Employment law: Mandatory wage equality analysis starting from July 1, 2020

The new provisions of the Gender Equality Act, which will enter into force on July 1, 2020, and will remain in force until June 30, 2032, stipulate that employers with more than 100 employees must carry out a wage equality analysis every four years and have it reviewed by an independent external body (such as auditing companies or employees’ organisation). It is to be noted that the number of employees is relevant regardless of whether the employment is full or part-time.

The wage equality analysis must be repeated every four years, unless the number of employees falls below 100. In this case, the analysis is only to be carried out again once the minimum number of employees has (again) been reached (art. 13a para. 2 of the Gender Equality Act). In addition, once a wage equality analysis shows that wage equality is maintained (art. 13a para. 3 of the Gender Equality Act), the analysis no longer needs to be performed.

The wage equality analysis must be carried out applying a scientific and legally compliant method, e.g. by using the tool provided by the government (art. 13c of the Gender Equality Act). When performing the review, the auditor focuses on formal aspects (art. 13e para. 2 of the Gender Equality Act), i.e. whether the analysis was performed within the period prescribed by law, whether the method is evidenced as being scientific and legally compliant and whether all employees, all wage components and all other necessary data have been recorded in full (art. 7 of the Ordinance on the verification of the Wage Equality Analysis). There is no (further) examination of the content. If the employees’ organisation acts as review body, its procedure shall be contractually agreed with the company (art. 13f of the Gender Equality Act). After completion of the review, the employees must be informed of its results in writing within one year (art. 13g of the Gender Equality Act); listed companies must also disclose the results in the notes to the annual financial statements (art. 13h of the Gender Equality Act).

The companies concerned need to perform the first internal wage equality analysis until June 30, 2021 (art. 10 of the Ordinance on the verification of the Wage Equality Analysis).

These regulations aim at creating initiatives for companies to voluntarily eliminate wage inequalities between genders. Accordingly, the new Gender Equality Act does not provide for any sanctions; neither for companies that do unlawfully not carry out wage equality analysis nor for those that remain inactive after a wage inequality has been established. Such companies merely remain obliged to review their wage structure every four years – until inequalities no longer exist. Given the duty to inform employees (as well as the public in the case of listed companies) and possible reputational damages resulting therefrom, companies may be well advised to remedy the situation. In addition, negative outcomes may also have consequences in wage discrimination cases (art. 7 of the Gender Equality Act).