Acceptable reasons for pay differencies

Work experience that helps an employee perform their duties better can be an acceptable reason for a difference in pay. The length of time in service can generally be used as a justification for the pay without the employer having to justify their actions separately. However, justifications are required if the employee contests the matter and brings up factors that give a justified reason to suspect the significance of the length of service regarding the performance of the duties. (See CJEU case Cadman C-17/05.)

Differences in pay can be justified by education if the education of the person with the higher salary improves their performance or if they can carry out a larger variety of duties for the employer than the person used for comparison.

Various factors, such as education and work experience, may also compensate one another as factors affecting the level of pay. 

The judgement of one court was that the employee’s long work experience and personal characteristics partially compensated for the fact that they were less educated than the employee with the higher salary. Therefore the employer was not considered to have an acceptable reason overall for the difference in pay, only for some of the differences. (Turku Court of Appeal, S 01/1471, ann. 28.2.2003.)

Pay often includes a personal salary component that is based on the employee's personal characteristics and performance at work. These can be acceptable reasons for difference in pay. The employer still has to be able to prove what they have used as evaluation criteria for the performance and that the differences in performance that the evaluation is based on really exist. The evaluation criteria must be non-discriminatory.

The regulations in collective agreements cannot contradict the requirements of the Equality Act. Sometimes one or several employees who suspect pay discrimination may be covered by a different collective agreement than the person or persons who have a higher salary and are used for comparison. The justification for the Equality Act states that the existence of different collective agreements cannot as such be seen as a reason for paying different salaries to employees who carry out the same work or work of an equal value for the same employer (HE 19/2014).

According to the rationale of the Equality Act, the differences in pay can, for a specific reason and for a limited time, be caused by organisational mergers, the introduction of a new remuneration system, changes in duties and market factors.

Problems relating to the availability of labour, or so-called market factors, may be an acceptable reason for paying one employee a higher salary than another who is carrying out work of equal value. Whether this is the case should be assessed individually in each case. Payment of a bonus on this basis may not be based solely on general assumptions on the availability of labour. In each case, it should be established separately that the facts required by the procedure exist. In the case of litigation the employer has to be able to prove the shortage of qualified labour.