German Pay Inequality Law Goes into Effect, But Businesses Still Aren’t Ready

Earlier this year, Germany took steps to close its wage gap—one of the highest in Europe—by passing a progressive pay transparency law to better enable women to seek equal pay.

The legislation would make it easier for many women to learn whether or not they’re being paid equally to their male counterparts. However, the new law went into effect on July 6 and many businesses are still unprepared.

The focus of this law isn’t on actually changing what employees earn, but rather information and transparency. According to the law, companies with at least 200 employees are required to provide employees with average salary information upon request.

If a female employee believes she’s being paid unfairly, or wants to be sure she isn’t, she can either submit a request anonymously to employee representatives or go directly to HR. The company is then required to provide the average salary for employees with similar work and responsibilities.

There are, of course, some caveats. Employees are only entitled to this information when they have at least six coworkers of the opposite sex in a similar position. The further up the career ladder an employee has climbed, the fewer peers they have and the less likely it is they’ll be able to access and benefit from this information.

This detail also makes it clear that the law is strictly focused on gender pay inequality and doesn’t take into consideration race, religion, sexual orientation, gender identity or ability.

Employees cannot ask for the specific pay of an individual colleague, only the average salary.

For companies with over 500 employees, the rules are stricter. They must also regularly review their pay structures to reach equality and submit salary reports to prove it, which at least resembles the equal pay law Iceland announced in March.

In theory, this legislation could be an important first step to closing Germany’s pay gap. Angela Merkel (CDU) and Martin Schulz (SPD), both currently campaigning for the upcoming federal election, have supported the law and their parties teamed up in a joint coalition to make it happen. Schulz even stated closing the wage gap was one of his highest priorities, calling pay inequality “one of the greatest injustices.”

Women in Germany currently make 21 percent less than their male counterparts, compared to 16 percent for the whole European Union.

“We have to break the taboo that you don’t talk about money,” said Manuela Schwesig, minister for women and families, “because we want to make sure men and women aren’t played off against each other when it comes to wages.”

By empowering women to go beyond the statistics and learn how the wage gap affects their personal salary, giving them the resources and even the permission to seek out this critical information, Germany may be lighting a spark for big change. Some women are understandably wary of utilizing the law, fearing that they’ll face negative consequences or pushback if they submit a request. But, if they’re brave enough to ask, the information could enable them to fight for a higher salary and close the gap themselves.

This change can only occur, though, if businesses are actually following the law. Consulting firm EY studied 206 medium to large businesses to see what the companies were doing to make the workplace more equal for men and women and how prepared they were for the new law.

They found that only 35 percent of companies were prepared to comply with the law and had examined the pay gap in their organization. These companies would be unable to quickly provide salary information if and when employees start asking for it.

The overwhelming majority of companies do not have an overview of whether women and men with the same job are paid the same, which can lead to great difficulties, said Karl Wirth, a partner at EY. Some of those difficulties, Wirth explained, range from loss of motivation to lawsuits.

If an employee finds out that she’s being paid below average (assuming her company actually has the information prepared) it will not immediately or directly affect her pay. She can, however, use this information the next time she negotiates a raise or she can make a legal complaint using the General Equal Treatment Act.

Germany has the opportunity here to make a real impact on a serious issue, but there won’t be any impact if businesses continue to ignore the law without consequences.

Photo Credit: Thinkstock

51 comments

Lisa M
Lisa M8 days ago

Noted.

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Lisa M
Lisa M8 days ago

Noted.

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Margie FOURIE
Margie F2 months ago

As long as people do the work, and dont play on being a woman, they should be paid equally.

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Son Y.
Son Y.2 months ago

It's a start.

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Carl R
Carl R2 months ago

Thanks!!!

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Veronica D
Veronica Danie2 months ago

Thank you so very much.

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Veronica D
Veronica Danie2 months ago

Thank you so very much.

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Veronica D
Veronica Danie2 months ago

Thank you so very much.

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Janis K
Janis K2 months ago

Thanks for sharing

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Leo C
Leo C2 months ago

Thank you for sharing!

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