EU Pay Transparency Cheat Sheet

| January 30, 2023 | 3 min read
EU Pay Transparency Directive Cheat Sheet

This article was originally published on January 20, 2023. It was last updated on January 30, 2023.

The pay 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 new EU Pay Transparency Directive looming, 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

Most apply to employers, irrespective of number of employees. 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

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 apply to employers, irrespective of number of employees. 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, irrespective of number of employees

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)

Ultimately employers with 100+ employees*

* Initially, employers with at least 250 employees will report every year and employers with between 150 and 249 employees will report every three years. After 5 years, employers with between 100 and 149 employees will also have to report every three years.

05
Joint pay assessment

If 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 works council or representative

Ultimately employers with 100+ employees*

 

What comes next?

On 4 March 2021, the European Commission presented a proposal on pay transparency to ensure that women and men in the EU get equal pay for equal work, with a decision to enter negotiations with EU governments passed on 5 April 2022. Just last month, on 15 December 2022, the European Parliament and the Council reached an agreement now subject to formal approval by the co-legislators. On January 27, 2023, the EU’s Committee on Women’s Rights and Gender Equality (FEMM) and EU Committee on Employment and Social Affairs also approved the Directive. There is only one more step to go: the plenary vote in March 2023. Once agreed, the Directive will enter into force 20 days after publication in the Official Journal. Then Member States will then need to transpose the new elements of the Directive into national law within three years.

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.

 

How to talk about pay

As the laws continue to require increased pay transparency and reporting from employers, it’s important to be prepared for questions and conversations with employees, investors, and other stakeholders. To help you build your own communications strategy, we’ve curated a bundle of workplace equity communications resources, linked below. You’ll find a playbook with step-by-step guidance, a lookbook with real-world examples from 20+ leading brands, and tips from a top communications consultant.

 

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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