The EU Pay Transparency Directive entered into force on 6 June 2023. This directive sets out pay transparency measures, such as pay information for job seekers, a right to know the pay levels for workers doing the same work or work of equal value, as well as gender pay gap reporting obligations for companies with more than 100 employees (both public and private companies). EU member states will have three years to transpose the directive into national legislation.
On average the gender pay gap is 12,7% percent in the EU with significant variations across Member States, whereas in Croatia is 11,2%. This gap has only decreased minimally over the last ten years. The gender pay gap is caused by various factors, such as gender stereotypes, the overrepresentation of women in low-paid service jobs and unequal sharing of care responsibilities. In addition, the gender pay gap is partly caused by direct and indirect gender-based pay discrimination (unequal pay for work of equal value). All those elements form complex challenges to achieving good quality jobs and equal pay for equal work or work of equal value and have long-term consequences such as a pension gap and the feminisation of poverty.
Even though gender discrimination is already prohibited, this prohibition has not had the intended effect of preventing gender-based pay discrimination. The fact is that general lack of transparency about pay levels within organisations perpetuates this and if people suspect discrimination, it is difficult to prove. This is where the EU Directive on pay transparency can play an important role.
Implications for employers and employees:
Gender pay gap reporting
Employers with more than 100 employees have a reporting obligation on different aspects of gender pay gap. If the pay reporting demonstrates an unjustified and not remedied difference in average pay of more that 5% in any category of workers, a joint pay assessment with workers representatives shall be carried out.
Recruitment
Employers will be required to provide information on pay (e.g. pay bandings) as part of the recruitment process (for example adding pay ranges to job adverts) and will no longer be able to ask candidates about current pay to determine offers.
Pay approach and philosophy
Employers with more than 50 workers must provide workers with information on what criteria are used to determine pay and pay progression
Average pay levels
Workers will have the right to request information on the average pay level of workers doing similar work to them, broken down by sex. This must be provided within 2 months of request.
Remedies and enforcement of remedies
Victims of pay disparity will be entitled to participate in class actions and to claim full compensation, including full recovery of back pay and related bonuses or benefits of any kind. There will be additional rights for works councils to support workers in equal pay matters. Individual EU member states are also being encouraged to set fines for companies that fail to comply with the Directive and allow public companies to include measures to ensure that, in the performance of public contracts or concessions, economic operators comply with their obligations relating to the principle of equal pay.
What does this mean for you?
The EU Pay Transparency Directive will impact almost all employers and its consequences will be reflected in the entire life cycle of an employee.
- For employers with more than 250 employees, the first reporting obligation is on 7 June 2027 and then every year thereafter;
- For employers with 150 to 249 workers, the first reporting obligation is on 7 June 2027 and then every three years thereafter,
- The reporting requirement for employers with more than 100 employees starts on 7 June 2031 and then every three years thereafter.
Meeting all the requirements of the Directive will mean modification of many HR processes at companies. We advise you now to review your recruiting process, job descriptions, job evaluation and total reward policies in view of gender-neutral performance and pay criteria. This ensures that you have a timely understanding of what steps need to be taken to meet the directive obligations.
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