Thursday 30th of March, the European Parliament voted to approve the Pay Transparency Directive, which was first proposed in 2021. The Directive covers points that work in tandem to fight the gender pay gap, and get rid of pay secrecy.
Member states have three years to transpose the new directive into national legislation.
Companies with more than 100 employees, will be required to report on their salary differences, as well as conduct full pay audits in the event that a gap of more than 5% is discovered. Individual employees have a strengthened right to information about their compensation in comparison to their peers, and job advertisements must include information about the expected pay range for the role.
Employees who have been subjected to gender discrimination can receive compensation, including full repayment of back wages and related bonuses or benefits in kind. The burden of proof lies entirely with the employer. The Directive also opens up for class action law suits against former and current employers.
Read more information here.
What does this imply?
- Pay transparency for job seekers
Employers need to provide information about initial pay level or its range in the job vacancy notice or before the job interview.
Employers will not be allowed to ask prospective workers about their pay history.
- Right to information for employees
Workers will have the right to request information from their employer on their individual pay level and on the average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value.
- Reporting on the gender pay gap (>100 employees)
All companies with >100 employees are forced to report on the aggregated gender pay gap externally and broken down by positions (equal & equivalent) internally.
- Joint pay assesment
Employers need to conduct a joint pay assessment or equal pay audit together with the unions if they have unexplained pay gaps that are >5%.
- Compensation for workers / Burden of proof
Workers who suffered gender pay discrimination can get compensation, including full recovery of back pay and related bonuses or payments in kind. The burden of proof is entirely on the employer.
- The greatest risk of the new legislation – collective claims on equal pay
Equality bodies and/or workers representatives (Unions) can present collective claims on equal pay towards employers. If employer is found to have discriminated it will be forced to conduct collective pay outs.
If my company has already done an equal pay audit and is compliant with the local legislation, do I have to carry it out again?
Yes. Though it is not mandatory to start reporting in accordance with the new EU Pay Transparency Directive, we strongly recommend to start measuring current gender pay gaps based on the 5% rule. Once the legislation commences it will have a major impact and it’s important to get ahead of the directive to control the narrative.
