The difference in pay between the genders not only affects women during their working life, but also drags on afterwards, even in retirement. In March 2020, the average public pension benefit for men was €1,332.35 in Spain, versus only €877.39 for women, according to data published in the Secretary of State for Social Security’s digital magazine. A simplistic view could chalk this up to the differences in remuneration at companies. In reality, though, the issue is much more complex and is caused by a number of factors.
Under equal rights legislation, business owners are given the not-always-easy task of combating the gender pay gap of employees during their working lives, by planning, negotiating and applying measures, enshrined in these companies’ equality plans, aimed at narrowing such gaps. To combat inequality, the legislation allows companies even to take affirmative action measures, such as giving preference to female applicants when hiring or deciding on promotions, or even to apply processes to review and adjust employees’ salaries to bring both genders’ pay into line.
However, Europe has halted similar public-level practices aimed at ending the difference in the average pension benefits for men and women, by derailing a regulation approved in Spain for that purpose.
In 2015, Spain’s General Social Security Law was amended to include a supplement to contributory pensions for women who had two or more children, recognizing, by adding a given percentage to their pension benefits, what the law called their “demographic contribution to the social security system”. The criticism against this wording is that although someone who has children undoubtedly makes a “demographic contribution”, it is not entirely clear that this contribution is made “to the social security system”, since this would only happen if these children contribute to the system one day and if they do so in Spain. As regards the nature of the supplement itself, one could also question whether only women make a demographic contribution or if men can make this contribution as well.
It did not take long for a man who had two daughters to challenge the social security system in court, in 2017, seeking the same supplement as afforded to women, arguing that he too had made a demographic contribution.
The court handling the claim submitted a request for a preliminary ruling to the Court of Justice of the European Union (CJEU), which issued a very interesting judgment on December 12, 2019. The judgment reviews the arguments submitted by the Spanish state, which explained that the supplement was actually conceived as a measure to reduce the gap between the average pension payments of men and those of women.
However, the CJEU concluded that the Spanish law establishing the pension supplement for women on account of a demographic contribution to the social security system was discriminatory and did not fall under the cases in which direct discrimination is permitted.
In effect, European legislation allows Member States to maintain or adopt measures offering specific advantages in order to help the less-represented gender exercise professional activities or to avoid or compensate for disadvantages in their professional careers. However, the CJEU considered that the regulation establishing the supplement did not provide any remedy for the problems that females may encounter in the course of their professional career and did not ensure full equality in practice between men and women in their working life; rather, only after the end of their working lives.
Royal Decree-law 3/2021, approved on February 2, 2021, adopting measures to reduce the gender pay gap and other social security and economic issues, amended article 60 of the General Social Security Law to replace the previous article and to regulate a new supplement specifically indicated “to reduce the gender pay gap”.
This pension supplement continues to apply preferentially to women; however, it is now indicated that men may be entitled to the supplement (in which case the mother of the children cannot receive the supplement), provided certain requirements are met, including his professional career having been interrupted or affected by the birth or adoption of one of his children, a requirement that does not apply to women seeking the supplement.
With this nuance in the new regulation, by allowing men to also enjoy the supplement if certain requirements are met, the law acknowledges that the Spanish pension system has never discriminated against women on account of their gender.
The differences between the average pension benefits of men and women stem from the differences in their respective contributions (because of different pay scales in their respective careers, because more women than men work part time, because women join the workforce later and similar issues), not from a pension benefit calculation system that is detrimental to women. When looking at the monthly pension benefit, if the calculation is performed on the total amount of pension benefits that men and women receive throughout their lives, this difference most likely disappears given the longer life expectancy of women.
We will still need some time before we can truly see whether this new regulation has the desired effect and whether, after a few years, this inequality in the average pension benefits of men and women will be lessened or even, someday, balanced out.
Garrigues Employment & Labor Law Department