A new law (EntgTranspG) to ensure equal pay of male and female employees comes into effect in Germany this summer (the “Act”).

This will require employers, upon request by an employee, to disclose anonymised salary details of other employees working in a comparable position, and how they are calculated. An employer will be caught by the Act if they have more than 200 employees in a single location (the threshold does not require employee numbers across the whole company to be aggregated).

What do the new rules say?

Disclosure of salary and method of calculation:

• Information which an employee may request from their employer includes:
  • The salary of all colleagues (anonymised) of the opposite sex who are working in a comparable position;
  • The data must show the different elements of the pay package, as well as how it is calculated;
  • However, if the group of employees in a comparable position is less than six, salary doesn’t need to be disclosed.
• Procedure for making a request:
  • Employees exercise this right through the works council (where one exists), which delivers the information to them after inspecting the relevant employer documents.
  • The new law provides that the employer can generally take over the process (although the details of this are still somewhat unclear); conversely a works council can request the employer undertake the disclosure process;
  • If there is no works council, generally the employer is responsible for providing the information directly to the employee unless agreed otherwise in a collective bargaining agreement.

Companies of over 500 employees:

• are invited (but not legally obliged) to implement a pay structure or procedure which allows them to check if equal pay is being properly promoted; the calculation basis is the number of employees in the whole company;

• must publish a Situation Report (every three years except where there is a binding collective agreement; in which case, every five years) concerning equal gender treatment across the company. The Situation Report has to include:
  • details of measures taken to ensure equal gender treatment;
  • information about the total amount of employees, including numbers of female and male employees;
  • information about the total amount of employees who work part-time and full-time.

Important uncertainties remain under the Act:

• The new law provides that pay information disclosed under this process may in some circumstances result in a reversal of the burden of proof at the expense of the employer, if the pay information supports an equal pay claim which reaches trial; however full details of how this will work are not yet clear.
• It is not yet clear whether an employee who requests information and uncovers inequality is entitled to make a claim to have their salary adjusted.
• The requirement to classify groups of comparable positions is likely to provoke much dispute and uncertainty, until this is clarified in the courts.

What does this mean for employers?

The new rules introduce a number of challenges for employers, including the additional bureaucratic burden, costs and possible damage to employee relations, depending on the data disclosed. 

It may cause employers to hesitate in negotiating salaries on a purely commercial basis, if they may appear to worsen a gender imbalance and if there are fears that pay packages will not remain confidential.  Employers may also have difficulty complying with the obligation to disclose details of how pay is calculated, if in fact it is a matter of commercial negotiation rather than calculation according to set pay scales or a formula. 

For further information or to discuss any of the issues raised, please contact Dr. Christian Ley on +49 (0) 89 2422300 at Keller Menz – http://www.keller-menz.eu/.

 

Resources

German Act on Salary Transparency (Entgelttransparenzgesetz (EntgTranspG)).