EurWORK European Observatory of Working Life

Gender pay gap

Definition

The gender pay gap is the difference between men’s and women’s pay, based on the average difference in gross hourly earnings of all employees. 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. 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, the gender pay gap is based on several data sources, including the European Community Household Panel (ECHP), the EU Survey on Income and Living Conditions (EU-SILC) and national sources.

Background

The gender pay gap can be presented in two ways: the unadjusted gender pay gap and the adjusted gender pay gap. The unadjusted gender pay gap is the figure obtained before adjusting for observed characteristics, including individual characteristics such as age, education, number of children, job tenure and occupation, and workplace characteristics such as economic sector, place of employment and existence of a collective agreement.

The unadjusted gender pay gap is considered an important indicator of the inequality in pay between men and women in Europe. The most recent Eurostat data on the unadjusted gender pay gap, which are provisional and relate to 2019, put it at 14.1% on average in the EU27, lower than the figure of 16.4% recorded for 2012. There are wide variations in the gender pay gap between EU Member States, ranging from 1.3% in Luxembourg to over 20% in Estonia and Latvia.

The reasons for the existence and size of the gender pay gap vary and may differ considerably between Member States. They include the kinds of jobs held by women, who tend to work in lower-paid industries and sectors with less negotiating power; the effects on women of career breaks or part-time working after having children; and the prioritising by women of family life. A study on the gender pay gap carried out by Eurofound in 2010 notes that ‘the list of factors used to explain the gender pay gap is long and relationships among them complex’.

Regulatory aspects

The gender pay gap has been a policy concern at EU level for some time. In 2003, the European Commission stated that one of the objectives of the European Employment Strategy was ‘to achieve by 2010 a substantial reduction in the gender pay gap in each Member State’. Further, in 2006, the Commission published a communication that set out the elimination of the gender pay gap as a priority, followed in 2007 by a communication that discussed a number of ways to address the gender pay gap. In 2010, the Commission launched its first strategy for equality between men and women, one of the priorities of which is to promote equal pay for work of equal value in the EU. It was followed by a strategic engagement in 2017.

In March 2014, the Commission published a recommendation on strengthening the principle of equal pay between men and women through transparency. It called on Member States to encourage employers and social partners to adopt transparency policies and implement measures to promote wage transparency, in the following areas: the right of employees to obtain information on pay levels; requiring companies to report regularly on pay by category of employee or position; and ensuring that pay audits are conducted and made available on request.

The most recent EU strategy covers all sources of gender inequality and violence against women. It establishes the principle of the ‘inclusion of a gender perspective in all EU policies and processes’. Some measures relate specifically to reducing the gender pay gap, constituting a proposal for a directive on pay transparency.

Towards a directive on pay transparency

As the non-binding text of March 2014 had relatively little effect, the Commission decided to ‘strengthen the rights of employees to get more information about pay levels’ without placing an excessive burden on companies. After consulting social partners, in March 2021 the Commission launched a proposal for a directive that:

'aims at laying down minimum requirements strengthening the application of the principle of equal pay between men and women and the prohibition of discrimination on grounds of sex through pay transparency and reinforced enforcement mechanisms.'

This directive would apply to both the private and the public sectors and to all workers who have an employment contract or employment relationship. It includes a number of measures, such as the right of workers to request information ‘on their individual pay level and on the average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value’. Companies with at least 250 employees would have to publish an annual report containing seven strands of information relating to the gender pay gap (Article 8). Furthermore, they would have to conduct a joint pay assessment in conjunction with employee representatives, in cases where the report shows a difference in average pay level of at least 5% between female and male workers in any category of workers, and where the employer has not justified this difference by objective and gender-neutral factors (Article 9).

The proposal is currently being reviewed by the European Parliament and the Council of the European Union and is expected to be adopted in 2022.

Related dictionary terms

Direct effectdiscrimination equality between women and men gender equality part-time work pay women in the labour market

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