Collective bargaining as a mechanism to advance gender pay equity

The principle that workers shall – irrespective of their gender – receive the same pay not only for the same type of work but also for performing work considered to be ‘of equal value’ has been an established part of the European Treaties since 1957.1 Furthermore, the Pay Transparency Directive ‒ currently undergoing transposition ‒ aims to ensure better implementation of the principle of equal pay, targeting individual employers responsible for bias-free wage setting for their employees. Key to wage setting in the EU are collective agreements, which cover approximately 60% of employees and thus represent a potentially powerful mechanism for advancing gender pay equity. How collective bargaining can support implementation of the equal pay principle – and which factors are limiting its potential in this regard ‒ is analysed and reflected upon in this article and in Eurofound's research report 'Equal value, equal pay: Concepts, mechanisms and implementation towards gender pay equity' and working paper 'The practical implementation of the work of equal value principle: Case studies'.

Regarding the principle of equal pay for the same work or work of equal value, the directive includes several tangible measures, among them the following:

• Member States must ensure that the concept of work of equal value in their national legislation is applied through four objective factors, in line with the case law of the Court of Justice of the European Union ‒ skills, effort, responsibility and working conditions ‒ and that employers are supported and guided in its application (Article 4).

• Company pay structures must adhere to the principle of equal pay, based on non-discriminatory, objective and gender-neutral job classifications (recital 26, Article 4(4)).

• The principle of equal pay is presented as an integral part of several pay transparency measures, including pay transparency prior to employment (Article 5) and in relation to the right to information (Article 7), reporting on pay gaps by ‘categories of workers’ (Article 9(1)(g)) and in joint pay assessments (Article 10).

The directive also explicitly recognises the role of collective bargaining in implementing measures to tackle pay discrimination and the latter’s adverse impact on the valuation of jobs predominantly carried out by workers of one sex (Article 13). Recital 45 further emphasises that social partners should ‘pay particular attention to matters of equal pay in collective bargaining’. Member States are encouraged to promote social partner engagement through measures that stimulate collective bargaining rights and support the development of gender-neutral job evaluation systems. Article 19 (and recital 29) regulates the choice of comparators in cases of alleged pay discrimination and establishes that such comparisons can be extended beyond individual employers to encompass any ‘single source establishing pay conditions’ that can rectify unequal treatment. This can include collective agreements covering multiple employers. This provision acknowledges that wage-setting mechanisms often transcend organisational boundaries and that the comparison can be invoked in case of alleged pay discrimination.

While separate pay scales for men and women would constitute straightforward discrimination, having a single pay scale for all workers is not sufficient on its own, either. For a pay structure to fulfil the requirements of the directive it must be set up (or reviewed) on the basis of ‘objective’ and ‘gender-neutral’ criteria. In other words, each job position (irrespective of the worker holding it) must be evaluated according to the same set of criteria.2 This evaluation either assigns each job a specific ‘value’ or produces an overall ranking of jobs. Depending on the weighting of criteria used for the evaluation, different jobs are then grouped into ‘categories of equal value’ and the ensuing pay structure is set up so that jobs within the same category are entitled (in principle) to the same pay. There are, of course, justified exceptions that companies can consider ‒ such as how they reward experience, i.e. ‘seniority’, or individual performance – providing they still meet the criteria of gender neutrality and objectivity. Applying a gender lens in this process ensures that factors relating to jobs traditionally performed by women are not overlooked but appropriately considered, valued ‘correctly’ in terms of the work of equal value principle and remunerated accordingly. How this can be done and what needs to be considered are discussed in detail in Eurofound's research report and working paper.

To illustrate how gender-neutral job classifications and pay structures could look in practice, consider this fictive3 (and simplified) example of a pay-scale review for a cleaning company.

In the top portion of the table, the original job classification and pay structure distinguish between ‘specialised cleaner’ – a job that happens to be predominantly held by men ‒ and ‘maintenance cleaner’ – a role predominantly held by women. The gender-neutral job evaluation results suggest that the differences in role requirements (qualifications and skills, responsibilities, effort and working conditions) between these two categories are negligible. With evaluation scores of 75 and 73, respectively, the roles can be considered of equal value. Consequently, as shown in the bottom portion of the table, the company merges these workers into a single, equal-value category – ‘cleaning staff’ – and raises the basic pay of those currently holding maintenance cleaning positions.

The directive affirms that collective agreements can have an important role in advancing the application of the principle of equal pay, but their influence depends on several factors. Eurofound's recent research report sets out two ‘channels’ through which agreements can advance equal pay.

• Higher-level collective agreements can provide gender-neutral job classifications and pay structures to guide companies’ pay setting (‘vertical influence’).4

• Social partners can seek to coordinate the pay setting for and valuation of jobs between collective agreements or address the concentration of a particular gender in certain positions with a view to reducing wage disparities between sectors and jobs (‘horizontal approach’).

Both channels are viable but the directive’s impact on implementing the right to equal pay will arguably be stronger along the vertical channel.

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Figure 1

The role and influence of collective agreements in advancing pay equity for jobs of equal value

Note: CA, collective agreement. The size of the arrows reflects the degree of influence sectoral collective agreements may have on company-level pay equity outcomes.

Source: Authors

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Vertical influence: From the sectoral agreement to the company

The extent to which collective agreements can support implementation of the equal pay principle vertically is determined by various factors.

The most obvious one is whether or not a higher-level collective agreement is in place. It is well known that bargaining coverage across the EU is uneven – by country and sector. But even where (higher-level) bargaining agreements are in place, there is no guarantee that they contain pay structures (or regulate pay at all). Where no collective agreements are in place that set gender-neutral pay structures, it is up to individual companies to develop and review their own pay structures. In such cases, company-level bargaining can still ensure that the outcome is a negotiated and, arguably, more legitimate one.

But even where collective agreements do contain pay structures, companies can decide to depart from them and pay different (usually higher)5 wages to some or all workers, as long as the minimum pay for each category is observed. This is called ‘wage drift’. Where wage drift exists and actual wages are different from the collectively agreed minima, collective agreements are, again, more limited in their ability to influence compliance with the principle of equal pay. In such instances, companies faced with an equal-pay case will not be able to refer to collective agreements as a source for establishing pay.

The research report and working paper include several studies of cases in which social partners reviewed the pay structures in collective agreements. The rather lengthy and difficult search for such examples, and the subsequent findings that these processes take a long time6 and don’t always consider the gender lens as part of the evaluation, suggest that this option is currently underutilised.

Horizontal approaches: Advancing pay equity across sectors

Differences in pay for women and men between sectors with different bargaining agreements and across companies where pay setting is not regulated by a ‘single source’ are not a de jure violation of the principle of work of equal value. They can stem from market factors, such as sectoral productivity levels and growth, the abundance of relevant labour supply and skills, and from distributional outcomes between sectoral profits and wages, which are, in turn, dependent on the bargaining power of companies and workers. But they also stem from societal choices – regarding, for example, the budgets made available for publicly financed activities, some of which are disproportionately female-dominated (think of carers and teachers), or the prices citizens are willing and able to pay for female-dominated private services (such as hairdressing, domestic cleaning and childminding).

Undervaluation of traditionally female-dominated jobs goes well beyond the reach and purview of individual companies. A gender-neutral pay structure in company A won’t address the wider question of why female-dominated jobs, such as carer, teacher, cleaner or hairdresser, are paid less than traditionally male-dominated ones, such as construction worker, driver or refuse collector.

Addressing such cross-sectoral pay inequities requires an approach beyond the individual company that encompasses buy-in from the social partners and governments. Such a ‘horizontal’ approach is only tangentially covered by the directive, however. On a macroeconomic level, some wage-setting approaches are more likely to result in lower sectoral pay gaps than others, namely those with stronger coordination at central level (as in Belgium). In systems where the pattern-setting industry is male-dominated and regularly achieves higher pay increases than others, disparities and pay gaps between sectors are likely to persist (as in Austria, for example). Eurofound's research report does contain some examples – mainly from Nordic countries – of where social partners had coordinated wage setting across sectors and agreed on higher wage increases for some female-dominated sectors or occupations. However, these examples are limited in number and don’t appear to have been widely replicated.

Governments, for their part, have the power to review pay structures within their pay agreements or legislation. They could also apply the principle more broadly by comparing the requirements of jobs under their authority to those of jobs in the private sector. Furthermore, the recent increase in statutory minimum wages in many European countries can be regarded as an influential horizontal approach to advance pay equity, as it has boosted the pay of more women, in particular.

Identifying and addressing direct and indirect pay discrimination is not an easy task.

Social partners have an important role to play in assessing the compliance of their collective agreements with the principle of equal pay. In addition to practical support on how to comply with requirements or access rights, this is the most relevant support they can provide to their members (employers, workers and company-level worker representatives) when companies are requested to ensure their pay structures are objective, gender-neutral and more transparent in relation to pay. Government’s role, in turn, is a dual one: as an employer, it can address the undervaluation of jobs traditionally done by women, including by securing societal support for budgetary requirements when pay increases are justified. Equally important is its role in encouraging a tripartite social dialogue and promoting collective bargaining on equal pay.

Before any of that happens, however, there must be joint recognition that undervaluation of jobs traditionally held by women may still be an issue and agreement on what policy approach(es) to follow.