Closing the Gender Pay Gap in France: Get Ready

Orrick - Employment Law and Litigation
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[co-author: Léa Ghoreychi]

Equality between men and women has been declared in France a “great national cause” of Emmanuel Macron’s Presidency in the wake of the #MeToo movement.

In March 2018, the French government unveiled an action plan for gender equality in the workplace consisting of ten measures aiming at reducing the gender pay gap and five measures to fight sexual and gender based violence.

The measures announced by the French government as part of the plan to reduce the gender pay gap include effectively applying the principle of “equal pay for equal work”, setting up an obligation of transparency for companies on their equal pay results, increasing labor inspectorate controls and promoting the fight against gender stereotypes when hiring.

With the stated intention of strengthening the existing legislative arsenal and put an end to unjustified gender pay gap, most of the measures announced were integrated in a law on “the freedom to choose one’s professional future” dated 5 September 2018. Further precisions on what is expected from companies have been recently given in an administrative decree dated 8 January 2019.

The creation of an equal pay index is one of the most ambitious and emblematic initiative, as it sets up an obligation to achieve results in closing the gender pay gap.

In practice, companies are now required to publish and report gender pay gap information (“equal pay index”), and, if necessary, put in place corrective measures. Companies failing to do so will be liable to a financial penalty.

This initiative is part of a larger trend throughout Europe in the last few years, which has seen new legislations arise to tackle the gender pay gap issue, most recently in the UK or in Germany.

Which companies must implement the equal pay index?

The implementation of the equal pay index is mandatory in companies with more than 50 employees.

When reaching the threshold of 50 employees, companies have a 3-year period before being subject to these new obligations.

What gender pay gap information should be collected in the equal pay index?

The equal pay index is comprised of 4 to 5 indicators depending on the size of the company. A number of points are assigned to each indicator for a total of 100 points. The sum of all the points earned by the company indicates its score in terms of equal pay. The evaluation method for each indicator is detailed in the decree dated 8 January 2019.

In companies with more than 250 employees, the equal pay index takes into account 5 indicators:

  • Pay gap between men and women, calculated on the basis of the average remuneration of women compared to men by age group and equivalent job category (40 points);
  • Gap in the percentage of individual pay increases – not related to promotions – between men and women (20 points);
  • Gap in the percentage of promotions between men and women (15 points);
  • Percentage of female employees with a pay increase in the year following their return from maternity leave, if pay increases occurred in the period during which the leave was taken (15 points);
  • Number of employees of the under-represented gender among the top 10 highest salaries (10 points).

In companies with 50 to 250 employees, the equal pay index only includes 4 indicators, as two of the above mentioned indicators (i.e. the gap in the percentage of individual pay increases not related to promotions and the gap in the percentage of promotions) are replaced with a single one, which consists in the gap in the percentage of individual pay increases between men and women (weighted with 35 points). In addition, the French labor administration should appoint contact persons to support small and mid-companies with the calculation of the equal pay index’s indicators and its implementation.

When will companies have to publish their score?

The company’s score in terms of equal pay, based on the equal pay index, should be published on the company’s website each year, no later than on 1 March of the following year. If there is no website, said score must be brought to the attention of the employees by any means.

The implementation date of this new obligation differs depending on the size of the company:

  • Companies with more than 1,000 employees have until 1 March 2019 to publish their score for 2018.
  • The deadline is extended to 1 September 2019 for companies with 250 to 1,000 employees.
  • Companies with 50 to 250 employees have been given an additional year to prepare and should publish their score, for 2019, at the latest on 1 March 2020.

Companies who have not published their score within these deadlines may be subject to a financial penalty of up to 1% of the total payroll.

What happens if the company’s score is insufficient?

To be considered compliant with their new obligations in terms of equal pay, companies should reach a score at least equal to 75 out of 100.

If the company’s score in terms of equal pay is below that threshold, corrective measures, and potential wage catch-up measures, should be defined with the unions during the mandatory negotiations regarding gender equality in the workplace. In the absence of an agreement, these measures are to be set unilaterally by the employer, after consultation of the social and economic committee.

Moreover, if the score is still insufficient at the end of a 3-year period, the company may be liable to a financial penalty of up to 1% of the total payroll.

That being said, measures implemented by the company with regard to equal pay, its bona fide attitude, as well as justifications for non-compliance (such as economic difficulties, ongoing restructuring, merger, or insolvency proceedings) may be taken into account either (i) to grant the company an additional period of up to one year to reach the required minimum score or (ii) to determine the amount of the financial penalty.

What are the other obligations of companies in terms of gender pay gap reporting?

The indicators of the equal pay index and company’s score, with all details relevant to their understanding, should be included in the social and economic database made available to the employee representatives and updated on an annual basis.

This information should also be transmitted to the Labor administration.

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.

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