What Is the Gender Pay Gap and How Is It Measured in the EU?

European Commission

MEMO

Brussels, 7 March2014

Commission Recommendation on pay transparency and the gender pay gap - Frequently Asked Questions

What is the gender pay gap and how is it measured in the EU?

The gender pay gap is shown as a percentage of men’s earnings and represents the difference between the average gross hourly earnings of male and female employees across the EU economy.

Gross earnings are wages or salaries paid directly to an employee before any deductions for income tax and social security contributions are made. In the EU, data on the gender pay gap is based on the methodology of the Structure of Earnings Survey.

The data are collected on a yearly basis and it includes all employees from companies with 10 or more employees without restrictions for age and hours worked.

Why is the Commission putting forward a Recommendation to tackle the gender pay gap?

The principle of equal pay for equal work or work of equal value is enshrined in the EU Treaty. At the same time, the gender pay gap has been stagnating at around 16% across Europe for several years(IP/14/190). Tackling the gender pay gap is a priority of the Commission’s policy on equality between women and men. It is one of the priority areas of the European Commission Strategy for equality between women and men 2010-2015.

The gender pay gap is a clear showcase of the obstacles women still face when entering and staying in the labour market.Closing the gender pay gap would contribute to a better use of a highly skilled female workforce thus benefitting the economy as a whole. It would also contribute to creating a more equal society and tofinancial and economic independence for women.

Gender pay gap statistics

Source: Eurostat 2012 except for EL (2010)

What are the causes of the gender pay gap?

The gender pay gap is a complex issue caused by multiple factors, which go far beyond the issue of equal pay for equal work. Such factors include for example:

• the fact that women and men work in different sectors and occupations, with female-dominated jobs (as for example in the case of social services) beingpaid less, as a general rule;
• the under-representation of women in senior and leadership positions;
• the unequal burden of family and domestic responsibilities between women and men which results in women working more part-time and having shorter careers; or
• discriminatory and gender-biased workplace practices and pay systems.

The effect of the gender pay gap goes beyond working life, as it accumulates over someone’s life and results in women receiving lower pensions in comparison to men. The 'gender pension gap' shows that on average across the EU, women’s pensions are 39% lower than men’s (IP/13/495).

Has there been any progress in reducing the gender pay gap recently?

The gender pay gap has slightly decreased from 17.7% in 2006 to 16.4% in 2012. This trend could be misunderstood as an improvement of the situation. The very slight decreasing trend for the past years is largely a result of the economic crisis, which has seen men's earnings decrease, rather than women's earnings increaseFor example, the manufacturing sector, traditionally characterised by a high gender pay gap, lost ground at the beginning of the economic crisis.

How can closing the gender pay gap help the economy?

Closing the gap can benefit companies. Employers who promote gender equality contribute to better working conditions for everyone. Paying women and men for their actual skills and valuing their contribution on an equal basis helps recruiting and retaining the best and most talented staff.

There are also benefits for the economy as a whole. The under-utilisation of women's skills is a lost resource for the economy and for society at large. A salary not matching the employee's and experience discourages women from entering or staying in the labour market, making the labour market less efficient than it would be under optimal conditions. With an ageing population and falling birth rates, this is an even more pressing problem.

Finally, closing the gender pay gap contributes to creating a more equal society and helps making women financially and economically more independent.

What are Member States already doing to tackle the gender pay gap?

Several Member States have measures in place aiming to tackle the gender pay gap through increased pay transparency. The Commission's Recommendation has been inspired by such national measures:

The Austrian Law on Equal Treatment obliges private companies and public sector bodies with more than 150 employeesto publish the average employees’ wages by occupational groups and gender every two years.

In Finland, employers with 30 or more employees are obliged to promote equality according to a plan concerning pay and other terms of employment drawn up every year in cooperation with employees’ representatives. The plan has to include an analysis of the placement of women and men in different jobs, of the job classification as well as of pay differentials. It must contain measures for achieving equal pay.

In France enterprises employing at least 50 employees have an obligation to produce and action plan on gender equality. Sanctions are foreseen if companies failto do so. For the first time, as a result of a 2012 decree, two firms were found in April 2013 not to have complied with the legislation on equal pay. Social partners arealso obliged to actively consider the reduction of the gender pay gap in collective bargaining.

Italian legislation includes the requirement for companies with more than 100 employees to compile a report on the working conditions of women and men in the company. The report is drafted every two years and contains information about many factors, including the pay gap between women and men in the organisation.

The Portuguese Resolution on 8 March 2013 includes measures to guarantee and promote equality of opportunity and results between women and men in the labour market, including the elimination of wage gaps. The measures include reporting on gender gaps in wages by industry.

In Swedenevery three years employers with at least 25 employees have to draw up an action plan for equal pay. Such an action plan must indicate the measures that need to be taken to bring about equal pay for equal work or work of equal value’ including a cost estimate and a time plan not exceeding three years.

The UK Equality Act makes it unlawful for an employer to prevent or restrict people from disclosing or seeking to disclose their pay to others, where the purpose of any disclosure is to determine whether there are links between differences in pay and sex or other characteristics protected against discrimination.

What is the Commission doing to close the gap?

On 9 December 2013, the Commission adopted a report assessing the application of EU-provisions on equal pay in practice in all Member States (IP/13/1227). It found that the main challenge for all EU countries is the correct application and enforcement of the rules on equal pay, as established by Directive 2006/54/EC. It also found that equal pay is hindered by a number of factors, including a lack of transparency in pay systems.In order to support Member States and other stakeholders with the proper implementation of the existing rules it includes a section on gender-neutral job evaluation and classification systems, a summary of equal pay case law of the European Court of Justice, examples of national case-law on equal pay and examples of national best practices.

Besides monitoring the correct implementation of EU legislation, the Commission has continued to take action on all fronts to tackle the pay gap, including the Equality Pays Off Initiative during 2012 and 2013, which supported employers in working to closethe gender pay gap with the organisation of workshops and trainings.

In 2013, the Commission proposed country-specific recommendations under the third European Semester (see IP/13/463) to11 Member States[1]on female employment, on childcare availability/quality and/or full-day school places and on care services.The Commission also initiated the European Equal Pay Day to raise awareness of inequalities in pay; it helps theexchange of best practices among Member States and finances Member State initiatives through the Structural Funds and actions by civil society.

What does the Commission Recommendation propose?

The Recommendation aims to assist Member States in finding the right approach to implementing the principle of equal pay more effectively. This will help to combat pay discrimination and contribute to tackling the persistent gender pay gap.

The Recommendation focuses on pay transparency, which is essential for effectively applying the equal pay principle. It presents a tool box of measures designed to assist Member States in taking a tailor-made approach to improving wage transparency.

Member States are encouraged to implement the most appropriate measures taking into account their own circumstances and to implement at least one of a series of core measures. These measures include the entitlement of employees to request pay information;company reporting; pay audits or theinclusion of equal pay issues in collective bargaining.

Increased pay transparency can reveal a gender bias or discrimination in the pay structures of an organisation. It enables employees, employers and social partners to take appropriate action to ensure effective implementation of the equal pay principle.

What does the Recommendation say on transparency, reporting and pay audits?

The Recommendation sets out a broad range of measures in order to addresswage transparency. These include or example:

• The entitlement of employees to request information on pay levels, including on complementary or variable components such as bonuses or payments in kind. They should be broken down by gender, for categories of employees doing the same work or work of equal value;
• Employers' regular reporting of average remuneration by category of employee or position, broken down by gender (this requirement applies only to large and medium companies);
• Conducting pay audits in large companies and making them available to workers' representatives and social partners upon request. These audits should include an analysis of the proportion of men and women in each category of employee or position and an analysis of the job evaluation and system used in the company. The provision does not apply to small and medium sized enterprises (SMEs);
• The inclusion of equal pay issues and pay audits in collective bargaining.

The Recommendation encourages Member States to put in place at least one of these actions. The approach of leavinga choice of at least one of the measures to the discretion to Member States leaves flexibility to the countries to decide which action is most appropriate in their specific situation to tackle the gender pay gap at home.

What other measures does the Commission recommend to Member States?

Other measures provided in the Recommendation that would also contribute to increased wage transparency are:

• Improved and up-to-date statistics on the gender pay gap. The Recommendation asks Member States to improve the availability of up-to-date gender pay gap data by providing Eurostat with statistics annually and in a timely manner. Member States are also encouraged to provide the Commission with data on the number and types of pay discrimination cases occurring at national level;
• A clear definition of "work of equal value" in the respective national equal pay legislation and the promotion of gender-neutral job evaluation and classification systems. In line with the jurisprudence of the European Court of Justice, the value of work should be assessed and compared on the basis of objective criteria, such as educational, professional and training requirements, skills efforts and responsibility, work undertaken and the nature of tasks involved;
• Enhancing the role of national equality bodies in tackling gender pay discrimination. Member States are encouraged to ensure that national equality bodies' powers and mandates cover issues related to gender pay discrimination. Member States are also encouraged to reduce procedural obstacles for bringing equal pay cases to court. They should, for example, enable equality bodies to represent individuals in cases of pay discrimination;
• The consistent monitoring and enforcement of the equal pay principle;
• Awareness-raising activities related to equal pay and the gender pay gap.

Are there special exemptions for small and medium sized enterprises (SMEs)?

SMEs are exempted from some of the measures on pay transparency depending on the potential administrative burden these measures would incur.

Pay audits will only apply to large companies with more than 250 employees.

Measures on regular reporting by companies on pay levels only apply to medium and large companies with more than 50 employees, exempting micro and small enterprises.

What are the next steps?

Member States are asked to inform the Commission of all the measures they have taken in accordance with the Recommendation by 31 December 2015.

This will enable the Commission to closely monitor the situation, to draw up a report on the progress achieved while implementing the Recommendation and assess the potential need for further measures.

For more information:

European Commission – Gender pay gap:

European Commission - Equality Pays Off:

Homepage of Vice-President Viviane Reding, EU Justice Commissioner:

Follow the Vice-President on Twitter: @VivianeRedingEU

Follow EU Justice on Twitter: @EU_Justice

Annex: The gender pay gap figures in EU countries

2008 / 2009 / 2010 / 2011 / 2012 / Difference 2012- 2008
EU / 17.3 / 17.2 (p) / 16.2 / 16.4 (p) / 16.4 (p) / -0.9
BE / 10.2 / 10.1 / 10.2 / 10.2 / 10.0 / -0.2
BG / 12.3 / 13.3 / 13.0 / 13.0 / 14.7 / 2.4
CZ / 26.2 / 25.9 / 21.6 / 22.6 / 22.0 / -4.2
DK / 17.1 / 16.8 / 15.9 / 16.3 / 14.9 / -2.2
DE / 22.8 / 22.6 / 22.3 / 22.2 (p) / 22.4 (p) / -0.4
EE / 27.6 / 26.6 / 27.7 / 27.3 / 30.0 / 2.4
IE / 12.6 / 12.6 / 13.9 / 11.7 (p) / 14.4 (p) / 1.8
EL / 22.0 / : / 15.0 / : / :
ES / 16.1 / 16.7 / 16.2 / 17.8 (p) / 17.8 (p) / 1.7
FR / 16.9 / 15.2 / 15.6 / 15.0 (p) / 14.8 (p) / -2.1
HR / : / : / 15.5 / 17.6 / 18.0 / :
IT / 4.9 / 5.5 / 5.3 / 5.8 / 6.7 / 1.8
CY / 19.5 / 17.8 / 16.8 / 16.4 / 16.2 / -3.3
LV / 11.8 / 13.1 / 15.5 / 13.6 / 13.8 / 2.0
LT / 21.6 / 15.3 / 14.6 / 11.9 / 12.6 / -9.0
LU / 9.7 / 9.2 / 8.7 / 8.7 (p) / 8.6 (p) / -1.1
HU / 17.5 / 17.1 / 17.6 / 18.0 / 20.1 / 2.6
MT / 9.2 / 7.7 / 7.2 / 6.2 / 6.1 / -3.1
NL / 18.9 / 18.5 / 17.8 / 17.9 / 16.9 / -2.0
AT / 25.1 / 24.3 / 24.0 / 23.7 / 23.4 / -1.7
PL / 11.4 / 8.0 / 4.5 / 5.5 / 6.4 / -5.0
PT / 9.2 / 10.0 / 12.8 / 12.5 / 15.7 / 6.5
RO / 8.5 / 7.4 / 8.8 / 11.0 / 9.7 / 1.2
SI / 4.1 / -0.9 / 0.9 / 2.3 / 2.5 / -1.6
SK / 20.9 / 21.9 / 19.6 / 20.5 / 21.5 / 0.6
FI / 20.5 / 20.8 / 20.3 / 19.6 / 19.4 (p) / -1.1
SE / 16.9 / 15.7 / 15.4 / 15.8 / 15.9 / -1.0
UK / 21.4 / 20.6 / 19.5 / 20.1 / 19.1 / -2.3

Source: Eurostat, SES

*(p) = provisional data

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[1]Austria, Czech Republic, Estonia, Germany, Hungary, Italy, Malta, Poland, Slovakia, Spain and the United Kingdom