The Pénicaud Index : 3 years later, what is the outcome?

Since 1972, equal pay for women and men has been enshrined in French law. However, a study (FR) undertaken by the Institut des Politiques Publiques shows that women earn on average at least 5.8% less than men in half of the companies with 50 or more employees. In light of this finding, a new tool to combat pay inequality, the Index de l’égalité professionnelle femmes hommes (or Pénicaud Index), was created by the law of September 5, 2018. What are the main features of this Index and what assessment can be made of it 3 years after it came into force?   

Presentation of the Index 

The Pénicaud Index is a binding tool that aims to capture several dimensions of wage inequality.

The objective of the Index is to report on professional inequalities between women and men within companies. Companies must publish their Index and convey it to their comité social et économique and to the competent authorities. The companies which are legally required to report on professional inequalities are those comprising more than 1,000 employees (since January 1, 2019), more than 250 employees (since September 1, 2019) and more than 50 employees (since March 1, 2020).

The Index includes an obligation of results. Gouvernement.fr (FR) indicates that when a company presents a low Index value (below 75 points out of 100), it has a period of 3 years to make the necessary adjustments. If companies do not reach a satisfactory Index by the end of this period, they may be subject to penalties of up to 1% of their payroll.

The indicators of the Index aim to capture several dimensions of professional inequality: the gender pay gap, salary increases after maternity leave, salary mobility and the number of women among the highest paid in the company. Each indicator is associated with a certain number of points. 

The first indicator, which is worth 15 points, measures women's salary increases after maternity leave. A company gets a score of 0 out of 15 if it does not give women the same pay increases after they return from maternity leave as it does to other employees during their absence. Conversely, if a company grants these pay increases, it obtains a score of 15. The second indicator, worth 10 points, measures the number of women among the company's top 10 earners. The third indicator (worth 35 points) refers to salary mobility. For companies with more than 250 employees, this indicator measures the gender differences in the rate of pay increase excluding promotion (20 points), and the rate of promotion (15 points). For companies with 50 to 249 employees, it measures the differences in the rate of pay increase between women and men (35 points). The fourth  indicator (worth 40 points) measures the wage gap between women and men. The company gets 40 points when the absolute value of its aggregate wage gap is between 0% and 1% (and loses one point for each additional percentage point).

T. Breda, P. Dutronc-Postel, J. Sultan and M. Tô (FR) point out that, according to French law, some wage gaps are justified (because they result from differences in qualifications or work experience). Once the factors responsible for the justified wage gaps are identified and isolated, the unjustified gender wage gaps can be calculated.

Index results

A study (FR) realized by the French Ministry of Labor, Employment and Inclusion in 2021 indicates that companies' scores have been improving since the Index was created in 2018. In 2021, the average score obtained by companies is 85/100 (compared to 84 in 2020). In addition, the percentage of companies exceeding the 75/100 score has increased from 55% to 56% compared to the previous year. Finally, companies with more than 1,000 employees have made significant progress since the creation of the Index, as they have gone from an average score of 82.9 in 2019 to 87.4 in 2020 and 88.3 in 2021.

However, challenges remain, as the study (FR) conducted by the Ministry of Labor, Employment and Inclusion shows. First, only 2% of companies score 100/100 on the Index and 56 companies have scored less than 75/100 for the past 3 years. Secondly, two indicators of the Index show unsatisfactory results: i) for the past 3 years, 171 companies have scored 0 on the indicator relating to return from maternity leave, and ii) in 2021, 43% of companies scored 0 on the indicator relating to the number of women in the company's top 10 earners.

Limits of the Index indicators

The study (FR) conducted by the Institut des Politiques Publiques points out two flaws of the Index.

First, the 1st indicator of the Index (worth 15 points) has an important shortcoming : a company can obtain a score of 75/100 without complying with article L1225-26 of the French Labor Code (according to which a company cannot not grant the same salary increases to women when they return from maternity leave as those granted to their colleagues during this leave). If a company does not comply with this legal obligation, it will lose the 15 points associated with the 1st indicator of the Index (which measures women's salary increases after maternity leave), but could still obtain 75/100 (100-15 = 85), which is the minimum score necessary to avoid being exposed to sanctions. Therefore, it is possible for a company not to comply with Article L1225-26 of the Labor Code, yet still score 75/100 on the Index.

Second, an alternative method of calculating the wage gap indicator reveals much larger gender wage gaps than those calculated thanks to the Pénicaud Index. The calculation method used by Breda, Dutronc-Postel, Sultan, Tôt (as part of the study (FR) carried out by the Institut des Politiques Publiques) reveals larger gaps: the authors of the study find that only 10% of companies have a very small wage gap (between 0% and 2%), compared to 23% when applying the Index calculation method.

Thus, what assessment can be made of the Pénicaud Index 3 years after its implementation ? The Index, which aims to capture different dimensions of pay inequality, has allowed to measure the progress made by companies in the field of professional equality since the Index’s creation in 2018. However, this progress must be nuanced : very few companies obtain the maximum score of the Index and two indicators of the Index (relating to the return from maternity leave and the number of women among the 10 highest earners in the company) present unsatisfactory results.

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