International Women’s Day 2022: German Employment Law Reforms Promoting Gender Equality
International Women’s Day, which draws attention to women’s rights and gender equality worldwide, has been celebrated since 1911. In order to counteract any inequalities that women may face in the workforce, the German government enacted a number of important employment laws and amendments in recent years.
The Second Leadership Positions Act (FüPoG II)
Women are particularly underrepresented at the executive level of German companies. Of the 200 largest German companies, only slightly more than one in ten board members are women. Germany took an initial step toward equal participation of women and men in leadership positions in the public and private sectors with the introduction of the first Leadership Positions Act in 2015. While the number of women on supervisory boards has risen since the act was passed, the number of women on management boards has not seen a comparable increase. In an attempt to address this, the German Bundestag enacted a second Leadership Positions Act, which took effect on August 12, 2021. Key regulations under the second Leadership Positions Act include the following:
Minimum participation requirement
Listed German stock corporations to which the Codetermination Act (Mitbestimmungsgesetz) applies (companies with more than 2,000 employees) must have at least one woman and one man on their management boards if the boards consist of more than three persons. This requirement also applies to European companies if they are listed on the stock market and more than three executive directors are appointed to their management boards. In addition, the requirement applies to board appointments made on or after August 1, 2022. Existing mandates remain unaffected. Any appointment of executive board members in violation of this minimum participation requirement will be
Target figures for women in executive positions
Companies listed on the stock exchange or subject to codetermination under the One-Third Participation Act (Drittelbeteiligungsgesetz) or Codetermination Act are required to set target figures for the percentage of women on management boards, supervisory boards, and at the two management levels below the management boards. Percentage targets must correspond to a whole number of persons. Companies that set a target figure of zero must provide detailed reasons for doing so.
The law imposes severe fines for violations. The targets must be achieved within a maximum of five years and are subject to the “prohibition on deterioration” (i.e., once a quota has been achieved, it may not be undercut if the target is below 30 percent). The target requirements will apply for the first time to reports relating to the financial year beginning after December 31, 2020; companies required to set targets are therefore already obligated to observe their target quotas now.
Temporary time off from board appointments
Members of the management boards of stock corporations, European companies, and limited liability companies now have the right to revoke their appointments for certain periods in the event of maternity leave, parental leave, illness, or the need to care for family members. The supervisory board must comply with the executive board member’s request to revoke the appointment and at the same time assure reappointment after the statutory maternity protection period (section 3 of the Maternity Protection Act [Mutterschutzgesetz]) or the maximum three-month period of leave (for parental leave, nursing care, or illness).
Thus, after the time off, a member of the executive board has a right to be reappointed. For the period a member of the executive board is absent, the minimum participation quotas will be considered met, if they would have been satisfied without the suspension of the appointment.
Amendments to the Federal Parental Allowance and Parental Leave Act
The Federal Parental Allowance and Parental Leave Act (Bundeselterngeld- und Elternzeitgesetz) was recently amended with the intention of strengthening families and supporting a better work-life balance. The new regulations became effective on September 1, 2021. Below are some highlights of the new amendments.
The permissible working hours during parental allowance and part-time parental leave were increased from thirty to thirty-two hours per week.
The partnership bonus, which supports the part-time work of both parents, can now be drawn for twenty-four to thirty-two hours per week (instead of the previous twenty-five to thirty hours per week). In addition, parents can choose between two and four months for the period of entitlement. Previously, a fixed entitlement period of four months applied.
Parents of premature infants may receive additional parental allowance based on when the child is born. If the child is born six weeks prematurely, the parents are entitled to an additional month of basic parental allowance. If the child is born eight weeks before the due date, the parents are entitled to two months of parental allowance, three months if twelve weeks premature, and four months if sixteen weeks premature. This is intended to take into account the special situation of premature births and to give parents the opportunity to spend more time with their children in order to compensate for possible developmental delays.
The expansion of support and flexibility is geared toward incentivizing less frequent and shorter family-related career breaks and a quicker return to work. Administrative adjustments and clarifications are also intended to ease the burden on parents, parental allowance offices, and employers. For example, parents who work part-time while receiving parental allowance will only have to provide proof of their working hours in exceptional cases.
Pay Transparency Act
The Bundestag also passed the Pay Transparency Act (Entgelttransparenzgesetz) to promote the transparency of pay structures, which took effect on July 6, 2017. Among other provisions, the act includes the following requirements:
Upon an employee’s request, an employer with more than 200 employees must provide information about the compensation paid to the employee’s colleagues of the other gender performing the same or comparable job and explain the “criteria and practices used to establish the level of remuneration.”
Private companies with more than 500 employees are required to review their compensation structures for equal pay compliance regularly.
Companies with more than 500 employees that are required to submit management reports must also report regularly on the status of gender equality and equal pay in their workforces. The reports must describe measures to promote equality between women and men and their effects on achieving equal pay. These reports are available to the public.
Despite the federal government’s actions, the gender pay gap (the wage gap between men and women) amounts to 18 percent in Germany. Even when differences in formal qualifications and job characteristics are controlled for, a gender pay gap of 6 percent persists, according to the Federal Ministry for Family Affairs, Senior Citizens, Women, and Youth (BMFSJ). Several relevant factors in the wage gap may be that the relatively lower rates of pay of some female-dominated occupations, career breaks, and subsequent reentries into the workforce on a part-time or mini-job basis.
The backdrop of International Women’s Day provides an opportunity for companies to review and reflect upon their corporate cultures with regard to gender equality. To that end, an “equality check self-test” for small and medium-sized enterprises can be found on the website of the BMFSJ (German version).