Gender inequality in performance-related pay. A gap in the EU equal pay agenda

Summary:

Gender pay inequalities have been high on the EU agenda in recent years, and even more so in light of the Covid-19 pandemic. The EU gender pay gap remains at a significant 14.1 per cent, having narrowed by less than two percentage points over the past decade, as shown by Eurostat data. Closing this gap is one of the central aims of the EU Gender Equality Strategy 2020–2025. One major initiative in this regard is the European Commission proposal for a Directive aimed at improving the effectiveness of the EU equal pay legal framework through more transparency and better enforcement. It is currently making its way through the legislative procedure.

Performance-related pay, as a factor contributing to the gender pay gap, has received little specific attention at the EU level. Recent research shows that such pay schemes are increasingly prevalent across the EU and that they contribute to pay inequalities, including inequalities between men and women. This growing issue seems to have escaped the attention of EU policymakers so far, with no explicit mention in either the Gender Equality Strategy 2020–2025 nor the EU Action Plan 2017–2019 on Tackling the Gender Pay Gap. These focus on some of the issues underlying the disparate effects of performance-related pay, such as horizontal and vertical occupational segregation, but without recognising the ways in which the increasing prevalence of performance-related pay could exacerbate gender inequalities that are linked to these factors.

This policy brief sketches, first, how the growth of performance-related pay schemes can contribute to the gender pay gap. It then discusses the extent to which the current EU equal pay framework and proposed Directive on pay transparency could be applied to address some of the arising issues. It argues that many of the factors underlying the disparate effects of performance-related pay on men and women fall beyond the scope of legislative frameworks, and are not identified in policy agendas, either. More attention should be paid to this topic at the EU and national levels, and appropriate solutions should be developed.

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