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New Law on Pay Transparency soon to be adopted by German Bundestag

At the beginning of this week (13 February 2017), the German government introduced the bill on pay transparency (which was adopted before by the cabinet on 11 January 2017) to the German Bundestag. The German federal assembly was asked beforehand for its opinion and did not raise any concerns. The draft bill will be debated in parliament in the upcoming weeks. The Bundestag may amend or change parts of the draft bill. However, it is not likely that there will be major changes. The new Remuneration Transparency Act is planned to enter into force on 1 July 2017 although that date may still change.

New employers’ obligations as to equal pay and transparency:

There will be three new obligations on employers:

First of all, there is the employee’s individual right to be informed about remuneration within the operation if the employer employs regularly more than 200 employees.

The information must be provided within three months of the request. The information right covers the average remuneration of all employees of the opposite sex performing the same or the same type of work. It includes information about two further salary components at the employee’s option. If there are fewer than six employees of the opposite sex performing the same or the same type of work, the average remuneration must not be disclosed. If a difference in remuneration is found, the employee is entitled to payment of the amount of remuneration that would have to be paid if there had not been an unlawful discrimination based on sex. This comprises a claim for compensation for past differences in remuneration for up to three years (the statutory period of limitation) and salary adjustment for the future.

According to the transitional provisions, the employee may request information for the first time after six months from the entry into force of the new law.

Secondly, a non-binding request/recommendation is introduced by the new law: Employers with more than 500 employees shall ideally conduct testing procedures on the salary structure within the operation to ensure that the employer’s statutory obligation to pay equal pay is fulfilled.

Thirdly, employers with more than 500 employees that are subject to reporting obligations according to Section 246 in conjunction with Section 289 of the German Commercial Code (Handelsgesetzbuch, HGB) will have to prepare a report on equality and equal pay describing company measures to enhance and ensure (pay) equality. If no measures are taken, the report must give reasons why not. This report needs to be produced every three or five years depending on whether or not the employer is bound by collective bargaining contracts and will be attached to the status report required by Section 246 in conjunction with Section 289 of the German Commercial Code (Handelsgesetzbuch, HGB) and thus published.

According to the transitional provisions, the first report is due in the year following the year of the entry into force, in 2018.