ARTICLE
22 March 2024

The EU Pay Transparency Directive – What's In Store?

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Whilst the right to equal pay between men and women is well established, the implementation and enforcement of same has proven challenging.
European Union Employment and HR
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INTRODUCTION

Whilst the right to equal pay between men and women is well established, the implementation and enforcement of same has proven challenging. Indeed, in the European Union, women earn 13% less than men on average.

The slow progress on the right of equal pay between men and women is a result, not only of lack of transparency when it comes to pay but also the result of various inequalities including gender segregation in employment and education, a lack of women in managerial positions as well as a lack of adequate work-life balance between genders.

For this reason, gender pay transparency was included as a key priority in the EU gender equality strategy 2020-2025 and as a result the EU Pay Transparency Directive (‘the Directive') was approved and is expected to be transposed into national law of the EU member states within three years and, by not later than the 7th of June 2026.

The Directive aspires to tackle the gender pay gap and promote fair pay practices by increasing transparency and accountability, but how will this be done?

THE DIRECTIVE'S KEY MEASURES

  1. Access to information

Employers will be required to inform job seekers about the starting salary or pay range of advertised positions, whether in the vacancy notice or ahead of the interview. Vacancies must also be gender-neutral and, the recruitment process non-discriminatory.

Employers will also be prevented from asking candidates about their pay history and from requiring employees not to share their salaries, therefore employers can no longer ban pay disclosures.

Once in the role, workers will be entitled to ask their employers for information about:

  • average pay levels, broken down by sex, for categories of employees doing the same work or work of equal value;
  • the criteria used to determine pay and career progression, which must be objective and gender neutral.
  1. Reporting Obligation

Companies with more than 250 employees will be required to report annually on the gender pay gap in their organisation to the relevant national authority, however for smaller organisations the reporting obligation will only take place every three years. Organisations with less than 100 employees will not have any reporting obligation.

If the report reveals a pay gap of more than 5% that cannot be justified by objective, gender-neutral criteria, companies will be required to take action in the form of a joint pay assessment carried out in cooperation with workers' representatives.

  1. Remedies and Enforcement

The Directive also provides for the ability of workers who have suffered gender pay discrimination to receive compensation for such discrimination, including full recovery of back pay and related bonuses or payments in kind.

A noteworthy point is that whilst the burden of proof in pay discrimination cases has traditionally fallen on the employee, it will now be up to the employer to prove that they have not violated EU rules on equal pay and pay transparency. Penalties for violations must be effective, proportionate and dissuasive and will include fines determined by the Member States.

  1. Widened scope

For the first time, intersectional discrimination, which is the combination of multiple forms of inequality or disadvantage, such as gender and ethnicity or sexuality, has been included in the scope of the new rules. The Directive also contains provisions ensuring that the needs of workers with disabilities are taken into account.

HOW TO GET PREPARED

The Directive sets out strong standards and will have significant implications for employers and employees, therefore for starters, and particularly for employers, such ought to be looking at getting the EU Pay Transparency Directive on their agenda.

Promoting gender equality and pay transparency in the workplace is a multifaceted challenge that cannot be easily or quickly resolved, to this end, employers ought to get ahead and anticipate obligations that will apply to them and, consider implementing same ahead of time.

Employers can seek to get a head start by not asking applicants about their pay history, adding initial pay or salary ranges to vacancies, ensuring that vacancies and job titles are gender neutral, by screening employment contracts, work rules and policies for pay confidentiality clauses as well as by undertaking a review of Human Resources processes such as recruitment and performance management, including the criteria used to assess performance and skills.

Employers ought to be considering criteria and methodology to group categories of workers performing the same work or work of equal value as well as, reviewing criteria used to determine pay, pay levels and pay progression. The review of criteria to grant complementary or variable components such as bonuses, also ought to be undertaken by all employers.

Policies and training also play a crucial part in the run up to compliance. Employers ought to be preparing pay policies and diversity and inclusion policies, as well as training key individuals on all relevant matters.

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.

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