Sat. Oct 1st, 2022

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

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

{SEC(2021) 101 final} – {SWD(2021) 41 final} – {SWD(2021) 42 final}

EXPLANATORY MEMORANDUM

  1. CONTEXT OF THE PROPOSAL
  • Reasons for the proposal

The right to equal pay between women and men for equal work or work of equal value is one of the EU’s founding principles enshrined in the Treaty of Rome. The requirement to ensure equal pay is set out in Directive 2006/54/EC (the ‘Recast Directive’) 1 as complemented in 2014 by a Commission Recommendation on pay transparency (the ‘2014 Recommendation’) 2 . Despite this legal framework, the effective implementation and enforcement of this principle in practice remains a challenge in the EU. Lack of pay transparency has been identified as one of the key obstacles 3 . The gender pay gap 4 in the EU remains around 14%. The pay gap has long-term impact on the quality of women’s life, their increased risk of exposure to poverty and on the persisting pension pay gap, which is 33% in the EU 5 . The Covid-19 pandemic and its economic and social consequences makes it even more pressing to tackle this issue, given that the crisis has hit female workers especially hard 6 .

The European Parliament has repeatedly called for more action at EU level to enhance the application of the equal pay provisions. The Council has called for action from both the Member States and the Commission. In June 2019, it asked the Commission to develop concrete measures to improve pay transparency 7 .

The European Pillar of Social Rights includes gender equality and the right to equal pay among its 20 principles 8 . In its 2017-2019 action plan on tackling the gender pay gap 9 , the Commission assessed the need for further legal measures to improve the enforcement of the principle of equal pay and opportunities for improving pay transparency. In her political guidelines 10 , President von der Leyen announced that the Commission would bring forward new binding pay transparency measures. This commitment was reaffirmed in the gender equality strategy 2020-2025 11 .

This initiative follows the Commission’s retrospective evaluation 12 of the relevant legal provisions (the ‘2020 evaluation’) and several other reports on the matter 13 . Those assessments concluded that the right to equal pay is not adequately applied nor enforced in practice and that pay transparency is lacking in many Member States.

  • Objectives of the proposal

The initiative aims at tackling the persisting inadequate enforcement of the fundamental right to equal pay and ensuring that this right is upheld across the EU, by establishing pay transparency standards to empower workers to claim their right to equal pay.

The proposed directive pursues these objectives by:

establishing pay transparency within organisations;

facilitating the application of the key concepts relating to equal pay, including ‘pay’ and ‘work of equal value’; and

strengthening enforcement mechanisms.

Pay transparency allows workers to detect and prove possible discrimination based on sex. It also shines light on gender bias in pay systems and job grading that do not value the work of women and men equally and in a gender-neutral way, or that fail to value certain occupational skills that are mostly seen as female qualities. Since such bias is often unconscious, pay transparency can help raise awareness of the issue among employers and help them identify discriminatory gender-based pay differences that cannot be explained by valid discretionary factors and are often unintentional. Pay transparency is thus an essential tool for dispelling doubts on equal pay between men and women and for supporting the elimination of gender bias in pay practices. It can also foster change in attitudes towards women’s pay by raising awareness and stimulating debate around the reasons for structural gender pay differences. Beyond the simple compliance with the principle of equal pay, it may also constitute a trigger for reviewing gender equality policies more generally at company level, and promote closer cooperation between employers and workers’ representatives.

  • Consistency with existing policy provisions in the policy area

Building on the Recast Directive and the 2014 Recommendation, this proposal introduces new and more detailed rules to ensure compliance with the principle of equal pay between men and women for equal work or work of equal value.

The European Pillar of Social Rights and its 20 principles are the EU’s compass to build a fairer Europe and to promote better living and working conditions for all. On 3 March 2021, the Commission put forward an ambitious Action Plan to ensure its implementation across the EU.

This proposed directive is part of a broader package of measures and initiatives addressing the root causes of the gender pay gap and economic empowerment of women. Pay discrimination and bias in pay structures are only one of the root causes of this gender pay gap of 14%, besides other causes and factors, such as horizontal and vertical labour market segregation, full time versus part-time work as well as unpaid care-related constraints. Even without these causes and factors, there is still a so-called “unexplained” gender pay gap, which accounts for two thirds of the gender pay gap in the EU Member States, and which this initiative aims to tackle. It is also important to note that the employment history, including the gender pay gap, together with the design of the pension system, affects the gender pension gap.

This initiative is part of a multipronged approach, including, among others, the Work-Life Balance Directive 14 , sectoral initiatives to fight stereotypes and improve gender balance, and a proposed directive on improving gender balance on the boards of large EU listed companies 15 .

The proposed Directive is fully in line with the EU’s commitment to the UN 2030 agenda and contributes to the implementation of the UN Sustainable Developments Goals (SDG), in particular SDG 5 on achieving gender equality and empowering all women and girls 16 .

Consistency with other Union policies

This proposal is coherent with the initiative aimed at increasing companies’ reporting of relevant non-financial information 17 . It is consistent with and supported by the EU minimum wage initiative 18 and the upcoming sustainable corporate governance initiative 19 .

[…]

Source: CELEX:52021PC0093: Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 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