Finland: Experiences of pay auditing measures

Studies in 2010 and 2012 of measures brought in by Finland to ensure pay transparency have shown that employers were initially reluctant to close the gender pay gap. The results highlighted the need for improvement in the implementation of pay auditing measures, which led to amendments in the law. 

Background

In 2014, the European Commission recommended that Member States implement pay transparency measures in order to decrease the gender wage gap – but, by the end of 2017, only a few Member States had gone further than the initial stages of implementing such measures. Nevertheless, in Finland, mandatory pay auditing was introduced in 2005 by the Act on Equality between Women and Men (609/1986) to be carried out every 2–3 years in companies with at least 30 employees. The following presents the findings of two evaluation studies of the measure in its early years.

Methodologies

First study

The first study, commissioned by the Ministry of Social Affairs and Health, was carried out by researchers at the University of Tampere. It The first study investigated the state of equality planning and pay audits at Finnish workplaces in 2008–2009. The study explored audit participation, achievement and consequences, and how well the audit results were publicised.

The research involved three key elements:

  • a survey of employer representatives’ views of the prevalence, processes and effects of equality planning and pay audits sent to HR managers at 1,500 Finnish workplaces with 30 or more employees (random sample, response rate 56%);
  • a survey of employee representatives, sent to 579 workplaces of the first survey (response rate 54%), investigated staff participation in equality planning measures;
  • a survey sent to the entire population of the principal trade unions and employer organisations, (response rate 44% from a total of 121 organisations) which investigated the perceived effectiveness of the Equality Act. Additionally, thematic interviews were carried out with 27 individuals at 10 workplaces.

Second study

The second study, in 2012, was also commissioned by the Ministry of Social Affairs and Health and carried out by a tripartite social partner working group. The second study investigated similar issues, albeit with a somewhat narrower scope. The research involved survey studies sent to employee representatives and public, private and church sector employers through peak-level trade unions and peak-level employer organisations. The employee representative survey gathered a total of 1,946 responses, and the employer survey 1,693 responses.

Key findings

Implementation

In 2008–2009, 60% of workplaces obliged to conduct pay auditing said they had done so, 36% had not, and 4% did not know whether it had been carried out. Pay audits were most common in the state sector (77% of workplaces), but less common in the private sector (60%), local government (58%) and the church sector (44%). Compliance was also higher among larger organisations (76% of organisations with more than 250 employees, compared with 44% of those with 30–49 employees).

The second study reported slightly higher figures, employers indicating between 65% and 85% compliance, and trade unions between 42% and 66%. However, a significant share of employee representatives (around 20%) did not know whether pay audits had been carried out.

Types of comparison

In the first study, pay comparisons were most commonly made between total incomes; basic salary plus any supplements (56%), or of average full-time salaries (47%). Only 15% of the workplaces made comparisons separately between different parts of a person’s pay, such as personal supplements, overtime supplements and bonuses. Comparable results were reached in the second study, and the responses of employer and employee representatives largely converged.

The second study also shows that comparisons were made either between employees of the same salary class, or between employees of the same occupational group (for example blue-collar/white-collar/managerial). No categorisation of the staff was made in fewer than 10% of workplaces.

Employee representative participation and availability of results

Some 82% of the workplaces reported HR administrations to be involved in pay auditing; at 51% of the workplaces, the HR administration was the only actor involved. Meanwhile, only 30% of the workplaces reported employee representative involvement. In the second study, employee representative figures were higher, ranging between 60% and 80%. In the first study, where employee representatives were involved, 70% had participated in analysing the results of pay audits, but only around one-third in the planning of audits or post-audit measures.

The first study suggests results of the audit were most commonly available to the HR administration and the management (around 80%) and often to employee representatives (63%), but only rarely to the employees (29%).

In the second study, around half of the employer representatives reported that the gender equality plan and/or the pay audit have been publicised internally in the organisation. On the employee side, around 35%–40% said the plan was freely available online, and around 30%–35% said it had been internally publicised. Only 12% of private sector employers, 5% of other employers, and 10% of employee representatives said the plan had not been publicised at all.

Detected gaps and follow-up actions

In the first study, around half of the respondents on both sides reported that a gender pay gap had been detected. Employer representatives (80%) usually explained the gap by the gender segregation of jobs and tasks, while in 11% of the cases the gap could not be explained.

In the second study, where the question concerned ‘unfounded’ pay gaps, around 20% of employee representatives reported gaps, compared with around 10% of employers in the private and local government sectors, and none in the state and church sectors. The researchers suspected there was confusion among respondents regarding the definition of ‘unfounded’, especially since the share of uncertain responses was relatively high: around 10% among employer representatives and over 20% among employee representatives.

Indicative results from the first study show that 38% of workplaces did not undertake any follow-up action. In the second study, where pay gaps were detected, the most common way to address them was by further investigations and adjusted salaries (mostly around 50%).

Commentary

Following the results of the studies, which indicated deficient implementation of pay auditing, as well as similar conclusions by other authorities and actors, the Equality Act was considerably revised in 2014 in order to narrow the gender pay gap. The revisions clarified and specified requirements for employers.

All peak-level social partners have been involved in the drafting of the Equality Act and, as such, support the measures it sets out, including pay audits. The social partners are furthermore involved in a tripartite Equal Pay Programme, which aims at reducing the average gender pay gap from 17% in 2016 to 12% by 2025. Improving pay audit practices is one of the measures included in the programme.

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