Classification linked to ISCO codes, an established and accepted practice
The requirements of the Pay Transparency Directive on reporting pay and statistics are new only in part. A long-established practice of reporting pay statistics is mentioned in Article 31 of the Directive. Member States are required to provide these statistics to the European Commission, i.e. Eurostat, with data on pay differentials in unadjusted form. These statistics are based on the International Standard Classification of Occupations (ISCO) codes. It is on the basis of this classification that official calculations of the pay gap between women and men are conducted. The same statistical basis is stated in Agenda 2030 to form the basis for indicator 8.5.1, which is said to describe progress towards the goal of equal pay for work of equal value. The problems of compiling statistics on work of equal value at the national level have been highlighted in
Chapter 6.
In Sweden, the country with the longest history of pay survey provisions in Europe, there has been widespread criticism from employers over the years over perceived requirements for duplication of effort. These objections, particularly from the public sector, are linked to the requirements to classify workers under the national ISCO system. In the public sector, the requirement to assign occupational codes to workers applies to all employers. The reporting requirements in the private sector are based on a sampling system. In the following text, reference is made to the Swedish variant of ISCO codes, called SSYK. The corresponding designation in Denmark is DISCO and in Norway STYRK. Similar national standards exist in Finland and Iceland.
Employer organisations’ objections to duplication of effort and two parallel processes
The obligation of Swedish employers to produce statistics is regulated by statute. The coding of work is often done with reference to industry-specific variants of SSYK, such as BESTA in central government or AID in municipalities and regions. SSYK is structured around different occupational areas (first digit), main groups (second digit), occupational groups (third digit) and subgroups (fourth digit).
The application of the concept of work requirements to define work of equal value under the Swedish Discrimination Act and the application of the concept of work requirements for classification according to SSYK/ISCO differ in a number of crucial ways:
The concept of work in the Discrimination Act and its detailed definition in preparatory works is not the same as or harmonised with the definition in Statistics Sweden’s guide to SSYK 2012. However, the different definitions are relatively close.
Work with the same grouping level within SSYK-related systems generally represent a wider range of work than represented by the classification equal work and work of equal value. Thus, work with the same SSYK-related grouping level may be judged to have different requirement levels in subsequent pay surveys. It is not unusual for a pay survey to identify more requirement levels than the levels on which the SSYK system is structured.
Another difference between the two systems, or regulatory frameworks, is that the Discrimination Act presupposes that different types of work can be compared. Thus, an assessment of work requirements under the Act is made ‘factor by factor’, i.e. all work under the same employer is assessed (or scored) in terms of educational requirements, and thereafter professional experience requirements, responsibility requirements, etc. In this way, the same assessment scale is used for all work under the same employer. The SSYK system (and ISCO codes), on the other hand, does not provide compatibility between different occupational groups. The Discrimination Act is thus based on a horizontal comparison, factor by factor, at the establishment level. The SSYK system is based on a vertical comparison (to get to the right level) within a system of occupational fields, main groups and occupational groups related to a uniform and national scale.
A further difference between the two systems for assessing work requirements is that the SSYK system is based on a template that should be applicable to all employers throughout the country. It is thus a top-down system. Pay survey provisions are based on the opposite logic, i.e. bottom-up. Equal work and work of equal value is based on the individual employer’s pay policy positions and specific organisational structure.
The concerns of employer organisations over duplication of effort arises when employers do not understand how to link the wording in their own collective agreements, which states that pay should be related to work requirements, to the legal definition in the Discrimination Act. In the everyday pay policy environment in which both local and central parties find themselves, the concept of work of equal value does not have a specific point of reference.
Discussion on pathways for possible solutions
In its 2008 annual report, the Swedish National Mediation Office states that more than 90 per cent of the country’s workers are covered by collective agreements that include local pay formation. It goes on to state that “the vast majority of union agreements that specify local pay formation contain principles to be observed when determining pay. The starting point is the degree of work demands and how well the work is performed.”
Given that pay setting should primarily be related to the concepts of what (the requirements of the work) and how (the individual’s ability and skill), there is no contradiction between, on the one hand, existing collective agreements based on local pay formation and individual pay setting, and, on the other hand, classification requirements for equal work and work of equal value. The latter requirements follow from pay survey provisions or Article 9.1.g of the Pay Transparency Directive. Collective agreements at union level generally require employers to have a documented the pay policy. Such documentation should show the basis on which the requirements for different work are assessed, evaluated, and handled in terms of pay. Thus, in practice, an employer will make a judgement on which work is considered to be of equal value. The very purpose of a pay policy is that it should express the organisation’s desired pay structure for existing jobs. For example, the pay policy should be able to serve as a guide so that new employees are paid at a level appropriate within the organisation. The purpose of a pay policy is generally to describe the expected pay ranges for different groups of work (of equal value). In addition, the pay policy should be able to specify pay criteria, and their application, to differentiate the pay of individuals performing equal work. The requirement of objectivity in pay survey provisions thus does not mean that all work of equal value should be paid the same, but that the pay should be justified on the basis of the local pay criteria applied. Given the existence of individual performance assessment criteria, the application of these criteria should be able to explain pay dispersion within given (equal) work. Thus, if pay survey provisions are correctly applied, when analysing a given pay structure, both the difficulty level of the work (regardless of who performs the work) and the way the work is performed (by individual employees) must be taken into account.
Given that Sweden has a system in which local pay formation is completely dominant, the possibilities for finding solutions for a better interaction between the pay survey provisions and the collective bargaining system are particularly favourable. As a general rule, in Sweden the employer's responsibility to ensure that pay is not gender discriminatory coincides with the actual level at which pay is defined. The transport sector is the main exception. The situation is different in countries with a high degree of collective bargaining systems, by which individual pay levels are defined in collective agreements that apply to an entire industry. In such situations, specific solutions are required to address gender pay differentials that are identified at company level, but which stem from the application of centralised pay scales. The previously referenced Finnish report
Kollektivavtalens effekter utifrån ett könsperspektiv (The impact of collective agreements from a gender perspective) points out that under EU law an employer cannot invoke a discriminatory collective agreement to justify a discriminatory practice. According to the report’s authors, it would be reasonable for the penalties for discriminatory provisions to be borne primarily by the parties to the collective agreement when the individual employer has complied in good faith with the provisions of the agreement.
Collective labour agreements based on local pay formation, which require pay criteria to be defined locally, apply the same methodology as the pay survey provisions. Interaction with the centralised job classifications of the SSYK/ISCO system can be improved by first developing clear pay criteria and a clear pay policy. As part of this work, the range of existing jobs needs to be identified (equal work) and categorised in terms of their different requirement levels (work of equal value). Once the pay policy positions have been established, in accordance with the principles of collective agreements and including an assessment of which work is equal and of equal value, the next step is to consider how the unique jobs in a particular workplace can best be classified according to the more general definitions of the SSYK/ISCO system. A bottom-up approach, which assigns SSYK/ISCO codes as a final step, can prevent fixation and lock-in at the grouping levels of the ISCO system. The ISCO system lacks in-built compatibility between occupational groups. Comparison between different types of work is at the heart of the concept of work of equal value.
In conclusion, it is important that local parties are made aware that the concept of work requirements can be interpreted in different ways and that the concept is more or less strongly linked to two sets of rules with completely different purposes: on the one hand, regulations or legislation on reporting wage statistics, and on the other hand, legislation on discrimination. It would be desirable for this risk of confusion to be recognized in collective wage agreements. It should also be clear from collective agreements that the starting point for determining the value of work and the associated ‘job requirements’ has a precise legal meaning. This definition is now contained in the Pay Transparency Directive. Clarification of collective agreements on these points does not affect the parties’ ability to conclude agreements on pay.