The focus on the gender pay gap continues to expand. While the UK is seeing a narrowing of the gap based on its pay reporting, France is not only requiring employers to report the pay gap but will after three years penalize employers that have not closed it. Meanwhile, Canada is considering legislation to require private employers to close the pay gap in three years.
Impact of UK Reporting Requirement
Effective April 2018, private and public-sector employers in the United Kingdom (UK) with 250 or more employees are required to publish information about their gender pay gap each year on their own website as well as on a government-hosted website. Specifically, covered employers must report average differences between men’s and women’s salaries and bonuses. Covered employers were required to submit their first report under the new law last April.
Early reports indicate that shining a spotlight on the pay gap has led to its narrowing. The UK’s Office for National Statistics reported on October 25, 2018, that the gender pay gap in Britain shrank 8.6% among full-time employees, and the gender pay gap is almost nonexistent for workers between the ages of 18 and 39.
France Takes Naming and Shaming to New Level
France has joined the UK in requiring employers to publicly report pay gaps between male and female employees. But France is taking its commitment to pay equity to a new level by imposing fines on employers that underpay women. The country is also considering requiring companies to install software that would allow the government to directly monitor their gender pay gap.
In France, women reportedly earn 9% less than men who hold the same jobs. As in other countries, French employers tend to hire men for more senior positions in industries with higher pay scales. Accordingly, in September 2018, France enacted a law similar to the UK law that requires companies to publish information about their gender pay gap. If a company’s pay gap surpasses a certain threshold, it will be required to propose an improvement plan.
Starting January 1, 2019, French employers with more than 250 employees must report pay differences between men and women, using a range of government-approved metrics. Companies with pay gaps will have three years to eliminate the gap or face a fine of up to 1% of their total payroll. Smaller employers with 50 to 250 employees have until 2020 to comply with the new law.
Canada Joins the Pay Equity Movement
On October 29, 2018, Bill C-86, Budget Implementation Act, 2018, No. 2, was introduced in Canada’s House of Commons. Bill C-86 includes new pay equity legislation, the Pay Equity Act. If passed, the Act will apply to federally regulated employers with 10 or more employees.
The Act is intended to remedy the following recent findings:
- Based on hourly wages, full-time working women make 88.5 cents for every dollar earned by men and 69 cents for every dollar earned by men when overall annual earnings are taken into account.
- Women tend to be relegated to lower-paying jobs and are significantly underrepresented in senior positions.
Under the proposed legislation, covered employers will be required to evaluate their compensation practices to ensure they are providing equal pay for work of equal value. (In the United States, this standard is referred to as comparable worth.) Moreover, within three years of being covered under the Act, employers must implement a pay equity plan that includes the following steps:
- Identify job classes within their workplace;
- For each class, determine gender representation, the value of the work performed, and the level of compensation;
- Compare the compensation associated with predominantly female classes with the compensation associated with predominantly male classes of similar value, identify predominantly female classes that require a pay increase, and set a deadline for implementing the increase.
Pay equity plans must be reviewed and updated at least once every five years. Certain employers are required to establish a pay equity committee to develop and update their pay equity plan. The Act also requires covered employers to:
- Post notices regarding their pay equity obligations and their compliance progress;
- Give employees an opportunity to comment on their pay equity plan; and
- File annual reports with the pay equity commissioner.
If the Act passes, the pay equity commissioner is expected to issue regulations providing details on how to identify job classes in which employees perform work of “similar value” as well as the types of analyses that would be deemed sufficient to identify pay disparities that require pay adjustments.
Global employers should continue to monitor international developments in pay equity and pay transparency laws. Laws are rapidly evolving, and each country has its own twist on compliance. Now is a great time to get a handle on your compensation practices and global compliance obligations.
Practice tip: All compensation analyses or modifications to your company’s compensation program should be done under the protection of the attorney-client privilege. Consult with legal counsel before undertaking any assessments of your compensation program.