Remuneration in Luxembourg: why the gender pay gap isn’t closed yet

in Industry Insights, Luxembourg, 26.07.2018

Studies have again and again shown that an organisation’s success and competitiveness depend on its ability to embrace diversity. Companies today spend a lot of money and time on workplace diversity and outreach programs, though often have little to show for it.

Diversity leads to more innovation, more opportunities for all, better access to talent, and better business performance. Creating a diverse and inclusive workplace results in improved services for customers and better returns for shareholders. It is thus critical to an organisation’s ability to adapt to a fast-changing environment, bringing fresh perspectives and experiences from a mix of cultures, genders, and ages.

What progress has been made in Luxembourg?

KPMG’s remuneration survey, which provides essential information on HR practices in Luxembourg, looked closely at diversity. The results reveal that 52% of the financial institutions in Luxembourg, as of 2017, have a diversity policy in place.

What does “diversity policy” mean?

As per the survey’s results, the main objectives of a diversity policy are various: companies are eager to create and maintain a respectful workplace by fostering respectful behaviour among employees (72%), by improving working conditions (62%), and by enhancing the organisation’s image and reputation (62%). Improving business performance (48%) is also central to diversity policies. Participants recognise as well that a workforce with diverse skillsets can provide a variety of solutions to workplace problems.

The types of diversity programs the survey found were gender equality (93%), work-life balance (83%), disability (41%), seniors over 50 (31%), and religion or personal beliefs (28%).

Have companies made efforts to close the gender wage gap?

Luxembourg, along with other OECD countries, has made significant progress in the gender equality realm in recent decades, particularly in education, health, and female workforce participation.

However, the gender gap in the Luxembourg workforce persists: women still earn less than men, and are less likely to advance as far in their careers.

According to the OECD employment database, the gender wage gap among full-time workers is basically unchanged at just below 14.5% in 2015 (the latest available year) although since 2005 it has decreased by 4% or more in some countries. The most improvement has been in Austria, Belgium, the United Kingdom, and especially Luxembourg, which is categorised as one the OECD countries with the lowest gender wage gap.[1] The wage gap here was 3.4% in 2014.

Sector appears to influence wage gaps significantly: across OECD countries, women working specifically in information and communications technology, finance, and personal services are generally paid less than their male counterparts. In 2014, on average across OECD countries, the gap in these industries stood at 22.1%, 22.8%, and 23.9%, respectively.

The last edition of the KPMG Remuneration survey, in which 80 organisations participated and almost 18,000 data points were generated, found the gender wage gap to be alive and well. Across all functions and hierarchy levels, women earned 29% less than men (the average total package being €87,654 for women and €113,434 for men).

The table below illustrates, in more detail, the gender gap in Luxembourg’s financial sector in 2017.

The higher the hierarchical level, the fewer women you find. At the staff level, there are more women than men by 8%, but the trend reverses in middle management with a gap of 93%. At the management level, the gap rises to a dismal 252%.

The survey’s results also show then that the gender age gap is very narrow, irrespective of hierarchy level. In other words, women achieve a hierarchy level equivalent to men at roughly the same age, but with lower salaries.

And that wage difference increases up the hierarchy, a fact also highlighted by the OECD report The pursuit of gender equality – An uphill battle, which stated that gender wage gaps are especially large among high earners across OECD countries.

The KPMG Remuneration Survey found just that: the income gap by gender is 10% at the staff level, rising to 24% at the management level.

Almost every OECD country has introduced legislation to ensure equal pay for equal work regardless of gender, yet the gap persists. There are all sorts of reasons why: discrimination can continue if laws are ignored or not enforced, or if there are loopholes.

Some countries have taken a bold approach: in Iceland, Fríða Rós Valdimarsdóttir, chair of the Icelandic Women’s Rights Association, backed a plan that has recently succeeded in legally enforcing equal pay—the first such plan in the world.[2] The law requires employers to show, through certification by an accredited auditor, that their pay management system complies with a national equal pay standard modelled on the international ISO environmental management standards familiar to all companies. This model could surely be adopted elsewhere: Portugal is exploring this option, for example, which may foreshadow the Europe-wide adoption of something similar.

What other efforts are being made by companies in terms of diversity?

Regarding diversity in general, Luxembourg’s financial companies are slowly changing and gaining enthusiasm about encouraging diversity and inclusion, tied to which is a work-life balance.

A major initiative taken by 100% of the companies surveyed is the adoption of flexible work patterns, such as part-time, variable working hours, and job-sharing. This initiative is followed by the offer of extended leave and other time-off arrangements (72%) like career breaks, sabbaticals, study leaves, and secondments. Workplace facilities is the third major initiative, with 55% reporting having implemented resources like childcare facilities, a conciergerie, and car-cleaning services. Working from home is another popular one (38%).

Flexibility, as these programs evidence, is thus central in diversity policies.

In conclusion

Most organisations recognise the benefits of having an inclusive, gender-diverse workplace in the modern economy: a rich and varied pool of talent helps foster innovation, open doors for business, and improve employee performance.

But achieving equality still seems to be difficult. Given the high returns and proven benefits of doing so, however, it is highly worth doubling your efforts to get there.

Next up on the KPMG Blog:

[1]OECD, Gender wage gap (indicator)
[2]The Guardian, Feb. 2018 “’Equality won’t happen by itself’: how Iceland got tough on gender pay gap”

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