EU Pay Transparency Directive: Significant Changes On The Horizon For Employers In The EU

The directive sets out minimum standards regarding pay transparency that EU Member States are required to implement in terms of (among other things):

1. a gender pay gap reporting regime across the EU.
2. a ban on contractual terms that restrict employees from disclosing information about their pay; and
3. a ban on employers asking job candidates about their pay history and their existing salary.

In addition, job seekers will also have certain new information rights under the directive (e.g. employers will be obliged to disclose the initial pay level or range in the job advert or before the job interview) as will existing employees (who will have the right to request information from their employer on their individual pay level and on the average pay levels, broken down by gender, for employees doing the same work or work of equal value).

While, as of 2022, Ireland already has existing gender pay gap reporting legislation, new legislation will need to be introduced in due course by the Irish government to ensure that the gender pay gap regime complies with the new directive and to ensure that the other additional measures prescribed in the directive are implemented into Irish law by the relevant deadline. By way of example, employers will be required to conduct a joint pay assessment (which is effectively an 'equal pay' audit) with employee representatives where the gender pay gap report identifies a gender pay gap of at least 5% in any category of workers (and this cannot be justified by objective and gender-neutral factors, or remedied within 6 months).

Lastly, the directive aims to clarify certain legal concepts in the area of equal pay e.g. "pay", "discrimination" and "work of equal value" which have been the subject of a large volume of case law since the principle of equal pay was enshrined in the Treaty of Rome in 1957.

Key Action Points for Human Resources and In-house Counsel

Although Ireland has three years to implement the directive into Irish law, given the wide-ranging requirements contained in the directive, employers may wish to start planning their compliance sooner rather than later by assessing how the directive might impact existing process in the business (e.g. recruitment, pay and gender pay gap reporting practices) and take steps to address any issues identified.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.