Many companies still aren’t transparent about salaries — to the frustration of employees wanting to ensure they are being paid fairly.
But there are signs of change as pay transparency laws are being enacted in places like New York and some companies commit to sharing salary bands — which has led to teething issues like firms sharing huge pay ranges or finding ways to circumvent the laws.
In the latest move toward more transparency, the European Union’s Parliament on Thursday approved new rules designed to help employees get key salary information.
“Pay secrecy will be banned,” a press release by the European Parliament said, explaining that employers can’t prevent their workers from sharing their salary or looking into other people’s pay. This means workers will have the right to access both individual and average compensation details, including a break down per gender.
“Pay structures to compare pay levels will have to be based on gender-neutral criteria and include gender-neutral job evaluation and classification systems,” the statement said.
Research has shown that salary transparency is key to closing the gender pay gap as women are often less likely to negotiate their compensation and tend to undervalue themselves. Knowing what their colleagues are earning could help mitigate this.
Companies in the EU with a gender pay gap bigger than 5% will have to go through a salary assessment with employee representatives — and could be fined, the European Parliament’s statement said. But what the exact consequences for too big a gender pay gap will be is up to the EU’s individual member countries.
Anyone who has been negatively affected by unequal pay will have the right to additional compensation, the new rules say.
“This legislation makes it crystal clear that we do not accept any kind of gender pay discrimination in the EU,” Danish EU politician Kira Marie Peter-Hansen, who worked on the new legislation, said.
“Historically, women’s work has been undervalued and underpaid, and with this directive we take an important step to secure equal pay for work of equal value,” she added.
Almost half of the world’s countries don’t have laws in place that require companies to pay all genders equally, a recent report by the World Bank points out. This can have a negative impact on economic growth, it adds.
And the effect isn’t just limited to individual countries. A recent report by Moody’s found that the gender pay gap could in fact cost the world economy as much as $7 trillion.
The most recent official data shows that the gender pay gap in the EU was at 13% in 2021. In the U.S., federal data for that year showed that women working full-time were paid 84 cents for each dollar of a man’s salary.
The new rules also cover the rights of non-binary people for the first time and tackle intersectional discrimination, Dutch EU politician Samira Rafaela, who also helped establish the new rules, points out.
“Non-binary people have the same right to information as men and women. I’m proud that with this Directive, we have defined intersectional discrimination for the first time in European legislation and included it as aggravating circumstances when determining penalties,” she said.
The last step to the rules becoming a law in the EU is now the formal sign off from the European Council, which is the heads of state or government of each of the EU’s member states.