July 17, 2017
Authored by: Martin Lüderitz
Although Germany faces next elections in September, the current government still establish new employment law acts, inter alia the new Act to Promote Transparency of Pay Structures (Entgelttransparenzgesetz) which came into effect July 6 2017.
In an effort to advance pay equity between men and women who perform the same work or work of equal value, the new act will allow employees, starting after January 6 2018, to claim for information about their pay structures and impose reporting obligations on particular companies.
Companies who employ more than 200 employees may face claims for information about
- the average of monthly gross salary of at least six colleagues of the other gender who perform the same work or work of equal value,
- information about up to two remuneration components (e.g. bonus), and
- the criteria and procedure for the determination of the remuneration.
Companies which do not provide the requested information within three months are at risk to be deemed to act discriminatory and to may be suited for paying the difference to the salaries of comparable employees.
Besides, employers with more than 500 employees are obligated to implement operational review procedures and safeguards to ensure their compliance with equal pay principles, starting 2018. This includes information into their management report in terms of the commercial code (handelsrechtlicher Jahresbericht) about their intended measures to promote gender equality and to achieve pay equity between men and women.
There is a lot of uncertainty among German companies how to comply with this new act, in particular several legal terms in the act are rather vague: what is the definition of “same” work or “work of equal value”? How to comply with data protection requirements while providing the exact pay of other comparable employees (who might be identifiable)? Which components of the remuneration must be laid out? What kind of detail is required on the “criteria and procedure for the determination”? How to valuate a company car for private use or extra payments for night shifts?
Clients are well advised to be prepared that first claims might appear next year and to use the time until then to review the current pay structures. Assessing the relevant remuneration data thoroughly under this act would avoid potential gender pay discrimination.
The German Labor and Employment law team of Bryan Cave is well prepared to help you to handle such topics. If you or your organization would like discuss this topic in more detail, please do not hesitate to contact a member of our team.