Brussels aims to toughen pay reporting obligations for companies

Brussels will introduce anti-wage discrimination legislation that will require large companies to disclose information on their gender pay gap and give workers the right to demand transparency over their salaries.

The European Commission on Thursday will publish a series of binding pay transparency measures designed to reduce wage inequality in the EU and shrink a gender pay gap that stood at 14.1 per cent in 2018 across the bloc, according to a draft seen by the Financial Times. 

The directive is the first time that Brussels has proposed legislation that will require all its 27 member states to enforce tougher pay reporting requirements on companies with more than 250 employees, and provide all workers with rights including the disclosure of colleagues’ salaries.

Other measures include prohibiting companies from asking potential recruits about their previous pay history, and giving employees the right to compensation in cases of pay discrimination. The directive is aimed at enshrining the principle of “equal pay for equal work”, the document reads. 

EU member states will have the power to decide how to penalise companies that fail to comply with the legislation, with fines as one option. The proposal will first need the agreement of a majority of member states and the European Parliament before it can be approved. 

Brussels’ transparency measures come amid growing evidence that the Covid-19 pandemic has disproportionately affected women in the workforce as they have taken on caring roles for family members and suffered a deterioration of work-life balance.

“[Women’s] over-representation in lower paid sectors and occupations, such as, for instance, hospitality, retail or personal services, has made them particularly vulnerable in the labour markets struck by the Covid-19 crisis,” says the commission’s proposal.

“It is important not to continue with the breach of the fundamental right to equal pay and not to continue to apply the biases which worsen women’s economic situation.”

About a dozen EU member states, mainly in the Nordics and western Europe, impose pay transparency obligations on companies.

Brussels wants the annual gender pay gap reporting to only apply to organisations with more than 250 employees, reflecting concerns that the added administrative burden could hurt smaller businesses struggling during the pandemic. All companies will be subject to rules that give their workers the right to know the pay of colleagues who work at a similar level.

Helena Dalli, EU commissioner for equality, told the FT: “The absence of pay transparency makes it difficult to detect, acknowledge and address gender-based pay discrimination.”

“With our proposal, all employers, regardless of the size of their enterprise, will have to provide pay information to workers to allow them to compare their pay with the average pay of co-workers doing the same work or work of equal value,” she said.

The annual gender pay gap topped 20 per cent in Estonia, Austria and the Czech Republic. The lowest pay gaps, of less than 5 per cent, were recorded in Luxembourg, Romania and Italy, according to figures from Eurostat. 

Employer groups such as the European Trade Union Institute have long called for binding transparency rules that will help empower workers in pay negotiations and make clear the extent of gender wage gaps across different sectors.

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