When discussing equal pay between men and women, the focus is often on pay. However, when we look at the income difference after reaching retirement age, this gap has increased to nearly forty percent. In the second part of our blog series on (in)equality of pay between men and women, PwC specialists Corien Dieterman and Marloes Schoonen provide some solutions to reduce the pension gap in your organisation.
"A smart girl is prepared for her future," was the slogan of a Postbus 51 campaign by the Dutch government from 1989 to 1992. But is that same girl also prepared for her pension?
When it comes to equal pay between men and women, the focus is often on the wages earned. According to CBS figures from 2022, women in companies in the Netherlands (uncorrected) earn about sixteen percent less than men. If we look at the income difference after reaching retirement age, this gap has increased to nearly forty percent.
The warned girls who received the Postbus 51 message, and their (grand)daughters (the working women now aged 25 to 67), work part-time more often than men for many reasons. As a result, many will have built up a part-time pension. Can you still live on that, and how aware are women who choose to work part-time that this perpetuates income inequality even in life after the working phase?
The pension gap in the Netherlands is alarmingly large
Due to the choice of many women in the Netherlands to work part-time, especially in certain sectors such as healthcare and education, the pension gap is large. It is even one of the largest in Europe. The question is to what extent women, but also men who work part-time, are aware of the long-term effects of their choice.
This is not a problem in case the own pension is sufficient and/or the life partner, the income supplementer of the working life, also supplements this part-time pension. But there is no certainty that all part-time workers will receive the necessary income supplement for a lifetime. Even after retirement age, an income supplementer will need to be found or kept, because the second pillar pension alongside the AOW is based on the part-time income. As an employer, it is important to point this out to employees when entering a part-time employment contract to prevent this income gap from arising unwantedly.
European Pay Transparency Directive: no attention yet for pension gap repair
How do you ensure that this gap becomes smaller? With the adoption of the European Pay Transparency Directive, companies with more than 250 employees are required to report on the pay gap between men and women in their organisation. The goal is to reduce the existing pay gap. However, the (possibly necessary) pay repair does not repair the pension that was built up over a lower amount in previous years. Unfortunately, the directive does not (yet) pay attention to the (repair of the) pension gap.
Corporate Sustainability Reporting Directive (CSRD) as an opportunity
In addition to the European Pay Transparency Directive, the CSRD requires many employers to be transparent. Companies that find their own employees - the so-called S1 - a material subject, will soon also have to be transparent about the chosen strategy, policy, and objectives in the field of HR. The employer then reports on how the company plans to achieve the necessary policy adjustments and progress.
Reporting standard ESRS S1 does not (yet) explicitly include accrued pension in the transparency about equal pay for male and female employees. However, more ambition, and more transparency are allowed. Employers can pay attention to this pension gap and present their solutions.
Solutions for reducing the pension gap
The pension gap is a problem that exists both now and, in the future, but where you can find the solution at this moment. We see the following possibilities:
- Employee education
Employees are not always aware that the choice to work less also affects their future income. As part of the conversation with employees about part-time work, employers would do well to also point out the indirect effects, such as reduced pension accrual. This is in addition to providing information about the importance of saving for later and how employees can possibly make additional contributions to their pension scheme to close the gap. A good way to do this is through concrete examples and calculations. - Improving leave arrangements and flexible working hours
Better care arrangements and leave arrangements, but also more flexibility in working hours, can lead to employees being enabled to approach their care tasks within existing employment contracts i a more flexible manner. As a result, it may not be necessary to convert a full-time employment contract into a part-time employment contract. Employers cannot eliminate the complexity of care tasks and childcare in the Netherlands, but they can positively influence it with their problem-solving ability. - Encouraging expansion of employment contracts
Employers in sectors with high demand for personnel, but also with many part-time employment contracts, can discuss with their employees whether it is possible to expand the employment contract. This is not only an increase in current wages but also in income for later and can positively influence previously calculated labour market tightness.
We believe that how you treat your employees and what remuneration and employment conditions you offer should also be a good reflection of who you are as an employer. Both financial and HR considerations play a role in this. But it is clear that as an employer, you can indeed make a difference in reducing the pension gap.
About the authors
