Employer action code: Monitor

The government has introduced a bill on pay transparency, with a planned effective date of July 1, 2017, that would require companies with over 200 employees to enhance pay transparency and equality for all workers in the same or similar roles. If enacted, the law is expected to provide gender pay difference information on more than 14 million workers across Germany and will help meet the government’s goal of reducing the gender pay gap from 21% to 10% by 2030 as part of a wider national strategy to achieve more flexible and equal working conditions.

The bill would introduce a fundamental new right for employees in affected companies to request information on their pay relative to their colleagues. Larger employers (with 500 or more employees) that are subject to certain reporting requirements under the German Commercial Code would also be required to report on their efforts to achieve pay equality. The bill would also recommend that all companies with 500 or more employees periodically review and test their remuneration arrangements to ensure compliance with their obligation to provide equal pay.

Key details

The bill grants employees a right to request information on the median total remuneration (inclusive of all cash and noncash rewards) of employees performing the same or same type of work with their employer. An individual with reason to believe there are gender-based pay differences could request that pay rates be compared specifically against job holders of the opposite sex in the same or similar roles or pay grades. The number and frequency of requests per individual would be limited, and a minimum of six job holders in the same or similar roles would be required to calculate the average rate.

If an unjustified, substantial difference existed, the employee would be entitled to up to three years retroactive compensation and a prospective, commensurate salary adjustment.

Employer implications

To date, opposition to the legislation has been muted. If the bill is passed as expected, affected employers may need to establish new policies and protocols for their compensation planning and dispute administration. The bill outlines calculations of the hourly and monetary expected costs of compliance. Work councils would collect and report information if collective agreements existed. Full implementation would be phased in over a three-year transitional period. Under the current draft bill, the earliest requests for information could be submitted six months after the law takes effect.