Equal Pay – who doesn’t immediately think of women? Logically, and partly rightly so. Because in the 9th richest country in Europe and 15th richest country in the world according to Statista, the average gross hourly earnings of women are still 18.4% (EUROSTAT 2022) below those of men – and that puts us at the bottom of the list in Europe – together with Estonia and Latvia (EU-27-average at 12,7%).
Should companies address the issue of equal pay only because it is enforceable by law? Not at all! Although violations can be very expensive: In June 2023, for example, Google settled a lawsuit over gender and race-based pay discrimination with a payment of 118 million US dollars.
Why else put equal pay on the corporate agenda? Wherever the workforce is largely male companies could sit back, right? But beware – Equal Pay means same wage for the same job with comparable performance – regardless of gender, age, part-time/full-time, nationality, religion, special needs.
Several reasons are driving the issue of Equal Pay onto the corporate agenda:
1. Regulatory requirements
Regulatory requirements such as ESG reporting and the European Union’s Pay Transparency Directive, which came into force in June 2023, are driving the topic of equal pay onto the corporate agenda. This directive obliges companies to disclose their pay structures and ensure that equal work and work of equal value is paid equally. Companies with more than 100 employees will not only have to regularly publish data on the gender pay gap, but will also have to take action by 2026 at the latest if this gap exceeds five percent. These regulations force companies to review their remuneration systems and eliminate discrimination in order to avoid legal consequences and fines.
2. Global markets
The global market often requires an international workforce: Supporting international customers, producing overseas, purchasing raw material all around the world are only some of the factors difficult or not at all to handle with only domestic know-how. Therefore, companies have long since stopped looking for suitable employees on their own doorstep and have started recruiting experts in and from other countries. And the temptation to pay less to employees from low-wage countries in order to save costs is not only a form of ‘wage dumping’, but also has a negative impact on the employer’s image in the long run: a vicious circle, because on social media such stories quickly ensure that no suitable employees can be found. The Supply Chain Act, which is also becoming mandatory for ESG reporting, also forces companies to check their entire supply chain for social and environmental standards and to ensure equal and fair wages.
3. Skills shortage
The shortage of skilled workers makes companies want to attract women to professions that were previously occupied almost exclusively by men. And suddenly, classic male domains must deal with the needs and characteristics of a female workforce. Even if the same salary is initially paid for the same job, the period of maternity leave, the return from maternity leave to a part-time job or the different negotiation skills in salary talks, among other things, can have a considerable influence on salary development: a reason to keep the issue of equal pay systematically on the agenda.
4. Hospitality and care professions
Since COVID, the willingness of employees worldwide to switch jobs has increased massively – especially employees working in the hospitality and care industry – because they believe they have better opportunities with a new employer due to the large number of vacancies.
A significant factor in this is the fact that many companies complaining about a shortage of chefs, waiters and nurses are still not offering better working conditions or wages above the minimum wage according to the collective agreement.
This is not so much about equal pay, same wage for the same job, but about pay equity, i.e., equal pay for work of equal value: why, for example, should jobs in the steel industry be worth more on the market than jobs in hospitality or retail? It’s time to rethink working conditions and pay in the low-wage sector.
5. Gen Z’s aspirations
Numerous studies, such as Stanford 2024, show that Generation Z (born between 1996 and 2010) attaches greater importance to meaningful work, work-life balance, diversity, equality and inclusion. They are looking for jobs that promote social responsibility and environmental sustainability.
Equal pay, i.e., same wage for same job with comparable performance, is the least that young employees expect from a good employer. Differences in treatment, promotion and pay based on gender, age, part-time/full-time, nationality, religion, special needs are no longer accepted – in general, the tolerance for “old white males only” seems very limited.
According to a Zenjob survey from June 2024, only 22% still want to work for a multinational. And according to a XING 2024 survey, the willingness to change jobs, especially among GenZ and Generation Y (25-34 years), remains significantly higher (61% and 47% respectively) than the average of 43%.
Author: Martina Ernst, MBA
