Pay Transparency Directive

Introduction

The Pay Transparency Directive (EU) 2023/970 is a key piece of European Union legislation aimed at strengthening the principle of equal pay for equal work or work of equal value between men and women. It introduces binding pay transparency measures and enhances enforcement mechanisms to combat the gender pay gap across the EU.

The directive builds upon existing EU law, notably Directive 2006/54/EC, which established the principle of equal opportunities and treatment. However, a 2020 evaluation found that the application of this principle was hindered by a lack of transparency in pay systems, legal uncertainty, and procedural obstacles for victims of discrimination. The Pay Transparency Directive directly addresses these shortcomings by creating clear obligations for employers regarding pay information and reporting.

Main Goal

The primary goal of the directive is to eliminate gender-based pay discrimination by making pay structures more transparent. This transparency is intended to empower workers to identify and challenge discrimination, and to encourage employers to proactively review and correct unjustified pay differences.

Who It Applies To

The directive applies to all employers in both the public and private sectors within the EU. It covers all workers, including part-time workers, fixed-term contract workers, and individuals in an employment relationship with a temporary agency. The obligations are phased based on the size of the employer:

• All employers: Subject to general transparency principles (e.g., pay transparency for job applicants, right to information for workers).
• Employers with 100 or more workers: Subject to mandatory pay gap reporting.

Key Dates

• Entry into Force: June 6, 2023.
• Transposition Deadline: Member States must integrate the directive into their national laws by June 7, 2026.
• First Reporting Deadlines:
  • June 7, 2027: For employers with 150 or more workers.
  • June 7, 2031: For employers with 100 to 149 workers.

Key Provisions

• Pay Transparency for Job Seekers: Employers must provide information about the initial pay level or range for a position either in the job notice or before the interview. They are also prohibited from asking candidates about their pay history.
• Right to Information: Workers have the right to request and receive information on their individual pay level and the average pay levels for categories of workers doing the same work or work of equal value, broken down by sex.
• Reporting on Gender Pay Gap: Employers with 100 or more workers must regularly report on their gender pay gap.
• Joint Pay Assessment: If a pay report reveals a gender pay gap of at least 5% in any category of workers that the employer cannot justify with objective, gender-neutral criteria, a joint pay assessment must be conducted in cooperation with workers' representatives.
• Compensation for Victims: Workers who have suffered gender pay discrimination have the right to full compensation, including back pay, related bonuses, and compensation for lost opportunities and non-material damages.
• Shift in the Burden of Proof: In cases of alleged discrimination, if an employer has not complied with its transparency obligations, the burden of proof shifts to the employer to demonstrate that there was no discrimination.
• Protection against Victimisation: Workers are protected from dismissal or other adverse treatment for exercising their rights under the directive.

Obligations & Requirements

• For All Employers:
  • Make the criteria used for pay setting and progression easily accessible to workers.
  • Ensure job vacancy notices and titles are gender-neutral.
  • Inform workers annually of their right to request pay information.
• For Employers with 100+ Workers:
  • Publicly report on the gender pay gap within their organization according to a phased schedule.
  • Conduct a joint pay assessment with workers' representatives if a significant and unjustified pay gap is identified.
  • Take remedial action to address any unjustified pay gaps.

Affected Products/Types/Actors/Processes

• Actors: All employers (public and private), workers, job applicants, workers' representatives, equality bodies, and labour inspectorates.
• Processes: Recruitment, pay setting, pay progression, collective bargaining, and legal proceedings related to pay discrimination.

Penalties

Member States are required to establish effective, proportionate, and dissuasive penalties for infringements of the directive. These must include fines. The rules should also establish specific, more severe penalties for repeated infringements. Furthermore, compliance with equal pay obligations can be a condition for participating in public procurement procedures, and non-compliance can lead to exclusion.