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Article | Executive Pay Memo – Western Europe

Fair Pay Regulatory Update – 2022

March 10, 2022

The end of 2021 and early 2022 has brought a flurry of new fair pay regulation from New York to Illinois and from Italy to Israel.
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Each piece of regulation is extending the boundaries on pay transparency. We have set out the key themes below, followed by individual market updates. Please note the groundbreaking EU Pay Transparency Directive and California proposals.

Employer implications

These regulations mean that employers must be confident they offer equal pay. This is part of being a responsible, as well as compliant, employer. Our Fair Pay Guide sets out key steps for a leading global approach on equal pay. We can support you all the way from building your roadmap, through the analytics and pay management improvements, to communication.

Common themes to equal pay regulation

  1. Applicant rights on hire: the requirement for applicants to be provided with salary range information automatically or on request. Included within the draft EU Pay Transparency Directive and applying (or about to apply) in seven U.S. states and three cities, most recently in New York.
  2. Employee rights to information: employee right to request information each year on the average pay for their employee group, including average pay by gender. While this right has not led to significant requests in Germany over the last five years (since its 2017 Pay Transparency Act), the new round of provisions in, for example, Israel and Norway, and the draft EU Directive may lead to more employee requests because the right is coupled with increased company disclosure of pay gaps and/or reminders of this right.
  3. Employer disclosure of gender pay gaps for entity: the obligation on the employer to disclose gender pay gaps on a whole-entity basis, familiar from the U.K., now also proposed in Ireland and Italy. It is often misunderstood as a measure of equal pay but is more a measure of equal opportunity; reducing the gap involves moving a higher proportion of female employees into senior/higher-paying roles.
  4. Employee disclosure of gender pay gaps by employee group: a key new development. It is present in the new regulations in Israel and the draft EU Directive. It is important because this gap is much more a measure of equal pay. This level of transparency requires companies to be confident on equal pay and able to explain any gaps. The EU has signalled that gaps over 5% that cannot be explained by objective reasons must be addressed.
  5. Employer action plans: most of the new regulations have moved away from simply asking companies to calculate and/or disclose gaps, they are requiring employers to take action, publishing their action plans. This is the case in Canada (federally regulated employers) and Spain, and in the draft Irish regulations and EU Directive.
  6. Employer transparency: a common theme to the European regulations is greater transparency. U.S. regulations have tended to be more conservative, requiring the filing of a non-public pay equity report (as in the new Illinois requirements). This may be set to change. A new California Senate bill is proposing public disclosure of pay gaps for the first time.

Latest regulation by market

  • EU Pay Transparency Directive: approved by European Council in December 2021. European Parliamentary Committee vote on March 17, likely to lead to a further iteration of the Directive. None of the Council or Parliamentary activity suggests that the Directive will not come into force.
  • European Banking Authority: application of updated Sound Remuneration Principles and gender-neutral pay policies, including measuring pay gaps from Jan 1, 2022.
  • Israel: gender pay gap disclosure by entity and by employee group by June 1, 2022.
  • Italy: new law requiring employers with over 50 employees to report on equal pay and opportunity actions. Details expected in 2022.
  • Ireland: Gender Pay Gap Information Act became law in 2021; the Government announced in March 2022 that first disclosure would be required by December 2022 using a June 2022 snapshot date; further details to be issued in April/ May 2022.
  • France: new law (Rixain Law) with additional gender equality requirements, including minimum gender-based quotas for senior executive and board members in large companies from 2026 and expanded reporting requirements related to the professional equality index (PEI).
  • UAE: new Labor Law explicitly affirms that all provisions on employment without discrimination apply to working women, with an emphasis on granting women the same wage as men if they perform the same work or other work of equal value.
  • UK: In March 2022 the Government has announced a pilot scheme under which participating employers will list a salary range on job adverts and not ask applicants to disclose salary history
  • Canada: under the Pay Equity Act 2018, from August 31,2021 federally regulated employers (such as banks, telecommunications companies and airlines) must identify and correct any pay differences between male- and female-dominated positions for work performed of equal value.
  • New York City: mandatory inclusion of salary range on job postings from May 15, 2022.
  • Illinois: requirement for employers to apply for an Equal Pay Registration Certificate every two years, initially between March 2022 – 2024. Right for employees to request and receive anonymized data regarding their job classification or title, and the pay for that classification.
  • California: new bill introduced (not yet passed) in the California Senate requiring California employers with 100+ employees to file pay data reports beginning in May 2023 that would be available to the public and include gender, ethnicity and race pay gaps by job category.

Existing regulation

  • Markets with additional equal pay/gender pay regulations: Australia, Canada, Germany, Belgium, France, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, U.K..
  • U.S. states with requirements: 19 states have provisions forbidding employers requesting salary history and nine states have (or are proposing) regulation relating to providing pay range information to candidates.
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