Pay transparency in the workplace – Part 5: What employers should know about workplace co-determination

Existing rights under the Pay Transparency Act and the Works Constitution Act

The Pay Transparency Act already grants the works council in companies with regularly more than 200 workers a specific right to access gender-related pay lists (section 13(2) Pay Transparency Act). If workers submit a request for information via the works council, the employer must make pay lists broken down by pay components available to the works council for inspection. This right of inspection can only be exercised in connection with a specific information request by a worker. The employer may satisfy the request vis-à-vis the works council without presenting the pay lists if it can assert a legitimate interest in not producing the lists.

Unlike the works council’s right to information, the conduct of company audit procedures to ensure equal pay has so far only been recommended – but not mandatory – for private employers with more than 500 workers (section 17(1) Pay Transparency Act). For employers with fewer than 500 workers, the company audit procedure has had no relevance so far.

In addition, sections 80(2), 87(1) and 99 Works Constitution Act operate as instruments of transparency and equal treatment beyond the Pay Transparency Act through rights to information, co-determination and participation. In particular, the works council must be involved in the company’s pay structure according to section 87(1) no. 10 Works Constitution Act. This co-determination right extends from pay principles to new pay methods and performance-related pay. There is also co-determination in the setting of performance-related pay under section 87(1) no. 11 Works Constitution Act. If the employer uses technical facilities in the voluntary audit procedure, this may trigger co-determination under section 87(1) no. 6 Works Constitution Act in relation to technical devices intended to monitor workers’ behaviour or performance.

The works council’s right to participate in the assessment of individual personnel measures – recruitment, classification, reclassification and transfer – under section 99 Works Constitution Act also serves the uniform application of the pay scheme and thus, in effect, pay transparency and equality.

New requirements under the PTD

The PTD does not affect existing participation rights under the Works Constitution Act, but expands the framework to pay reports and – in certain cases – joint pay assessments with workers’ representatives for companies with 100 or more workers. Where pay is governed by collective agreements, involvement of the competent trade union may be required.

Triggers and process for the joint pay assessment

Employers with at least 100 workers are required to prepare reports that depict the gender pay gap between workers by categories (Article 9 PTD). If, within a category, there is a difference in pay of at least 5% that the employer cannot justify by objective, gender-neutral – i.e. in particular job-related – criteria, and the employer does not rectify that difference within six months, a joint pay assessment with the worker representation must be conducted (Article 10(1) PTD). The involvement of the labour inspectorates and equality bodies may also be envisaged in the context of the joint pay assessment. The aim is to review existing systems and, where necessary, to establish new systems for gender-neutral job evaluation and professional classification.

The joint pay assessment must be made available to the competent bodies – for example, equality bodies or labour inspectorates – pursuant to Article 10(3) PTD.

Need for legislative adaptation in Germany

The PTD requires more co-determination than is currently provided for under national law. Criteria for pay differentiation must be assessed jointly, and in individual cases in consultation with the trade unions.

In companies without a worker representation, workers must be able to designate an appropriate representative according to Recital 43; a procedure for this must be established in national law. The same applies to a procedure for judicial enforcement of the principle of equal pay, as provided for in Article 14 PTD. The Pay Transparency Act must also be amended: audits that have been voluntary so far will become mandatory measures in the future (where appropriate in cooperation with workers’ representatives), and the requirements for reports will become more detailed.