EU Equal Pay and Transparency Directive FAQs

| May 23, 2023 | 13 min read
EU Equal Pay and Transparency Directive FAQs

This article was originally published on 2 February 2023. It was last updated on 23 May 2023.

The new EU Equal Pay and Transparency Directive presents new challenges for organisations based in the EU, or those with a global workforce. We have published resources on the Directive and its requirements, but in our webinar on 25 January 2023, we received a number of excellent questions. Those questions and answers are below, followed by a glossary with definitions of common terms used in the Directive.

 

General questions

Where can I find the latest version of the Directive?

The latest version of the Directive is available here.

 

Which countries will be covered by the EU Directive?

All 27 Member States of the European Union are covered by the EU Equal Pay and Transparency Directive. The Member States are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

 

Has the EU Directive been approved by the European Union Parliament and Council?

Yes, a substantial majority in the European Parliament voted in favour of adopting the EU Directive on 30 March 2023.The Directive was then affirmed by the EU Council on 24 April 2023. 

 

When will the Directive go into effect?

The Directive was published in the Official Journal on 17 May 2023 so the Directive enters into force on 6 June 2023,  20 days after publication in the Official Journal. Each Member States will then need to transpose the new elements of the Directive into national law no later than June 2026.  Be warned: Member States don’t need to wait until 2026 to transpose the law. Provisions in some Member States may come sooner! 

 

Can the individual countries in Europe that are part of the EU still keep their own pay equity, pay gap, and transparency laws? 

Yes, if the provisions are more favourable to workers. The EU Directive lays down minimum requirements. The Directive says that Member States can introduce or maintain provisions that are more favourable to workers but the rules cannot be less favourable.

 

Which individuals are covered by the Directive?

The Directive applies to workers in EU Member States who have an employment contract or employment relationship as defined by law, collective agreements, and/or practice in force in each Member State. The pay and career progression transparency provisions (Article 5) also apply to applicants for employment. 

 

How many employees do you need to have in the Member State to be covered by the Directive?

Most of the provisions apply to employers of any size. So if you have 1+ employee in any of the EU Member States, many of the provisions apply to that Member State’s laws. For example, if you have five employees in France, the requirement to provide a pay range applies to applicants in France.

Some provisions apply only to larger employers. For example, the provision to publish the gender pay gap will ultimately apply only to employers with 100+ employees and even higher thresholds will apply when the law first goes into effect. See the question “Does this apply to all employers?” in the ‘Gender pay gap calculation and reporting’ section below for more details.

Also, Member States can, but are not required to, exempt employers with fewer than 50 employees within that Member State from the obligation to provide the criteria for pay progression. See the question “Does the pay and career progression transparency requirement apply only to large employers?” in the ‘Pay and career progression transparency’ section below for more details.

 

Does the EU Directive only apply to gender, or does it cover other protected classes?

The Directive applies to gender and to intersectional discrimination, i.e., discrimination based on a combination of sex and any other ground or grounds of discrimination protected under Directive 2000/43/EC (covering race/ethnicity) or Directive 2000/78/EC (covering religion or belief, disability, age, or sexual orientation).

 

The EU laws for self-ID/visual ID of gender are different from the U.S. where there is a clear requirement under several laws to ask and maintain that data. Currently, our EU gender data is very spotty. Is there anything in this Directive related to collecting gender info, either by self-IdD or visual ID? And in categories other than gender binary?

There is nothing in the current Directive requiring data collection, either of gender, gender binary, or race/ethnicity information.

 

 

Equal pay for work of comparative value 

What does the EU require about pay discrimination?

The Directive requires that Member States shall take the necessary measures to ensure that employers have pay structures to ensure equal pay for equal work or work of comparable value.

 

How will employers know what work is of comparable value?  Will this be a point system? Will this be standardised at some point? 

More guidance will likely come. The Directive instructs the equality bodies within each Member State (i.e., the bodies designated pursuant to Article 20 of Directive 2006/54/EC for the promotion, analysis, monitoring, and support of equal treatment of all persons without discrimination on grounds of sex) to develop analytical tools or methodologies to support employers and guide the assessment and comparison of the value of work in line with the criteria set out in this new Directive. These tools or methodologies are supposed to allow employers and/or social partners to easily establish and use gender-neutral job evaluation and classification systems that exclude any pay discrimination on grounds of sex.

 

 

Pay and career progression transparency

What are the pay scale disclosure requirements in the EU Directive?

Employers must provide job applicants information about the initial pay or its range, based on objective, gender-neutral criteria and, where applicable, the relevant provisions of the collective agreement applied by the company in relation to the job. This information needs to either be  included on the job posting (or other vacancy notice) or provided prior to the job interview, or otherwise prior to the conclusion of any employment contract.

 

Who is responsible for providing the initial pay or the range?

Either the employer or the social partner.

 

Some U.S. employers post wage ranges so broad as to not be all that meaningful. Do you see the EU laws being amended to address this problem?

More guidance may come as Member States transpose the laws.  Right now the Directive says that initial pay or its range must be based on objective, gender-neutral criteria or,, where applicable, the relevant provisions of the collective agreement applied by the company in relation to the job.

 

Does the EU Directive have a salary history ban?

Yes. The Directive in Article 5(2) says that employers cannot ask applicants about their pay history in their current or previous roles. 

 

I heard that the Directive requires that job titles must be gender-neutral (i.e., cannot say “policeman” or “batman”).

This is correct. Article 5(2a) says that employers must ensure that vacancy notices and job titles are gender-neutral. Also employers need to ensure the recruitment processes are led in a non-discriminatory manner.

 

What is the pay and career progression transparency requirement and how does it apply to the Directive?

Article 6 of the Directive requires employers to provide the objective and gender-neutral criteria used to determine pay, pay levels and pay progression for workers. This information must be easily accessible.

 

Does the pay and career progression transparency requirement apply only to large employers?

The pay scale transparency, salary history ban, and the obligation to provide the criteria used to determine the pay and pay levels apply to employers of every size within the EU Member States. 

Member States can, but are not required, to exempt employers with fewer than 50 employees within that Member State from the obligation to provide the criteria for pay progression.

 

 

Right to information

You said the EU Directive requires that you have to provide information to employees. What information must be provided?

Workers can request and receive in writing information on their individual pay level (i.e., gross annual pay and the corresponding gross hourly pay) and average pay level broken down by sex for workers doing the same work as them or work of equal value.

 

Does this information need to be requested by the worker?

No, they can request it through their representative or through an equality body.

 

How quickly does the information need to be provided to the worker?

It has to be provided within a reasonable time period, which the Directive defines as no more than two months after the request was made.

 

Is there a notification requirement?

Yes, employers must notify workers annually of their right to receive the information and the steps that the worker can undertake to exercise that right.

 

Can employees use the information to sue the employer?

Yes, employees can use the information obtained about their peers to defend the right to equal pay. But they cannot use the information about their peers for any other reason. Employers may limit the use of this information accordingly.

 

Can employers prohibit employees from discussing their pay?

No. The EU Directive says that Member States shall put in place measures to prohibit contractual terms aiming to restrict workers from disclosing information about their pay.

 

How do you square this call for transparency with the strict EU laws related to data privacy? There seems to be a natural tension between them? For example, gender/pay data is protected under GDPR, yet you can now request data on your peers? Isn’t this a conflict?

The data processed under the Directive cannot be used for any other purpose other than to implement the principle of pay equity. Also, the data that will be provided will be anonymous.

 

 

Gender pay gap calculation and reporting

What pay gaps are employers required to calculate?

Employers must calculate:

  • Overall mean and median pay gap
  • Mean and median pay gap calculated from “complementary and variable” pay (e.g., bonuses)
  • The proportion of female and male workers receiving complementary or variable components of pay 
  • The proportion of female and male workers in each quartile pay band 
  • The pay gaps between “categories of workers” (i.e., workers performing the same work or work of equal value), calculated from both base pay (“ordinary basic wage”) and complementary or variable components of pay

 

Does this apply to all employers?

No. Initially, employers with at least 250 employees will report every year and employers with between 150 and 249 employees will report every three years. Beginning in 2031, employers with between 100 and 149 employees will also have to report every three years.

 

When will the first report be due?

The due date changed with the final version of the Directive. The final version locked the due date for the filing of the pay gap reports. Upside: The deadline will be the same for all 27 Member States, so you will not need to juggle different reporting deadlines.  Downside: Reports in 27 countries will all be due on the same date!  The final deadlines are:

  • The first report for employers with 250+ workers within the Member State will be due 7 June 2027 based on 2026 calendar year data. Employers with 250+ employees will need to submit this report annually thereafter. 
  • The first report for employers with 150-249 employees will also be due 7 June 2027, and due every three years thereafter.
  • For employers with 100-149 employees, the first report will be due 7 June 2031, with subsequent reports due every three years thereafter.
  • Employers with under 100 workers can voluntarily provide the information. Also, Member States can, but are not required to, require employers with fewer than 100 employees provide the information on pay.

 

Is this information public?

Yes, the median/mean pay gaps are to be publicly reported. Each Member State will be responsible for assigning a body or bodies as responsible for compiling and publishing the data. The employer may also publish the information on its website or make it publicly available in another way. But whatever the method, employers will be required to provide the information to all workers and their representatives. 

Employers will also be required to provide the information to the labour inspectorate and the equality body upon their request. The information from the previous four years, if available, shall also be provided upon request.

The adjusted pay gaps and the joint pay assessment are not required to be public.

 

Do the works councils or worker representatives need to have access to the methodologies?

Yes, the accuracy of the information shall be confirmed by the employer’s management, following consultation of workers’ representatives who shall have access to the methodologies applied.

 

What right is there to follow-up on requests?

Workers and their representatives, labour inspectorates, and equality bodies will have the right to ask the employer for additional clarifications and details regarding any of the data provided, including explanations concerning any gender pay differences. Employers have to respond to these requests within a reasonable time.

 

 

Joint pay assessment

What is the joint pay assessment?

If the average pay gap is at least 5% in any category of workers and it is not explained by objective and gender-neutral factors, and the gap has not been remediated within six months of the submission of the gender pay gap report, employers must perform a joint pay assessment in all groups. The joint pay assessment is in coordination with the works council or representative.

 

What triggers the need for a joint pay assessment?

A joint pay assessment is needed if: 

  • The difference of average pay level between female and male workers is at least 5 percent in any category of workers; 
  • The employer has not justified such difference in average pay level by objective and gender-neutral criteria; and, 
  • The employer has not remedied the difference within six months of the date of submission of the gender pay gap report.

 

What will need to be assessed during a joint pay assessment?

If a joint pay assessment is required, it will require assessing:

  • The proportion of female and male workers in each category of workers;
  • Information on average female and male workers’ pay levels and complementary or variable components for each category of workers;
  • Any differences in average pay levels between female and male workers in each category of workers;
  • The reasons for such differences in average pay levels, on the basis of objective, gender-neutral criteria, if any, as established jointly by the workers’ representatives and the employer;
  • The proportion of female and male workers who benefited from any improvement in pay following their return from maternity or paternity leave, parental leave or carers’ leave, if such improvement occurred in the relevant category of workers during the period in which the leave was taken;
  • Measures to address differences in pay if they are not justified on the basis of objective, gender-neutral criteria; and, 
  • An evaluation of the effectiveness of measures from previous joint pay assessments.

 

Remedies and enforcement

What are the remedies under the EU Equal Pay and Transparency Directive?

When the EU Directive is transposed by the EU Member States, the Member States must ensure that any worker not receiving equal pay can have the right to claim and obtain full compensation or reparation of the harm. Member States shall ensure that the compensation or reparation includes full recovery of back pay and related bonuses or payments in kind, and compensation for lost opportunities, moral prejudice, or any harm caused by other relevant factors which may include intersectional discrimination, as well as interest on arrears.

 

Who has the burden of proof?

If the employer did not implement the transparency provisions (i.e., right to information, gender pay gap reporting, and pay scale and career transparency provisions in Articles 5 – 9), the burden is on the employer to prove that there has been no discrimination.

 

What is the cap on damages on a claim for failure to pay equally?

There is no cap. The Directive says that there can be no “upper limit” on the damages.

 

Who will determine penalties?

The Directive says that each Member State must set penalties. The Member States must “​​ensure that penalties guarantee a real deterrent effect for the infringements of the rights and obligations relating to the principle of equal pay.”

 

Who are the comparators in an equal pay claim?

When assessing whether female and male workers are carrying out the same work or work of equal value, the assessment of whether workers are in a comparable situation shall not be limited to situations in which female and male workers work for the same employer but shall be extended to a single source establishing the pay conditions (for example, within the same bargaining unit). The assessment of whether workers are in a comparable situation shall also not be limited to workers employed at the same time as the worker concerned. In a situation where no real-life comparator exists, it shall be allowed to use any other evidence to prove alleged pay discrimination, including statistics or a comparison of how a worker would be treated in a comparable situation.

 

What is the statute of limitations?

It is no shorter than three years, but it does not begin to run until taking into account that the limitation periods shall not begin to run until the claimant knows, or can reasonably be expected to know, about the infringement. Further, the Directive gives Member States the ability to extend the statute of limitations to as long as the infringement is still ongoing or before the termination of the employment contract. 

 

Are there any teeth to these laws? Who will enforce the Directive?

Each Member State is required to designate a body for monitoring the Directive. This body will be responsible for collecting and publishing the gender pay gap data.

 

Who is responsible for paying legal fees?

Even if an employer prevails on a pay discrimination claim, the court can assess, according to the national law, whether the losing claimant had reasonable grounds for bringing the claim to court, and order that the losing claimant does not have to bear its costs.

 

EU Equal Pay and Transparency Directive glossary of common terms

  • ‘Pay’ means the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind which the worker receives directly or indirectly (‘complementary or variable components’), in respect of his/her employment from his/her employer
  • ‘Pay level’ means gross annual pay and the corresponding gross hourly pay 
  • ‘Gender pay gap’ means the difference of average pay levels between female and male workers of the employer, expressed as percentage of the average pay level of male workers 
  • ‘Median pay level’ means the pay of the worker that would have half of the workers earn more and half less than they do
  • ‘Median gender pay gap’ means the difference between the median pay level of female and median pay level of male workers expressed as percentage of the median pay level of male workers
  • ‘Quartile pay band’ means each of four equal groups of workers into which they are divided according to their pay levels – from the lowest to the highest 
  • ‘Work of equal value’ means work that is determined to be of equal value in accordance with the non-discriminatory and objective gender-neutral criteria referred to in Article 4(4) of the Directive
  • ‘Category of workers’ means workers performing the same work or work of equal value grouped in a non-arbitrary manner and based on gender neutral criteria referred in Article 4(4) of the Directive, by the workers’ employer and where applicable in cooperation with the worker’s representatives in accordance with the national law and/or practice in each Member States
  • ‘Direct discrimination’ means the situation where one person is treated less favourably on grounds of sex than another person is, has been or would be treated in a comparable situation
  •  ‘Indirect discrimination’ means the situation where an apparently neutral provision, criterion or practice would put persons of one sex at a particular disadvantage compared with persons of the other sex, unless that provision, criterion or practice is objectively justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary
  • ‘Equality body’ means the body or bodies designated pursuant to Article 20 of Directive 2006/54/EC, for the promotion, analysis, monitoring and support of equal treatment of all persons without discrimination on grounds of sex
  • ‘Labour inspectorate’ means the body or bodies responsible, in accordance with national law and/or practice, for control and inspection functions in the labour market. Where provided for in national law, social partners may carry out these functions
  • Workers’ representatives’ means the workers’ representative in accordance with national law and/or practice

 

The EU Equal Pay and Transparency Directive is evolving

Interpretation of the Directive continues to evolve, and we will provide you with updates as needed. Our recommendation is to begin preparing now, with a pay equity strategy that will comply with the Directive. To help you with that, we have prepared an EU Pay Transparency Cheat Sheet that gives you an overview of the requirements. Check our blog often for updated information.

 

 

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