This post is also available in: Español
The wage gap in Spain continues to be above 20%, meaning that it is still similar to the difference in pay received by men and women 14 years ago when Spanish Act 3/2007 of March 22, on effective equality between women and men, was approved.
To try to overcome this situation, Royal Decree 902/2020 of October 13 on equal pay for women and men (“RD 902/2020”) provides two corrective mechanisms to realize two business obligations that are of the utmost importance for companies: (i) the salary audit and (ii) the pay register.
These new obligations are already a reality and will become enforceable on April 14, 2021. Specifically, they entail the obligation to register pay for all companies located in Spain and the obligation to perform salary audits for companies with more than 100 employees on March 7, 2021. Companies with a workforce between 50 and 100 individuals must soon start registering pay, but they can delay the salary audit until March 7, 2022.
Complying with these new obligations is crucial, not only because failing to do so could have administrative consequences or important repercussions in legal proceedings, but also because of the reputational damage for a company at a time when organizations are increasingly interested in being socially responsible and sustainable. This makes compliance with equality obligations (and even further, in terms of diversity) a priority for personnel management teams.
Creating the salary audit and pay registration mechanisms is a complex process and must be coordinated. First, to carry out a salary audit, a company must have previously assessed its jobs in accordance with the objective criteria provided in the regulation. It must also identify the factors included in the calculations of arithmetic means and medians and provide objective and reasonable justification if a wage gap is identified between categories, professional groups or jobs of equal value (a detailed summary is provided in our Legal Flash).
Everyone is aware that data about salaries is considered particularly sensitive information by companies and employees. As such, companies are mostly concerned about how to disclose this type of information. It is important to remember that:
- The results of the salary audit are part of the minimum content of a company’s gender equality plan that must be entered in a public register (REGCON), making it available to the public. This does not mean that individual salaries must be published, which could compromise a company’s ability to retain talent in industries with profiles in high demand and that have low retention rates.
- Companies must consult with their employees’ legal representatives before creating a pay register. Once the register has been set up, these legal representatives will have access its entire contents. If a company has no employee legal representatives, its employees will only be able to access the percentage differences in average pay between men and women, broken down depending on the type of pay structure and the applicable classification system.
- Royal Decree 901/2020 contains a specific provision that reminds employee legal representatives of their obligation to not disclose any information they have had access to and handled that has been communicated as confidential, including salary.
Therefore, it is essential that information be properly analyzed and processed and that any identified wage gap is sufficiently justified, which is a legal requirement if the difference is 25% or more, although it may also be a good idea to provide objective and reasonable justification of any wage gaps below 25%.
Companies may be fined up to €187,515 if there is evidence of wage discrimination, on top of the reputational damage. Companies that fail to comply with these obligations may be fined up to €6,250 for each instance of non-compliance, and those that fail to consult with the employees’ legal representatives may face fines for the same amount.
Therefore, the following two important points must be taken into account:
- not all wage gaps are necessarily discriminatory. Indeed, wage gaps are not discriminatory if they exist for objective and well-founded reasons (e.g., internal promotions during the year, conditions inherited following a merger or takeover, or collective bargaining agreements that reward seniority in industries that traditionally employ more men than women). This is something that must be analyzed and justified on a case-by-case basis; and
- not all differences in pay below 25% are non-discriminatory. In fact, Royal Decree 902/2020 makes it clear that, just because there is an obligation to justify a difference of more than 25%, it does not necessarily mean that there is no evidence of discrimination.
In conclusion, companies must prioritize compliance with the above obligations, process information in an appropriate way (given its sensitive nature and the impact it might have) and, most importantly, provide objective and legitimate reasons to justify any pay inequalities or create an action plan to remedy them.
This post is also available in: Español