EU Pay Transparency Directive
The EU Pay Transparency Directive is a key tool to help combat the numerous structural obstacles hampering compliance with the principle of equal pay for women and men, writes Caroline Reidy
Print25 September 2024
The EU Pay Transparency Directive measure is designed to stop the practice of pay secrecy, improve transparency in wage rates and career trajectories, and support effective implementation.
Three key measures are introduced by the Directive:
- Implementing public reporting measures (Gender Pay Gap Reporting)
- Creating new information rights (for everybody); and
- Refreshing the concepts of the equal pay regime.
Enhancing Pay Transparency
One of the EU Pay Transparency Directive’s key goals is to prevent income discrimination by improving compensation visibility. Annually, employers with more than 100 employees must also report on their wage gap between men and women. After 2025, the employer mandate would also apply to employers with 50 or more employees. Employers also need to report all pay differences between employment categories, so the workforce has a clear picture of where they stand in terms of achieving genuine equal pay within an organisation.
Gender Pay Gap reporting
The Directive sets out that employers with more than 100 employees must report on their gender pay gap annually. Starting in 2025, this threshold will decrease to 50 employees. It is a requirement of the reporting, that a break-down by employment category is provided, providing a full picture of the pay equity within an organisation.
Disclosure of pay information
From commencement of the EU Pay Transparency Directive, vacancy notices will be required to include the initial pay level or range, and employers will no longer be allowed to ask potential hires about prior salaries. These measures are intended to ensure that applicants can negotiate compensation based on the value of the job and their qualifications, rather than being anchored to past earnings.
Employee rights to records
Employees have the right to request details of their own pay, and information on average pay levels of their colleagues, broken down by gender for comparable work. Employers are required to provide this information within 60 days upon request, promoting transparency and enabling employees to address unjust pay gaps.
Addressing pay inequality
The Directive also introduces powerful measures to address and close the gender pay gap, including:
- Burden of proof on employers
The Directive places the burden of proof on employers to show that there was no discrimination in relation to pay. This is a significant departure from the current standard in discrimination and equal pay cases, where an employee must first present facts that suggest discrimination before the burden shifts to the employer to prove otherwise.
- Full recovery of back pay
Employees who can demonstrate that they were paid less than others due to discrimination are entitled to full recovery of back pay. Unlike other frameworks that may cap back pay, the Directive mandates comprehensive compensation, potentially exposing employers to significant financial liability if they fall short.
- Joint pay assessments
If a gender pay gap of at least 5% is identified and persists after six months, employers must conduct joint pay assessments with employee representatives. This involves a detailed review of pay practices to identify and remedy unjustified disparities.
Key actions for employers
The upcoming Pay Transparency Directive will impose additional compliance requirements on employers. Employers should consider using the three-year window to conduct a gap analysis of their current practices against the future expectations outlined by the Directive.
Key actions include:
- Assessment of current practices: Review and identify any potential discrepancies in existing remuneration and progression policies within the business. Plan how and when to address these gaps in alignment with the Directive’s requirements.
- Organise worker categories: Evaluate how “categories of workers” are structured within the organisation and determine the criteria for defining these groups.
- Update data management: Assess whether current data storage and collection processes need to be updated to ensure timely processing of information requests.
- Analyse gender pay gaps: Generate reports to identify any significant gender pay disparities between different worker categories. If gaps are detected, consider implementing strategies to reduce them. For instance, a large organisation with a gender pay gap exceeding 5% between worker categories may need to investigate the causes and take corrective action before potentially facing a joint pay assessment.
Conclusion
The EU Pay Transparency Directive is a significant step forward in the ongoing effort to achieve true pay equality between men and women across Europe. Employers must proactively adapt to these changes by reviewing their current practices, updating their data management processes, and addressing any gender pay gaps. As the Directive’s implementation draws nearer, organisations that take these steps now will be better positioned to ensure compliance and promote a fair, equitable workplace for all employees.
If you are an organisation based in the Republic of Ireland and require further information or advice relating to HR, please do not hesitate to contact our office on (066)7102887 or email us at info@thehrsuite.com. For more information visit https://thehrsuite.com or read our blog.
Read more: Gender Pay Gap reporting
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