, of which at least 300 are employed in the same production unit, a ‘Joint Equal Opportunities Commission’ may be established, at the request of one of the parties, consisting of no more than 3 members representing the management and the unitary union representation respectively. This Commission is empowered to assess initiatives and actions to promote behaviour consistent with the principles of equal opportunities in the workplace; to facilitate the reintegration of female workers after maternity leave; to promote the employment of women in new technology-related roles; to prevent forms of sexual harassment in the workplace. It also examines any disputes on the application of equality principles. The company commission is in addition to the national commission and the territorial commissions whose establishment is also provided for by the same provision of the NCBA. It should be noted that, at present, the NCBA does not contain any specific reference to the gender pay gap.
- Financial Services
The gender pay gap in the financial services sector is 26.4%.
Many companies in the credit sector have initiated projects to promote the advancement of women in top positions.
In this sector, mixed company commissions can be set up to jointly examine and evaluate the issue of equal opportunities. The main purpose of these commissions is to plan positive actions with the aim of enhancing female resources and eliminating differences in treatment.
- Information and communication
The gender pay gap in the information and communication sector is 14.8%.
In this sector, the 12.11.2020 NCBA for Telecommunications sector provided for the establishment of a national forum in which the national secretariats of the trade unions and the governing bodies of the employers’ associations signing the agreement participate. This Forum, which is held once a year, constitutes the forum for analysis, verification, comparison and proposals between the parties on a series of issues, including equal opportunities. In addition, in relation to the topics dealt with by the Forum, specific joint commissions are set up for in-depth analysis, study, research and proposals, at sector level, on the relevant issues.
The gender pay gap in the electricity and gas sector is 11%.
In this sector, the gender gap is not high, but the presence of women is lower than that of men (female presence is less than 15%).
Unfortunately, it should be noted that there are currently no specific initiatives to compensate for this gap.
The NCBA for Energy and Oil sector of 21.7.2022 provides for the establishment, by January 2023, of a National Sector Observatory, which will have the task of carrying out consultancy and support activities in the development and implementation of gender equality policies, as well as research and monitoring activities on the conditions of gender equality within the companies of the sector, identifying and proposing best practices, enhancing training, knowledge and culture of equal opportunities, including on equal pay. Moreover, the contractual provision stipulates that the companies in the sector undertake to send the Observatory the final balance of the activities related to initiatives for the promotion of equal opportunities culture carried out in the previous year, which will make it possible to monitor and assess the sector’s performance with reference to this issue.
REMUNERATION IN THE CORPORATE BODIES OF LISTED COMPANIES AND LARGER COMPANIES
For listed companies, there is a regulation on gender balance, contained in Law No. 160/2019, which established the quota (to be applied to the six renewals starting in 2020) to the extent of two-fifths of the administrative body, which is higher than the one-third quota provided for by the Golfo-Mosca Law (Law No. 120/2011, applicable to the three renewals after August 2012). As of the end of 2021, most issuers have applied the two-fifths gender quota: in particular, there are 131 companies with an average of four women on their boards, representing almost 44% of the board.
In addition to the rules protecting the representation of both genders within the corporate bodies of listed companies, Article 123-ter of Legislative Decree No. 58/1998 requires listed companies to prepare a report on remuneration, which is made available to the public at the company’s registered office, on the company’s website, or in any other manner provided for by the competent authority (CONSOB). This report must illustrate the company’s policy on the remuneration of members of management bodies, general managers and executives with strategic responsibilities with reference to at least the following financial year; it must also contain the procedures for the adoption and implementation of such policies.
On the other hand, with regard to all large companies with more than five hundred employees and an asset value of more than twenty million euros or total net revenue of more than forty million euros, Legislative Decree No. 254/2016, issued with a view to corporate sustainability, has required such companies to prepare a non-financial policy document. This document must also indicate social and personnel management aspects, including actions taken to ensure gender equality.
Other smaller companies may draw up voluntary non-financial statements in accordance with the provisions of Legislative Decree 254/2016.
At the European level, it is worth mentioning that, on 23 November 2022, the Parliament finally adopted the directive on gender balance in listed companies (so-called ‘Women on Boards’), ten years after the proposal was tabled”).
The measures contained in the directive will be applicable to all large listed companies in the European Union, but not to small and medium-sized companies with fewer than 250 employees, and will entail, by the end of June 2026, the adoption of measures to increase the presence of women in top positions.
The aim is that, by that date, 40% of non-executive directorships or 33% of all director posts are filled by the under-represented gender.
Appointments shall be made on the basis of clear and neutral criteria and, in the case of equally qualified candidates, the candidate belonging to the under-represented gender shall be preferred.
There are no provisions to protect gender pay parity in corporate bodies, which is exacerbated by the fact that directors rarely hold the position of managing director, to which a higher remuneration usually corresponds.
THE GENDER EQUALITY STRATEGY AND THE NEW EQUAL PAY ACT
In full agreement with European recommendations and the extraordinary emergency context due to the pandemic, the Italian government decided to draw up a policy document called the ‘National Strategy for Achieving Gender Equality’, published in July 2021. The Strategy acts within a five-year time horizon and intends to produce changes of a structural and lasting nature.
To this end, a number of key areas of intervention have been identified and, among them, income is a strategic priority.
There are initiatives to:
- define wage inequality by law and identify a tolerance threshold, thus clearly identifying the parameters for the sanction resulting from any exceeding;
- identify the parameters, broken down according to the variables that may affect workers’ pay (such as position, qualification and seniority), in order to adopt a summary equal pay measurement system for the private sector;
- define guidelines for the adoption of a Gender Policy for the private sector and introduce ad hoc regulations that consider the right to request gender pay transparency of workers and the prohibition for (potential) employers to ask, during the interview phase, for information on the candidate’s previous wages in order to avoid the perpetration of discriminatory schemes;
- support working parents by increasing the parental leave allowance, currently 30% of the ordinary salary for a period of 6 months, as well as increasing parental leave days for fathers, with the aim of overcoming the stereotype of childcare as an exclusively maternal responsibility;
- reduce the pension gap due to maternity by considering periods of leave as useful for contribution purposes.
Consistently, a few months after the Strategy was published, Law No. 162 of 5 November 2021 was passed, amending some provisions of the Equal Opportunities Code adopted in 2006 and other provisions on the gender gap in employment.
The text aims to tackle the gender pay gap both through rewarding measures for companies that remove discrimination, and by adopting a series of measures to facilitate women’s participation in the labour market, facilitating the reconciliation of work and life times (e.g, increasing the allowance for parental leave, solidarity holidays or the creation of company crèches) by enshrining, in Article 28, the principle that “any discrimination, direct or indirect, concerning any aspect or condition of remuneration, with regard to the same work or to work to which equal value is attributed, shall be prohibited“.
This law acts in two directions: firstly, certain key definitions are defined and updated at the regulatory level, extending the cases of direct and indirect discrimination also to protect candidates at the personnel selection stage, and bringing under the umbrella of indirect discrimination, by which is meant that series of apparently neutral behaviours which may, however, constitute a difficulty for women, “any treatment or change in the organisation of working conditions and working hours which, by reason of sex, age, personal or family care requirements, pregnancy, maternity or paternity, including adoption, or by reason of the ownership and exercise of the corresponding rights, places or may place the worker in at least one of the following conditions:
- disadvantageous position in relation to the generality of other workers;
- limitation of opportunities to participate in the life or choices of the company;
- limitation of access to the mechanisms of advancement and career progression’.
At the same time, internal and external control systems are established, with related reward and sanction mechanisms, as indicated below:
- an obligation is established for the National Equality Adviser or Adviser to submit to Parliament, every two years, a report containing the results of the monitoring of the application of legislation on equality and equal opportunities in employment and the assessment of the effects of the provisions of the decree (Article 1, Law 165/2021 amending Article 20 of the Code of Equal Opportunities between men and women, referred to in Legislative Decree 198/2006)
- the scheme already provided for under Article 46 of Legislative Decree 198/2006 for public and private companies with more than 100 employees is extended to companies with more than 50 employees, which provides for the preparation of a report at least every two years on the situation of male and female employees on the basis of various defined parameters. This report must indicate the situation of male and female employees in each of the professions and in relation to recruitment, training, professional promotion, levels, changes in category or qualification, other mobility phenomena, redundancies, early retirements and retirements, and salaries actually paid.
The report must be forwarded to the company trade union representatives and to the regional Equality Advisor or Councillor, who processes the results and forwards them to the national Equality Advisor or Councillor, the Ministry of Labour and Social Policies and the Department for Equal Opportunities at the Presidency of the Council of Ministers. This obligation is also accompanied by a relative sanctioning apparatus that consists, in the event of failure to draw up the report, in the suspension for one year of any contribution benefits enjoyed by the company and, in the event of an incomplete or false report, in the application of a pecuniary administrative sanction ranging from 1,000 to 5,000 euro;
- a national ‘equality certification’ system is established, which is part of the objectives of the NRP, specifically in Mission 5 ‘Inclusion and Cohesion’, Component 1, Investment 1.3 (M5C1- 1.3) “in order to certify the policies and concrete measures adopted by employers to reduce the gender gap in relation to opportunities for growth in the company, equal pay for equal tasks, policies for managing gender differences and maternity protection”, providing incentives such as contribution relief of up to 1% of the total contributions due and €50,000 per year for each company, or a better ranking in public procedures for companies that obtain this certification;
- in conclusion, it is stipulated that, in order to ensure gender balance in the bodies of unlisted public companies, the less represented gender must constitute at least two fifths of the elected directors.
There is no doubt that the regulatory innovations introduced both at EU and national level are necessary agents of change towards a fairer society and represent valuable tools to counter gender pay discrimination in the workplace and a turning point towards effective and fair gender equality.