Germany: Act to Promote Transparency of Pay Structures (Entgelttransparenzgesetz)

On 30 March 2017 the German Parliament (Bundestag) passed the Act to Promote Transparency of Pay Structures (Entgelttransparenzgesetz). The objective of this act is an achievement of the pay equity between men and women, who perform the same work or work of equal value. It is expected that the act will come into force this summer (immediately on the day after its promulgation).

According to this new act (i) employees are, under certain conditions, able to claim for information about pay structures, (ii) the companies are encouraged to implement operational review procedures and (iii) a reporting obligation will be imposed on certain companies:

• If the company regularly employs more than 200 employees, the employees of each operation will be able to claim for information about the pay structure. Such information comprises the average monthly gross salary of at least six colleagues of the other gender who perform the same work or work of equal value. Also, the employee can ask to be provided with information about up to two remuneration components (e.g. bonus) and the criteria and procedure for the determination of the remuneration. Only the pay system of each company's site or office must be taken into account, without consideration of potential regional differences between the sites and offices. For the first time, such claim can be brought six months after the act came into force.
• Companies with regularly more than 500 employees are encouraged to implement operational review procedures to ensure their compliance with equal pay principles. The explanatory memorandum to this act states that there will be no legal obligation to implement such procedures.
• Companies with regularly more than 500 employees which are required to prepare a management report pursuant to sec. 264 and 289 of the German Commercial Code (Handelsgesetzbuch) will be obligated to include in this report information about their measures to comply with gender equality and to achieve pay equity between men and woman. The first report must be prepared in 2018.

In addition to the employee's individual information claim, any discriminated employees will be entitled to be paid the difference between the salary actually received by him/her and the salaries of comparable employees. It is recommendable to review the company's pay structures and to collect/prepare the required information for the future. The company will be obligated to provide an employee with the requested information within three months after the information request; otherwise discrimination will be assumed and, in case of a dispute, the company will bear the burden of proof that it has complied with the statutory equal pay provisions.