Analysis

May 28, 2024

Can EU legislation improve European startup gender pay gaps?

New data shows the lack of women in the most senior positions at startups has a direct impact on gender pay discrepancies

The gender pay gap at European startups persists — but there are signs that things are improving, according to new research from compensation benchmarking platform Ravio.

The data shows that when looking at the adjusted pay gap — which compares male and female salaries in the same job, function and country — women earn 2.5% less than men. 

In 2022 that number sat at 3.5% for companies which did not have transparent salary policies, according to data from pay benchmark platform Figures.

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New EU legislation around salary transparency, which came into force in June last year — and will require companies to disclose the percentage gap in pay between men and women, among other things, by 2026 — is pushing many companies to implement change.

But companies still need to address the distinct lack of women in the most senior positions at startups, which Ravio’s data shows has a direct impact on pay discrepancies between men and women.

EU legislation making change?

Ravio cofounder and co-CEO Merten Wulert says that there is growing “awareness” among companies that the gender pay gap is an issue and that new EU legislation is pushing companies to implement important changes.

“With legislation like the EU Pay Transparency Directive coming into effect soon, we hope companies will start to see that pay equity is not optional,” he says.

“Some companies are taking practical steps, training their staff to avoid unconscious biases and introducing policies like flexible working and generous family leave, but others are yet to treat pay equity as a business priority.” 

Lagging behind national averages

When looking at the unadjusted pay gap, which calculates average earnings of men and women without considering external factors like which country they work in and what job they do, European startups are still dragging their feet. 

Across European startups, women earn 25% less than men on average — largely due to a lack of women in executive, and thus higher-paid, positions, according to Wulert.

Ravio’s data found that men dominate the executive level at European startups: 79% of senior positions are held by men, compared to 21% held by women.

“We are nowhere close to equality on that front,” he says. “Very few companies are making this a top priority, and even fewer have truly solved this issue.”

The findings follow Sifted reporting last month that 15 out of the 20 best-funded UK tech companies have wider gender pay gaps than the national average.

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Retention

Part of the reason for the lack of women in more senior and higher paying roles at European startups is the fact that male tech executives stay in their roles 46% longer than female executives, according to Ravio’s research.

“Women often exit (executive) roles prematurely due to challenges like unsupportive work environments and balancing family responsibilities,” says Vaso Parisinou, chief people officer at Ravio.

In Sifted’s recent survey of women in tech, a third of respondents told us they’re considering leaving their current roles in the next year, citing lack of career progression, inadequate salaries and the need for more work-life balance as reasons for moving on.

The gender pay gap starts at the hiring stage

Women receive similar rates of promotions and pay increases to men, Ravio’s data found, suggesting that the pay gap happens at the point of hire, and is carried forward as women rise up the ranks.

"Offering equal parental leave helps to lighten the responsibility of childcare, which is often shouldered by women. Companies must also offer policies that aid in returning to work, like supporting a gradual or staggered return to help ease any stress or anxiety,” adds Parisinou.

Women typically receive lower salary offers than men for the same job in the same country. In the UK, Ravio found that  male software engineers receive salary offers which are 3.3% higher than their female counterparts.

One factor for the discrepancies made in salary offers at the point of hire is that women are less likely to negotiate their salary than men, Ravio’s survey found.

“Preventing the pay gap from being introduced at the point of hire requires focused changes in the hiring process,” says Parisinou.  

“Employers must improve training so interviewers don't question candidates about their salary history, which we know can perpetuate existing pay disparities. Standardising salary negotiations is also essential, given that men are more likely to negotiate their starting salary than women.”

The gender pay gap across countries

Spain and the UK are the countries with the highest unadjusted pay gap at 35% and 31% respectively.

But when comparing salaries of men and women who work in the same job function and level — the adjusted pay gap — Spain has the largest pay gap, followed by the Netherlands.

The UK has the lowest adjusted pay gap between men and women at 1.4%.

Spain has the lowest percentage of women in senior positions out of all European markets: only 11% of women hold senior positions, compared to 25% of men. This explains why Spain’s adjusted pay gap is so high: there’s a higher proportion of women in lower-earning roles than men.

The roles with the worst gender pay gap

Among the seven job functions Ravio analysed, engineering was the worst across the board when it comes to pay equality and the percentage of women in senior positions.

The adjusted pay gap in engineering is 5.1%, and it has one of the lowest percentages of women in senior positions at 18%.

Comparatively, non-tech functions like marketing and people have a much lower adjusted pay gap at 1.3% and -0.4% respectively, and have some of the highest representations of women in senior positions.

Aside from the people and product functions, finance has the highest percentage of women in senior positions — yet, it has the second highest adjusted pay gap at 3.4% 

What can be done about the gender pay gap?

Based on its findings, Ravio has some suggestions for how companies can begin closing the gender pay gap.

  • Companies need to use reliable market data to know what fair pay looks like for their employees — and define a compensation strategy based on that. They then need to ensure the strategy is understood and adopted by all hiring managers.
  • This compensation strategy also needs to be clearly communicated to all employees so they understand the “why” behind compensation decisions
  • Companies should also perform pay equity analyses to identify when and how discrepancies arise. “Make a plan to eliminate the root cause issues you identify and, where historic pay discrepancies have occurred, make a one-time correction as soon as possible,” Ravio recommends.

Securing CEO buy-in to actively reduce the gender pay gap is also extremely important.

"CEOs are uniquely positioned to champion pay equity, not just as a matter of compliance, but as a strategic driver of business performance,” says Wulfert.

“We believe that when everyone is rewarded equitably for their contributions, it creates a more dynamic, committed, and ultimately successful company. Making pay equity a priority is a must for any CEO looking to define the future of their organisation.”

Miriam Partington

Miriam Partington is a reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on X and LinkedIn