The EU has adopted new rules on transparency in employee salaries to address the gender pay gap. This sweeping directive affects employers throughout the EU, with a new set of responsibilities and obligations. Here is a brief guide on what to expect and how to prepare. 

Overview of the Pay Transparency Directive Provisions

Here are the new rules that employers will need to comply with under the directive:

  1. Transparency and disclosure. Under the transparency and disclosure provisions, employers will have to disclose the starting salary or pay range of a position in the job listing or before the first interview, and provide information about average pay levels, broken down by gender, for categories of employees doing the same work or work of equal value. Employees will not have to disclose prior salary history during the recruitment process, will have access to salary information for equivalent work, and will have access to the criteria used to determine pay and career progression. 
  2. Reporting obligations. In addition to providing average pay level information to employees who request it, employers will be required to report their pay information, broken down by gender, to the relevant national authority. If their data reveals a pay gap greater than 5%, they will be required to cooperate with workers’ representatives to address the disparity. 
  3. Access to justice. In the past, the burden of proof of pay discrimination has fallen on the employee. Going forward, in cases of pay disparity, the employer will need to prove that their compensation levels do not violate EU rules. Victims of gender discrimination will be entitled to compensation in the form of back pay and related bonuses. Employers will also be subject to penalties for violations. 
Benefits of Pay Transparency

Pay transparency is a strategy to address the gender pay gap in Europe. On average, women in the EU earn 13% less than men, down from 16.2% less in 2011. Over time, this pay discrepancy adds up, giving working women pensions worth 30% less than male pensions. Although the gender pay gap has been an issue for decades, improvement has been minimal, so the European Parliament has adopted the Pay Transparency Directive to promote greater equality in compensation. 

Although pay transparency is framed as a gender equality issue, all workers will benefit from the provisions in this directive. Candidates will have more information about salary when reading job listings, employees will have more rights to compensation information in their company, and people who discover pay discrimination will have an easier time recovering lost compensation. It also includes specific provisions for workers with disabilities and victims of intersectional discrimination. It’s just another way in which workers in the EU will have more rights, more information, and more equality.

How Companies Can Prepare for the Pay Transparency Directive

The Pay Transparency Directive has a staggered implementation, with full implementation for every business with over 100 employees by June 2026. Every organization will need to assess the requirements and deadlines in a way that works for them, but here are some smart steps to take:

  • Review your current compensation data. You cannot address pay discrepancies, or comply with disclosure and reporting requirements, without clear and accurate data about your current pay levels. Look for gender pay disparity:
    • Across job titles and roles
    • Across seniority levels 
    • Within departments or functional areas
    • Within locations or sectors
  • Develop a clear and objective compensation policy. If you do not currently have an objective, independent, organization-wide standard for new hire salaries, periodic pay reviews, and performance-based incentives, it will be essential moving forward. Employers will have to prove that they have an objective pay policy and that it is applied impartially. 

Employers who are prepared with all the relevant data, and who have developed objective compensation criteria, will be prepared to implement the provisions of the Pay Transparency Directive as they come online. 

While pay transparency is required for all businesses with over 100 employees, it will affect all employers in the EU. Companies that want to grow will need to anticipate and proactively comply, while small companies that don’t disclose will need to compete on the job market with companies that do. For more information about how to attract top talent and remain competitive, contact grapefrute today.