EU Pay Transparency Cheat Sheet

| May 23, 2023 | 4 min read
EU Pay Transparency Directive Cheat Sheet

This article was originally published on 20 January 2023. It was last updated on 23 May 2023.

The transparency era is here. Last year, we saw a steady drumbeat of new pay reporting requirements in Europe and around the globe, a post-pandemic revival of Gender Pay Gap reporting in the UK, a laser focus on pay range transparency in the U.S., and more employees openly discussing and sharing their pay. With the passage of the new EU Equal Pay and Transparency Directive and publication in the Official Journal on 17 May 2023, even more transparency is on the horizon.

If you are feeling unprepared, don’t worry. You’re not alone. To help, our team of experts has put together a comprehensive cheat sheet outlining the key features of the EU Pay Transparency Directive and how organisations might start preparing.

 

Key requirements of the EU Pay Transparency Directive

EU Pay Transparency Directive key requirements

Key requirement Key details Employee threshold
01
Equal pay for work of comparable value

Employers will need to develop tools or methodology to compare value of work with objective criteria

  • E.g., educational, professional and training requirements, skill, effort, and responsibility, work undertaken
  • Comparators need not work for same employer
    • If there is a single source setting criteria for pay (e.g., bargaining agreement), can use that comparison
    • Can use statistics if no real-life comparator

Workers who have suffered gender pay discrimination can receive compensation, including full recovery of back pay and related bonuses or payments in kind

  • Member States may establish specific penalties for infringements of the equal pay rule, including fines

The Directive includes protection for nonbinary employees

Most provisions apply to all employers with any employees in the EU. 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

02
Pay and career progression transparency

Pay scale transparency is coming to the EU. Employers will have to provide information about the initial pay level or its range in the job posting or vacancy notice or before the job interview and provide, where applicable, the relevant portion of the collective agreement applied by the employer in relation to the position

Pay secrecy will be banned. Employers will not be allowed to ask prospective workers about their pay history. Bans pay secrecy confidentiality clauses

Job titles must be gender-neutral (i.e., no “fireman”)

Employers must make accessible to workers a description of the gender-neutral criteria used to define their pay, pay levels, and and pay progression

Most provisions apply to all employers with any employees in the EU. 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

03
Right to information

Employees can request individual pay level and on the average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value

  • Must be provided in writing (within 2 months)
  • Must inform employees of this right on an annual basis and outline the steps needed to make the request 
  • Can request through representative or equality body

All employers with any employees in the EU

04
Public pay reporting

Covered employers will be required to complete public pay gap reporting on base pay and “any other consideration”

The report will include:

  • 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 and complementary and variable pay

Ultimately employers with 100+ employees*

* First reports in all 27 member states for employers with 150+ employees due 6 June 2027 based on 2026 calendar year data. Employers with 250+ employees will need to submit this report annually thereafter. Employers with 150-249 employees will need to submit every three years thereafter. For employers with 100-149 employees, the first report will be due 5 June 2031, with subsequent reports due every three years thereafter.

05
Joint pay assessment

If average pay gap is at least 5% in any category of workers and this gap 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. This 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

The joint pay assessment is in coordination with works council or representative

Ultimately employers with 100+ employees (See threshold details in Section 04 above)

 

What comes next?

The Directive was approved by EU Parliament in plenary on a vote on 30 March and then affirmed by the EU Council on 24 April 2023.  The Directive was published in the Official Journal on 17 May 2023 so the Directive enters into force on 6 June 2023,  twenty days after publication in the Official Journal. Each Member State 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! The final version of the EU Directive, however, did not waste any time, locking down the deadline for submission of the first public pay gap reports in all 27 Member States. Public pay reporting across all Member States will be due 6 June 2027, based on calendar year 2026 data for employers with 150+ employees (this will not be due until 2031 for smaller employers).  

→ Get more details about the EU Pay Transparency Directive in our FAQ and glossary of common terms

 

The Directive is the epicenter of a global cross-pollination of workplace equity law

There’s a very clear trend of global cross-pollination of pay equity laws in recent years. While pay scale transparency and rises in litigations are aspects of U.S. regulation that have influenced Europe in its latest Directive, we can also see Europe’s influence in the other direction too. Europe’s focus on the median pay gap, public reporting, and representation metrics were all features also borrowed by the U.S. that have proven successful. 

Global cross-pollination of workplace equity law

 

How leading brands are responding

It may feel tempting to surgically implement transparency only in the locations that require it. However, many leading companies are embracing pay scale transparency as a principle, not a mandate. This means they’re universally sharing ranges, regardless of whether or not it’s required. So while the EU Pay Transparency Directive will not impact UK employees following Brexit nor impact countries not admitted to the EU, you may wish to plan a strategy that applies across Europe, or across the globe, for better alignment across your workforce.

Regardless of what companies choose to make of pay transparency, the trend of global harmonisation is clear evidence that similar laws will be making their way to the UK very soon.

So, what are the benefits? While this approach is more expansive, it also simplifies your strategy and makes it consistent.

Additionally, current and prospective employees love transparency. As we face a looming global economic downturn, brands that set themselves apart by going above and beyond the status quo are best positioned to retain and motivate the talent they need to get them to through economic downtimes.

Lastly, employees are now more mobile than ever before. If you set a precedent of transparency in one location but not another, you may face confusion and dissatisfaction from employees who have changed locations.

 

Build your pay reporting and communications strategy

To ensure comprehensive compliance with pay reporting requirements around the world, a global pay reporting strategy is essential. Syndio helps our customers analyze and complete pay reports for compliance with many pay reporting requirements around the globe. Global Pay Reports is a one-stop solution for global pay reporting in 28 jurisdictions in Europe, the U.S., and around the globe. You can request reports with a single click and submit your reports with step-by-step guidance, communications advice, and more.

However, don’t stop at compliance — pay reporting is a communications opportunity to showcase your fair pay brand to employees, investors, and other stakeholders. Syndio offers a bundle of workplace equity communication resources linked below, including a step-by-step playbook, a lookbook featuring real-world communications examples from 20+ companies, and advice from a leading communications consultant, to help you build a robust communication strategy for your pay programs and reporting.

 

The information provided herein does not, and is not intended to, constitute legal advice. All information, content, and materials are provided for general informational purposes only. Links to third-party or government websites are offered for the convenience of the reader; Syndio is not responsible for the content on linked pages.

 

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