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Out-Law Analysis 5 min. read

Gender pay gap reporting: the international perspective

ANALYSIS: The gender pay gap (GPG) is not just a UK-centric issue, and understanding the international picture is becoming essential for multinational employers.

Thanks to the UK GPG reporting regulations, UK employers with 250 employees or more have already published at least one GPG report. A significant number of countries have introduced their own equality legislation and reporting requirements with a view to closing their gender pay gaps.

The global trend to address the gender pay gap has led to increased scrutiny from the media, employees, trade unions, shareholders and governments, meaning that the stakes are high. This is especially the case given the misconception by many that having a gender pay gap equates to having equal pay issues, which is not the case.

International employers will also want to be seen as leaders within their sector, able to attract and retain the best talent. This means they will need to ensure that they are aware of the legal requirements and initiatives in all the different jurisdictions in which they operate. The good news is that many jurisdictions face the same issues on a sector level, and have introduced similar reporting requirements and programmes to address the gap.

By considering their GPG as a global/group issue, and implementing a single 'fair pay' action plan, multinational businesses will have a strong base from which to comply with jurisdictional reporting requirements, and can more easily track their progress.

The main international requirements

There has been significant progress, particularly in Europe, on addressing gender pay gaps, with new legal requirements now in force in countries including the UK, France and Germany. However, even countries which may be traditionally more conservative in their approach have started introducing initiatives to ensure equal pay.

The UK's GPG reporting regulations came into force in April 2017, and the first reports had to be published on a central government database by April 2018. The UK regulations require private and voluntary sector employers with 250 employees or more to publish GPG data for their organisation on an annual basis. Similar requirements apply to public sector employers.

The UK requirements have been successful in improving pay transparency, with 100% compliance from employers within scope of the regulations to date. A leading think tank has now proposed increasing GPG reporting requirements to medium-sized employers, while the UK government has also begun consulting on how best to implement ethnicity pay reporting.

No GPG reporting requirements apply in Northern Ireland. The Employment Act (Northern Ireland) 2016 makes provision for GPG regulations, although with no sitting assembly it is uncertain whether, and if so when, such regulations will be brought into force. The Republic of Ireland has produced draft gender pay legislation, which it is anticipated will be passed in 2018 although there is no guaranteed timeline.

France passed new laws on gender pay this year, the provisions of which will become effective, subject to decrees, by 1 January 2019 for companies with at least 250 employees, and by 1 January 2020 for companies with at least 50 employees. Companies will have a three-year time period to be compliant with GPG indicators set by the decrees, failing which they may be fined 1% of their total wage bill. Companies will be required to publish annually the results of their efforts to close their gender pay gaps.

New pay transparency measures in Germany entered into force this year. They allow employees of businesses with more than 200 employees to request information regarding the amount that employees of the opposite gender working in an equal position in the same region are paid, provided that there are more than five such employees in the business. The request, which can be repeated every two years, may include a request for an explanation on how the employee's pay was calculated.

The German legislation also introduced new reporting requirements for companies with more than 500 employees. These companies must introduce mechanisms to equalise pay for both sexes, and must report on the measures that they have implemented. Data gathered by the European Commission suggests that Germany has one of the biggest gender pay gaps anywhere in the EU, and the goal of the German government is to reduce the gap to 10% by 2020.

Few statistics exist in relation to gender pay discrepancies in traditionally more conservative countries like China and the UAE. However, even in these countries, the principle of equal pay for equal work is enshrined, or will be enshrined, in law. China's State Council has issued and implemented an 'Outline on Women Development in China for Year 2011 to 2020', urging that measures should be taken to procure equal pay for equal work, although we are not aware of any specific initiatives to close the gender pay gap.

The UAE Cabinet passed the Gender Equal Pay bill in April 2018, although the legislation has not yet been implemented. This draft law aims to guarantee equal pay for men and women, as provided for in Federal Law No. 8 of 1980 (the UAE Labour Law). A federal entity, the UAE Gender Balance Council, has also been established to help reduce the pay gap between women and men by empowering women and enhancing their role in the development of the UAE.

Sector-specific trends

Analysis of the UK's first GPG reports shows that the gaps vary across different business sectors, ranging from 10% in the manufacturing sector to 22.5% in the financial services sector. But sector-level pay gaps are not a UK-centric issue, as a look at the data from different jurisdictions shows.

We reviewed GPG data across five industrial sectors, with input from over 20 countries spanning four continents. The financial services and construction sectors typically have much higher pay gaps, regardless of jurisdiction, than the energy sector, for example.

We also found commonality across sector-specific initiatives. In the financial services sector, the UK, Bulgaria, Spain and Italy all have a focus on increasing the proportion of women in the sector, in particular in senior management positions. Over 300 firms have signed up to the UK's Women in Finance Charter as of November 2018; committing them to identifying barriers to women entering and progressing in the sector and to increasing the proportion of women in senior management roles to 50% by 2020. By way of comparison, Spain's 'Plan Alcanza' includes three leadership programmes, which are directed at identifying and supporting women of high potential at key points in their careers.

In the construction sector, there are a number of country-specific initiatives to increase the number of women employed in technical positions. The Republic of Ireland, where the construction sector was 93.6% male as of 2016, is developing a National STEM Education Policy Statement, to promote greater uptake by girls of science, technology, engineering and mathematics subjects. In Italy, many companies in the metalworking sector have started up projects to increase female presence in technical posts, while Engineers Canada has launched a '30 by 30' initiative aimed at increasing the percentage of newly-licensed engineers who are women to 30% by the year 2030.

Next steps

Multinational companies caught by the UK GPG reporting requirements will in many cases find it artificial to consider their gender pay gap on a UK-centric basis. Many group companies will work closely together, and it is incorrect to divide the labour force geographically.

However, the UK methodology (from both an equal and gender pay perspective) provides a reasonable starting point for multinational companies seeking to better understand the overall picture relating to how gender is aligned with pay within their organisation. Legal advisors with expertise in remuneration and reward can conduct a legally privileged fair pay review using the UK methodology, which can also include global GPG calculations for individual employing entities within the corporate group. Such a review can include approaching local counsel to verify the UK methodology and allow you to understand the equal pay risks in each jurisdiction in which you operate.

Addressing GPG as a global issue will allow you to present the full picture to your employees, while acting in the spirit of transparency which the UK regulations are designed to promote. They will also enable you to take a 'one business' approach to tackling any gaps that emerge, for the benefit of the workforce as a whole.

Chris Evans and Susannah Donaldson are employment law experts at Pinsent Masons, the law firm behind Out-Law.com.

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