Germany: Pay Transparency Act – Does it work?

Germany has introduced the Pay Transparency Act which came into force on 6 July. The Act is intended to reduce the gender pay gap, but whether it turns out to be a “bureaucratic monster” as some predict, or a “breakthrough for fair pay for women”, as the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth is calling it, remains to be seen.

What the Act says:

• In companies employing 200 or more employees, each individual (male or female) will have a right to information covering all types of pay criteria. The information can be accessed once the Act has been in force for six months. In companies covered by collective bargaining agreements, the right to information can be exercised by the works council. Fourteen million employees will benefit from the new right.

• The right to information covers basic salary plus two other salary components, which can be chosen by the employee, for example, company cars or bonuses. The employee can ask for information relating to a comparable group of up to six employees of the opposite sex.

• In principle, employees will be able to exercise their right to information every two years (beginning from the day the previous request was made or earlier if, for instance, the employee’s job has changed within the company). But in the meantime, there is a transition period: the first request can only be made six months after the Act comes into force and if the employee makes the first request within three years of the Act coming into force, they can only do so again after waiting a further three years. After that, the employee will be able to make a request every two years, as normal. The request for information must be in writing, but this can include electronic form.

• Companies employing 500 or more employees are encouraged to implement a voluntary monitoring process for equal pay and to make an internal report on their pay structure (this was originally planned as an obligation).

• Companies that are already required to fulfil certain reporting duties under sections 264 and 289 of the German Commercial Code and that have over 500 employees will in future have to report on the status of equal opportunities and equal pay for men and women within their organisations every five years. The reports must cover the previous three years and will be made publicly available.

Overall:

It is uncertain whether the Act will actually improve gender equality or just prove an additional administrative burden on employers. There is room for doubt, as the gender pay gap seems to be related more to women taking part-time employment and having fewer years of service, resulting from maternity leave and caring responsibilities than to unequal pay compared to male colleagues doing a similar job.