The German Pay Transparency Act has been in force since 6 July 2017. The aim of the law is to enforce the principle of equal pay for women and men for equal work or work of equal value. Employers are obligated to design their pay system in such a way that gender discirmination is excluded. The law also provides employees with a right to information on the average monthly gross pay for the same or equivalent work in order to check compliance with the equal pay requirement.
On 11 April 2023, the European Pay Transparency Directive was adopted. The directive came into force on 6 June 2023 and the German legislator must implement it into German law by 6 June 2026. The aim of the directive is to eliminate direct pay discrimination. However, this does not prevent employers from remunerating employees differently on the basis of objective, gender-neutral and non-prejudicial criteria. Such objective criteria can be
- Job requirements
- Education requirements
- Competencies
- Job related stresses
- Responsibility
- Working conditions
The member states are required to provide for sanctions in the event of infringements. These sanctions should include fines that could be based on the employer’s gross annual revenue or the employer’s total remuneration.
The European Pay Transparency Directive does not apply directly to companies in Germany, but must first be implemented into German law by the German legislator. However, large parts of the directive can already be found in the current German Pay Transparency Act or have already been developed by case law (e.g. claim for damages). The German legislator will therefore probably limit itself to a tightening up the existing law. The exact form of the future German law cannot yet be assessed.
The requirements for pay transparency pose considerable challenges for employers, and we would be happy to assist you in that regard. Please feel free contact our experienced team of employment lawyers at rugekrömer.
