Scope:

The evaluation’s scope is limited to analysing the relevant provisions of Directive 2006/54/EC with a view to improving implementation of the equal pay principle, its enforcement and protection of victims of discrimination, taking into account other existing legal provisions (Art. 157 TFEU, having a direct horizontal effect) and the non-binding 2014 Pay Transparency Recommendation and their impact. This scope allows the evaluation to focus on the implementation of the legal provisions related to protecting the victims of pay discrimination and the related pay transparency measures.

Evaluation findings

The evaluation confirmed that the Recast Directive and the Pay Transparency Recommendation are important legal instruments supporting the application of the equal pay right, but it also concluded limited progress on increasing pay transparency by Member States and evidenced, in particular, vastly distinct and largely inefficient systems operating in most Member States – making equal pay an inert legal provision. The evaluation suggested a number of problematic areas deterring victims from enforcing their right and requiring further action:

• Definitions: Existing legal concepts such as ‘pay’ and ‘work of equal value’ are not defined uniformly across national legislation, and require the assessment of factors that can be complex. It is not always easy to determine what counts as equal work, or work of equal value. This deters victims of pay discrimination from bringing claims, and makes claims more complex for litigants and courts to manage. Greater clarity on how to apply existing concepts could be helpful.
• Pay transparency: Lack of transparency about pay within organisations means that pay discrimination goes undetected or, where suspected, is difficult to prove. Binding measures could improve pay transparency, encouraging organisations to review their pay structures to provide for equal pay for women and men for the same work and work of equal value, and enabling victims of discrimination to bring claims. Equality bodies, labour inspectorates and trade unions can play an important role in this context.
• Burden of proof: Although it is only necessary to establish a presumption of discrimination before the burden of proof shifts to the employer, it is not always easy for victims and courts to know how to establish this. The evaluation suggests that pay transparency measures have the potential to support the use of the reverse of the burden of proof, by helping workers determine the average pay for women and men performing the same work or work of equal value. Enabling workers to provide evidence which allows discrimination to be presumed would swiftly trigger the reverse burden of proof for the employer.
• Victim support: Building an equal pay case is a complex and therefore costly task. For many victims, it is too difficult to bring a claim without legal representation or support. They may also fear further victimisation (even though the Recast Directive prohibits it). The fact that victims are unlikely to bring claims reduces the deterrent effect of the legislation. Equality bodies could be better equipped to assist victims of discrimination, either by bringing claims on their behalf or by being empowered to investigate cases and take decisions. Better legal aid could also be made available to victims.
• Compensation and other sanctions: Compensation awards are not high enough to have a deterrent effect on employers. Sanctions could be improved to increase their deterrent effect.
• Gender-neutral job evaluation and classification systems: Such systems help detecting indirect pay discrimination related to the undervaluation of jobs by measuring and comparing jobs whose content is different but of equal value. In this way, they support a transparent pay system and enhance clarity on what is considered work of equal value, thus contributing to reducing the gender pay gap. Nevertheless, the use of gender-neutral job evaluations and classifications as part of wage determination is generally limited in the private sector.
• Awareness raising: Lack of awareness about equal pay rights, and the right not to be victimised for bringing a claim, means that injustices are more likely to continue. More needs to be done to raise awareness of these rights.

Estimated savings and benefits

As to costs, the efficiency assessment found no evidence of significant administrative burden linked to the EU provisions. It suggests that a better enforcement of equal pay — one of the EU fundamental rights — can be achieved at a reasonable cost. The costs for companies would differ between Member States, depending on the scope of the implementing measure, they would in principle be limited, even in the case of the most burdensome measures such as pay audits.

As to the benefits, the analysis compares the magnitude of short-term costs for business to the potential long-term benefits from reducing the gender pay gap. These simple computations show that the benefits in terms of higher female earnings from closing the gender pay gap would outweigh any possible costs incurred by employers and Member States in a relatively short period of time (2 weeks in our rough calculations).

Which objective(s) does the Commission pursue?

The overall objective of the initiative is to improve the implementation and enforcement of the principle of equal pay for equal work or for work of equal value and support the elimination of gender bias and discrimination in pay practices. This initiative shall enable change in attitudes towards women’s pay by increasing awareness and debate around reasons for structural pay differences.

In addition, the initiative indirectly facilitates a better targeting of policy measures aimed at reducing the gender pay gap. While pay discrimination is only one of many factors contributing to the gender pay gap, the lack of conceptual understanding of pay, earnings and pensions from a gender perspective, and the related lack of relevant measurements, make policy targeting more difficult and unfocused. Identifying pockets of disparities will create conditions and a change in attitude to better target and tailor policy action, thus improving gender equality overall.

More specifically, the main elements of the proposal are the following:

- a right to information on pay prior employment, a prohibition to ask salary history and a prohibition of non-disclosure agreements on salaries.

- a right to request information on pay which aims at ensuring that workers can compare themselves, at any time during the employment relationship, with co-workers of the other sex carrying out equal work or work of equal value.

- pay reporting on pay gap between female and male workersfor employers with at least 250 employees.

- joint pay assessments in case of statistically relevant indications of pay inequalities.

 

Furthermore, the proposal clarifies what should be understood by the concept of ‘work of equal value’ and introduces measures to improve access to justice and strengthen enforcement mechanisms.

Estimated savings and benefits

The Commission has looked at ways of simplifying and reducing burdens, in particular for smaller companies. The measures in this proposal, which are based on national practices in the EU and elsewhere, are designed to strengthen the right to equal pay while limiting possible costs and burdens and taking account of the difficult economic situation in the EU as a result of the COVID-19 pandemic. The proposal thus takes account of the principle of proportionality. In particular, given the potential effort required to extract and report on pay information, the reporting obligation applies only to employers with at least 250 workers. The joint pay assessment will apply only to those employers in respect to which, following their annual report, there is a strong reason to believe that problems of gender pay inequalities may exist. The analysis shows that the measures proposed in this directive involve modest costs and no evidence was presented of cheaper ways of achieving the same objectives with the same effectiveness.