In-Person - EU Pay Transparency Directive

What?
Recognising the role that pay transparency plays in reducing the pay gap, the European Parliament and
Council adopted the EU Pay Transparency Directive in 2023. All EU countries must implement the Directive
into their national laws by 7 June 2026, which might still seem far away, but the new rules require an
implementation of measures by employers, which for most companies will take a significant time to prepare
(https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32023L0970).
It is applicable to employers in the public and private sectors and to all workers who have an employment
contract or employment relationship according to national law. Certain aspects also apply to job applicants.
In a glimpse?

1. Pay transparency prior to employment: the recruitment procedure

First, job applicants receive a right to receive information from prospective employers. This information
regards the initial pay or its range, based on objective, gender-neutral criteria, to be attributed for the position
concerned; and where applicable, the relevant provisions of the collective agreement applied by the
employer in relation to the position.
Second, employers are prohibited from askingjob applicants about their pay history during their current or
previous employment relationships. This does not mean that the job applicant cannot use this information
himself or herself during the pay negotiations, but he or she also has the right to keep this information secret.

2. Pay transparency during employment and the right to information

Also, workers who are already in an employment relationship are granted a right to information.
First, employers need to be transparent regarding pay setting and their pay progression policy. They have
to make easily accessible to their workers the criteria that are used to determine workers’ pay, pay levels,
and pay progression.
Second, the workers also receive the right to request and receive in writing information on their individual
pay level and the average pay levels, broken down by sex, for categories of workers performing the same
work as them or work of equal value to theirs.
Third, the directive prohibits any restrictions by the employer for workers to disclose of their pay (so they
can discuss and compare it with others).

3. Reporting obligations

The directive also contains a reporting obligation for employers workers. The reporting includes among
others:
 the gender pay gap;
 the gender pay gap in complementary or variable components (e.g., variable bonuses, additional
benefits, etc.);
 the median gender pay gap;
 the proportion of female and male workers receiving complementary or variable components;
 etc
The frequency and entry into force of the reporting obligation vary according to the size of the company.
Why does this matter?
This directive will have a big impact on reward policies within companies, for example:
· Employers must already inform about the initial wage level or pay scale in the job announcement or
before the interview. Employers cannot ask future employees about their pay history.
· Employees have the right to request information about their individual salary level and the average
salary level, broken down by gender, for categories of employees doing the same work or work of
equal value. This right applies to all employees irrespective of company size.
· Obligation to report annually on the gender pay gap for companies with more than 250 employees.
Companies with more than 100 employees should report every three years.
· A joint pay gap assessment must be conducted with employee representatives if the gender pay
gap exceeds 5%.
These new obligations are part of a larger European movement that goes far beyond gender equality. In
addition to gender equality, companies will have to strive for workplace diversity and inclusive policies in the
future. This is seen as essential by Europe and fits into the framework of a future proof ESG strategy
(Environmental, Social and Governance standards).
How can companies prepare?
The clock is ticking, as member states now have three years to transpose this directive into national law.
Employers can prepare by:
· Mapping the potential current wage gap based on objective data and statistics;
· Drafting an ESG future proof wage policy;
· Establishing clear objectives & plan of action to close the wage gap;
· Drafting policies and procedures;
· Step-by-step implementation and follow-up; and
· Communicating to all stakeholders.

3.What are the sanctions for non-compliance?

· Compensation for employees who have been victims of gender pay discrimination, including full
recovery of back pay and related bonuses or benefits of any kind.
· Reversal of burden of proof - where the employer has failed to meet its transparency obligations, it
will be up to the employer, not the employee, to prove that there was no wage discrimination.
· Sanctions will include fines - member states must establish specific sanctions for violations of these
regulations, including fines.
· Organizations watching over equal treatment and employee representatives may act on behalf of
employees in judicial or administrative proceedings.

More information: Pay transparency in the EU - Consilium (europa.eu)