When it comes to closing the gender pay gap, the EU Pay Transparency Directive is streets ahead in global terms. “Equal pay for equal work or work of equal value” is a founding principle enshrined in Article 157 of the Treaty on the Functioning of the European Union (TFUE).
It is also a driving principle of the EU pay reporting framework.
Outside of the EU, Canada's Federal Pay Equity Law shares the same goal of equal pay for work of equal value. In this article we explore the similarities in legislation, and one major difference.
Background to EU pay reporting framework
Across the EU, the gender pay gap stands at 13%, largely unchanged in the past decade. Gender pay differences across the 27 member states range significantly, from less than 1% to 18%.
On April 24th, 2023, the Council of the European Union formally adopted the new EU pay reporting framework, following its approval by the European Parliament. It aims to eliminate the gender pay gap by introducing some of the most stringent and comprehensive pay transparency laws seen to date.
EU member states have three years to transpose the Directive into law (until June 7, 2026).
Comparisons with Canada Federal Pay Equity Law
Canada’s Federal Pay Equity Law is designed to ensure employers offer equal pay for work of equal value to all federal employees. Historically, that has proved a struggle for Canada, as OECD data shows a national pay gap of 17.1%.
The legislation also focuses on achieving pay equity across four marginalized groups, i.e., women, Indigenous peoples, people with disabilities, and members of visible minorities. Similarly, the EU makes provision for intersectional discrimination and the needs of workers with disabilities.
To comply, Canadian employers with 10 or more employees must create a pay equity plan, which must:
- Identify the different job classes made up of positions in their workplace
- Determine if the job class is predominantly male, female, or gender neutral
- Determine the value of work of each predominantly female or male job class by considering the skill, effort and duties associated with the work
- Calculate the compensation of each predominately female or male job class
- Compare the compensation between predominantly female and male job classes doing work of equal or comparable value
- Identify and remedy any wage gaps for predominantly female job classes
When the plan is established, employers must raise the pay of any female job class that is paid less than the male equivalent. Pay equity plans are to be updated every five years to find and close new pay gaps.
Canada’s Federal Pay Equity Law came into force in August 31, 2021, and the first reports are due in September 2024.
Outside of federal legislation, pay equity legislation is patchy across Canadian provinces. On May 11, British Columbia became the latest to introduce pay transparency laws but critics claim the bill doesn’t go far enough. British Columbia, Nova Scotia and Prince Edward Island are the only provinces with pay transparency legislation currently in force.
As well as Canada, the EU pay reporting framework shares similarities with US pay equity legislation.
What is the EU’s Joint Pay Assessment?
One key difference in European and Canadian legislation is the EU’s Joint Pay Assessment (JPA), which is triggered when:
- A gender pay gap of at least 5% is found in any worker category;
- The employer cannot justify the gap based on objective gender-neutral criteria; and
- The employer has not resolved the pay gap within six months.
To ensure a “deterrent”:
- The burden of proof shifts to employers to prove the absence of pay discrimination.
- Workers are entitled to compensation for recovery of back pay and related bonuses or payments in kind. Compensation is uncapped.
How effective is pay equity legislation?
The EU Directive is a bold statement of intent to close the gender pay gap and achieve equal pay for work of equal value.
Meanwhile, Canada faces something of a credibility problem. A March 2023 survey from Indeed found that 65% of Canadian working women believe they are underpaid. What’s more, one fifth don’t believe the gender pay gap will ever close.
They have a point.
Women have already faced a 50 year wait for equal pay, and while pay equity is gaining momentum, more needs to be done. The gap in equal pay widens for women of color, and pay data for the LGBTQIA+ community is inadequate.
Closing the gender pay gap: next steps for employers
Invest in pay transparency: Pay equity offers significant benefits for organizations, but only 14% set aside an appropriate budget. Equally, only 14% use data and equity platforms to identify pay disparities. Investment in pay equity ensures compliance with legislation, attracts and retains more talent, and helps companies to meet financial objectives.
Carry out a pay equity analysis: An audit identifies disparities in your pay structure. Trusaic PayParity is a software solution that conducts a pay equity audit at the intersection of factors such as gender, race/ethnicity, age, and disability. Learn why intersectionality is important.
Set equitable and explainable pay ranges: Explaining a perceived gender pay gap will be key to complying with EU legislation. Trusaic PayParity and Salary Range Finder® can help to determine competitive and fair salary ranges by overlaying internal pay equity audit data with that of external labor market data. Fair salary ranges are determined by combining the two data points.
Start your journey to pay equity. Schedule a demo or speak to one of our pay equity experts.
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