Equal Pay Act: find out how companies are impacted by the regulation

Companies must implement measures and policies geared towards achieving equal pay

By Marcelo Lima

Issued in November, Decree No. 11,795/2023 regulated the Equal Pay Act which tackles wage disparity between men and women. The regulation outlined measures to combat unequal compensation for work of the same or equal value.

Also in November, the Brazilian Ministry of Labor and Employment (MTE) issued an ordinance setting out the procedures for inspecting wage transparency and compensation criteria adopted by companies.

Article 461 of the Consolidation of Labor Laws (CLT) already addressed the issue, determining that all employers should be paid the same amount for identical work provided to the same employer in the same company, without distinction of sex, ethnicity, nationality, or age.

As of now, however, the rules and consequences for non-compliance have been clearly outlined and properly regulated, a fact that requires employers to adapt immediately in order to avoid penalties.

Check out below the main provisions set out in Decree 11.795/2023, which regulated the Equal Pay Act.

Who is required to comply with the rules?

The decree mandates that companies with 100 or more employees, having a head office, branch, or representative firm in Brazil must comply with its provisions.

Salary and Remuneration Criteria Transparency Report

The purpose of the report is to facilitate the comparison of salaries, compensation, and the distribution of job positions, thereby ensuring transparency in remuneration policies. The document must contain the following information:

• The job position or occupation as per the Brazilian Classification of Occupations - CBO, along with the respective duties; and
• The employee’s salary as per the employment agreement, Christmas bonuses, commissions, premiums, overtime rates, allowances (e.g. night shift differentials and hazard pay), vacation pay, work performed during a notice period, paid weekly rest, tips, and other payments that, according to law or a collective bargaining agreement, form part of the worker's remuneration.

Data shall be anonymized to comply with personal data protection standards, although the Ministry of Labor and Employment (MTE) has not yet specified the format and procedure for submitting the report.

Nevertheless, the regulation already dictates that the document must be publicly disclosed on company websites, social networks, or similar platforms, ensuring that information is made available to employees and the general public. This disclosure is expected to take place in March and September.

Plan of action for the mitigation of wage disparity and different remuneration criteria between genders

According to the regulations, if the Ministry of Labor identifies that a company has been paying men and women in unequal terms, the entity will receive a notification and must draw up, within 90 days, a plan of action for the mitigation of wage disparity and different remuneration criteria between genders. The plan must contain:

• The measures to be put in place, along with specified goals and implementation schedules; and
• The establishment of programs involving:

- Training for managers, business leaders, and employees regarding gender equality in the job market;

- Promotion of diversity and inclusion in the workplace; and

- Training for women aimed at encouraging their entry and permanence in the job market, and career progression under equal conditions with men.

Representatives from labor unions and employees must be allowed to take part in the preparation and execution of said plans, which preferably should adhere to a format outlined in a collective bargaining agreement.

How to conform to the rules

Companies should perceive this change as necessary and take proactive steps to adapt.

A constructive starting point is to carry out a thorough analysis of job roles and salaries, scrutinizing and rectifying any discrepancies found in the payments made for the performance of identical work.

Given that, in practice, companies are required to prepare and disclose salary transparency and remuneration criteria reports in May and November, it is advisable to initiate the preparation process as early as possible to keep all data organized. Another important step is to set indicators to gauge the effectiveness of the measures put in place.

It is also worthwhile to invest in the training of leaders and employees on gender equity, along with promoting efforts related to diversity and inclusion, while providing training opportunities for women to enter, remain, and progress in the job market on equal terms with men.

Fines and penalties

Non-compliance will subject employers to an administrative fine of up to 3% of their payrolls, limited to 100 minimum wages.

In case of discrimination based on sex, race, ethnicity, origin, or age, rectifying salary disparities for the affected employee does not waive their right to pursue claims for moral damages.

The fine in such cases will amount to 10 times the revised salary owed by the employer to the worker who experienced pay discrimination, and this penalty will be doubled for repeated offenses, in addition to other potential legal actions.

Labor management in good standing

DPC's experts keep abreast of all legislative changes in order to assist clients and ensure their compliance with the rules in force. You can rely on our support: dpc@dpc.com.br.