Thought leadership from our experts

Reducing the Gender Pay Gap: Mission (not) Impossible

In the last few years, gender pay gaps have become increasingly topical and several studies and statistics have been published on the issue.

An increasing number of countries, including Italy, have either adopted or begun adopting specific regulations mandating equal pay regardless of gender, and provided for specific gender pay reporting obligations. For example, this is the case in the UK where gender pay gap reporting legislation has recently been introduced, and in Norway, where one such regulation came into force in 2018.

The increased media attention and the developing regulations on this issue have contributed to a rise in employer awareness regarding the potential consequences arising from non-compliance with obligations on gender pay equality and gender pay reporting. As a matter of fact, I've personally noticed a considerable increase in the amount of requests I receive from my clients for advice on such aspects.

A recent multijurisdictional survey on gender pay gaps conducted by Ius Laboris – the largest international Alliance of legal specialists in labour, employment and pension law, with over 1,400 lawyers in more than 50 countries – demonstrated that this trend cannot only be found in Italy, but also in other countries, both in and out of the EU.

With regard to equal pay between men and women, it should be noted that, in Italy, there is no general principle of "equal pay for equal work" that isn't specifically linked to discriminatory grounds, meaning that employees can receive different salaries even if they perform the same duties, as long as the basis for the pay difference isn't discriminatory. In fact, there is a general non-discrimination principle under which any act or agreement is null and void if it directly or indirectly provides for different treatment on the basis of race, ethnicity, language, gender, etc.

Legal frameworks similar to the Italian one can also be found in other countries, such as in Austria, where, in spite of the fact that there is basically no general principle of "equal pay for equal work" that isn't specifically linked to discriminatory grounds, Austrian courts have established a legal principle prohibiting employers from treating an individual employee differently from other employees (in terms of working conditions, compensation and fringe benefits), unless they have justifiable cause to do so. The situation is similar in Germany too, where, irrespective of a general "equal pay for equal work" principle, salaries are a matter for negotiation (unless mandatory provisions apply), making different salaries possible. Similarly, under the Equality and Anti-Discrimination Act in Norway, equal pay for equal work is specifically linked to gender discrimination.

On the contrary – unlike in Italy or in the other previously mentioned countries – in France, there is a general principle of "equal pay for equal work" that isn't specifically linked to discriminatory grounds, and this principle has been supported by case law since 1996. A similar approach is also taken in Mexico, where the Mexican Federal Labour Law provides (as a general rule, not specifically linked to any discrimination grounds) that equal work performed under the same conditions (in terms of position, schedule and efficiency), must receive equal pay. Finally, further examples include Russia, where, under the Russian Labour Code, all employers are obligated to provide employees with equal pay for work of equal value, as according to a general principle that isn't specifically linked to discriminatory grounds. In the USA, the Equal Pay Act of 1963 requires companies to pay members of either sex the same wages for equal work.

Having described the general legal framework, it would be useful to add that, in Italy, there is a regulation on gender pay equality that prohibits the unequal treatment of employees based on their gender, including in relation to compensation. In particular, Art. 28 "Prohibition on wage discrimination" of Legislative Decree 198/2006, entitled the "Code of equal opportunities between men and women" (hereinafter, the "Code"), prohibits all direct and indirect discrimination – concerning any aspect or condition of remuneration – with regard to the same job or a job considered as having the same value.

It is important to clarify that the gender equality regulation in Italy considers aspects other than mere compensation: as a matter of fact, Art. 29 "Prohibition on discrimination concerning work and career progression" of the Code, prohibits any discrimination based on gender with regard to the assignment of a job level, tasks or career progression.

Other countries such as Austria, Norway, France, Poland and the USA also have specific legal regulations on gender pay equality, which similarly consider aspects besides compensation.

Contrary to the aforementioned countries, in India, there is no statute providing for the consideration of aspects other than compensation for the purpose of gender equality. However, there is an increasing trend of multinational companies becoming more sensitive to these factors as well. In Mexico, no specific law provides for the inclusion of aspects other than compensation, but it is the criteria used by local Labour boards when resolving employment-related disputes.

There is also a regulation in Italy concerning the obligation to report gender pay differences. Under Art. 46 "Reporting on the personnel situation" of the Code, public and private companies employing over 100 people are required to draw up a report at least every two years, containing information on male and female employees with specific reference to their working conditions and especially the overall remuneration paid to them. The report must be shared with the union representatives and with the competent public authorities set up by the Code, which will then process the collected data and transmit it to the Ministry of Labour.

It may be useful to clarify that, in Italy, employers are not directly required to draw up an action strategy for reducing gender pay gaps revealed by the report (if any). However, under Art. 37 of Code, if discrimination is found, an action strategy aimed at reducing the gender pay gap within a maximum of 120 days could be required.

A regulation providing for an obligation to report gender pay differences also applies in Germany for employers with generally more than 500 employees. In Norway, all companies must not only report gender pay differences, but undertakings with more than 50 employees are also obliged to issue a statement concerning equality measures that have been implemented to promote equality. Likewise, employers with more than 50 employees in France must present an annual report to the works council addressing gender equality.

It is very important for employers to be aware of the existence of any regulation mandating equal pay regardless of gender, as well as any gender pay gap reporting legislation, given that there are often specific sanctions for companies that fail to comply.

For example, in Italy, the law provides for administrative penalties should a company not comply with the reporting duty or should discrimination be found. Furthermore, according to Art. 40 of the Code, the burden of proving the non-existence of discrimination is placed on the employer if the employee cites factual elements – including those deriving from statistical data and relating to remuneration – capable of providing grounds for the presumption of the existence of gender discrimination. In consideration of such rule, even if the results of a report don't in themselves give employees grounds for directly filing a claim, employees could use them as evidence of discrimination. Therefore, particular care should be taken when drafting said report.

France is another country in which there are specific sanctions for non-compliance with the gender pay equality principle or with any reporting requirements. There is an obligation to negotiate with Labour unions on gender pay and to negotiate a company agreement on gender equality; if an agreement is not reached, the employer must present an action plan. Criminal sanctions apply in the event of discrimination or in the event of obstruction to an employee representative's role, and a significant penalty per month of delay may be applicable if the company does not have a company agreement or an action plan in place.

The trend is clear: an increasing number of countries, including EU member states, are introducing gender pay gap reporting legislation or gender pay equality rules. Matters relating to gender pay gaps are expected to rise, thereby becoming a real issue for employers in terms of possible claims arising from individual employees, unions or even in terms of possible class actions. Therefore, it is crucial that all employers conduct audits to check their compliance with any existing regulation mandating equal pay and the reporting of gender pay differences, taking action where necessary in order to reduce the company's gender pay gap.

For the above-mentioned purpose, it should be considered that a gender pay gap can be the result of many issues which are not linked to deliberate discrimination but due to many different circumstances that disadvantage women in comparison with men. In this regard, women very often have more difficulty in career progression and in obtaining a related salary increase, perhaps due to possible career breaks taken for maternity leave or for the responsibility they bear in caring for children, etc. Although these kinds of issues are not always directly caused by employers' decisions, employers could take appropriate measures to reduce them in order to avoid discrimination claims. In this respect, Italy can be considered a good example. In fact, in order to remove obstacles to equal opportunities and substantial equality between men and women at work, under Art. 42 of the Code, employers are encouraged to adopt "positive actions", with the possibility of being reimbursed for the related expenses. In addition to the above incentive, further opportunities for employers that want to ensure substantial equality between men and women have recently been introduced in Italy through specific regulations aimed at granting employees a better work-life balance.

Furthermore, in Italy, Law no. 81 of 22 May 2017 introduced "smart working": a new way of performing work under an employment contract. "Smart working" allows employees to perform their work wherever they want (off company premises, at home, in public spaces, etc.) and with more flexibility as to their working hours. Additionally, the number of benefits in kind excluded from employment income has been recently expanded; thereby encouraging employers to introduce private welfare benefit plans for their employees.

In conclusion, there is still work to be done in order to achieve substantial pay equality between men and women. However, employers have the instruments to at least attempt to reduce the gap as well as the possible risks relating to non-compliance with the gender pay equality principle. The important thing is to identify issues in due time and take the appropriate measures before being forced to do so.