Germany: More Bureaucracy, Less Gender Pay Gap?

by Littler
Contact

Littler

[co-author: Dr. Richard Lauer]

Under the new German Remuneration Transparency Act, employers face complex review and reporting obligations. The gender pay gap in Germany for comparable work and equivalent job qualifications is still nearly 7%. In order to counteract this discrepancy, the Bundestag passed the "Act to Promote Transparency of Pay Structures," also known as the German Remuneration Transparency Act (Gesetz zur Förderung der Transparenz von Entgeltstrukturen, Entgelttransparenzgesetz) on March 30, 2017, which took effect on July 6, 2017. The intent of the required compensation policy and practice disclosures is to encourage non-discriminatory pay and to reduce gender-based pay inequality. A right to information for employees on the one hand, and various review and reporting requirements for employers on the other hand, serve to facilitate the adjustment of salaries.

What Does the Individual Right to Information Entail?

The German Remuneration Transparency Act allows employees to initiate a process to verify equal pay. In companies with more than 200 employees, all employees may request individual pay-related information from the works council or the employer, every two years, provided that the job activity to be used as a basis for comparison is performed by at least six employees of the opposite sex. Following an employee's assertion of this right, within three months the employer must disclose how much it pays employees of the opposite sex who perform comparable job activities, and how that pay is calculated.

What Other Obligations Does the Employer Have?

In companies with more than 500 employees, the employer must also regularly check compliance with the equal pay requirement by recording and analyzing audit procedures for compensation policies and practices. For employers without a collective agreement, this must take place every three years. In addition, these employers must prepare a report on gender equality and equal pay, identifying measures for ensuring equal pay as well as rules to achieve equal pay.

Must the Works Council be Involved?

The German Remuneration Transparency Act will strengthen works councils, the bodies representing employees' interests. In order to meet the individual right to information, the works council is allowed to view and evaluate lists of gross wages and salaries. In addition, works councils will have the right to participate in the planning and implementation of the company's audit procedure as well as the right to receive information regarding the choice of the auditing instruments.

How Are Violations of the Law Sanctioned?

If the employer does not comply with the request for information within three months, the burden of proof will shift. In the event of a dispute, the employer must prove that there is no breach of the principle of equal pay.  If the employer cannot provide the evidence, direct or indirect pay discrimination is presumed to exist. The employer will be required to remedy the pay discrimination, but the method for doing so will be at its discretion.  Whether the elimination of the pay disparity will include retroactive pay is not stipulated in the German Remuneration Transparency Act. Nor are any explicit sanctions for violations of the principle of equal pay defined. In any case, the provisions of Germany's General Act on Equal Treatment and the principle of equality under employment law give rise to retroactive claims for the payment of the compensation differences.

How Will Employers Structure Compensation Systems?

In principle, pay disparities for equal or equivalent work can be justified if the compensation system is gender-neutral. Different pay may not, however, be paid because of gender. In this respect, employers still have a certain latitude.

With regard to the review and reporting requirements, employers also have a certain degree of latitude over implementation. Employers may choose the appropriate instruments and methods, as well as the underlying assessment system. Ultimately, how pay differences, once ascertained, are eliminated is up to the employer. The law merely states that they must take "appropriate measures." Both the manner and the period of elimination remain at the employer’s discretion.

Therefore, despite the far-reaching obligations imposed by the German Remuneration Transparency Act, employers have some latitude in structuring and reviewing non-discriminatory pay practices. Whether the high administrative burden for employers justifies the new law to ensure gender equality remains to be seen. This determination will depend heavily on employee acceptance and any demonstrable gender-specific wage adjustments.

What Happens Now?

The right to information under the new law can be asserted for the first time six months after the law takes effect. The law therefore does not give companies much time to prepare. If they have not already done so, employers should now start to look more closely at their compensation systems and compile the necessary information. After reviewing their pay practices, employers should take steps to remedy any potential pay disparities. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Littler | Attorney Advertising

Written by:

Littler
Contact
more
less

Littler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.