Gender Equality: France Issues Decree on Application of New Legal Framework for Equal Pay

The decree, published on 9 January, was issued under the act, “For the Freedom to Choose One’s Professional Future” of 5 September 2018, and introduces measures to eliminate the pay gap between women and men in France.

Decree No. 2019-15 (the Decree) specifies the methods for calculating the indicators relating to the pay gap between women and men and the measures implemented to eliminate them (the Indicators), as well as their publication methods: four for companies with fewer than 250 employees, and five for those with more than 250 employees.

Publication Deadlines

The new article D. 1142-4 of the French Labour Code, introduced by the Decree, sets the deadline for publishing the level of results obtained by companies with regard to the Indicators for the previous year. Companies must therefore publish their results once a year, no later than 1 March of the current year. Companies with more than 1,000 employees should publish their results no later than 1 March 2019.

Transitional publication measures are provided for in the Decree:

• Companies with more than 250 employees and less than 1,000 employees have until 1 September 2019
• Companies with 50 to 250 employees have until 1 March 2020

Employees to Be Taken into Account for Calculation of Indicators

All employees of a company present during the annual reference period chosen by the employer for the calculation of the Indicators (the Reference Period) are not to be taken into account. Indeed, apprentices, holders of a professionalization contract, employees seconded to the company by an external company, expatriate employees, as well as employees absent for more than half of the Reference Period considered are excluded from the company's workforce for the calculation of the Indicators.

Remuneration Elements to Be Taken into Account

The remuneration of each employee is reconstituted in full-time equivalent over the Reference Period.

The compensation items taken into account exclude severance and retirement indemnities, bonuses linked to a particular hardship not affecting the employee's person, seniority bonuses, overtime, as well as payments made in mandatory profit-sharing and incentive schemes (“Participation” and “Intéressement”).

Calculation Methods and Evaluation of Indicators

As discussed in our prior Lawflash, the Indicators are as follows:

• The gender pay gap, calculated on the basis of the average pay of women compared to men, by age group and equivalent job category
• Difference in the rate of individual increases (excluding promotion) between women and men
• Gap in promotion rates between women and men (only for companies with more than 250 employees)
• Percentage of employees who returned from maternity leave during the Reference Period and who benefited from an increase upon their return during the same period
• Number of employees of the underrepresented sex among the 10 employees who received the highest remuneration

Concerning, for example, the modalities of calculation of the pay gap Indicator:

1. Employees are divided into groups according to four age groups (under 30 years of age, 30 to 39 years of age, 40 to 49 years of age, and 50 years of age and over) and by equivalent job categories. With regard to equivalent categories of posts, the employer may decide, after consultation with the employee representatives, to allocate employees by level or hierarchical coefficient in accordance with the branch classification or another job rating method. Failing this, the equivalent job categories are the standard four socio-professional categories (workers, employees, technicians and supervisors, engineers, and managers)
2. Groups where the number of employees of either sex is less than three are not taken into account
3. Once the groups have been formed, the average remuneration of women and men for each group is calculated
4. The percentage of the pay gap is calculated for each group (by subtracting women's average pay from men's average pay and relating this result to men's average pay)
5. The threshold of relevance of the gaps is 5% in the groups constituted by socio-professional categories and 2% in the groups constituted by hierarchical level or coefficient
6. The gaps thus adjusted for each group are multiplied by the ratio (number of employees in the group/total number of employees in the groups taken into account), then added together to obtain the overall pay gap between women and men
7. The final result is the value of the total remuneration gap rounded to the first decimal place

The Indicators are calculated and evaluated according to a scale ranging from 0 to 100 points, in accordance with the tables annexed to the Decree. Companies must achieve a minimum score of 75 points out of 100; otherwise, they will have to implement measures to achieve a sufficient score in three years. If not, companies will incur a financial penalty of up to 1% of the payroll.

Incalculable Indicators

The Decree also forecasts three cases in which the Indicators cannot be calculated:

• When the total number of employees retained is less than 40%
• When no individual increase or promotion has occurred during the Reference Period
• When no return of maternity leave has taken place during the Reference Period or no increase has taken place during the period of such leave

When one or more Indicators are incalculable, only the calculable Indicators are taken into account and the total number of points obtained is reduced to 100 points, applying the proportionality rule. However, if the maximum number of points obtained before the application of the proportionality rule is less than 75 points, no result level can be determined for the concerned Reference Period. However, the employer remains obliged to make the calculable Indicators available to employee representatives and the labor authorities.

Finally, when a company reaches 50 employees, it has three years to apply the provisions of the Decree.

In conclusion, the first step is to carry out an audit of remunerations based on the Indicators in order to assess the precise situation of the company. Corrective measures can be considered and/or implemented on the basis of the audit results.

Even for the smallest companies (50 to 250 employees), the deadlines are short (one year) and the implementation of the Indicators may require upstream work to be started as soon as possible.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Paris
Sabine Smith-Vidal
Laetitia de Pelet