EU Pay Transparency Directive close to adoption

The proposed EU Directive on pay transparency measures is close to formal adoption as the European Parliament and Council reached a political agreement on its text in December 2022.

The aim of the Directive is to establish pay transparency standards to empower workers to claim their right to equal pay. The Directive is part of a broader package of measures and initiatives addressing the root causes of the gender pay gap and economic empowerment of women. These include the Work-Life Balance Directive, sectoral initiatives to improve gender balance and a proposed directive on improving gender balance on the boards of large EU listed companies. 

Key provisions

The key elements of the Directive are as follows:

• Employers will be obliged to provide information about the initial pay levels or pay range in job advertisements or before interview stage. Furthermore, employers will not be allowed to ask prospective employees about their pay history, including their existing salary. These provisions do not limit the parties’ power to negotiate a salary outside the indicated range.
• Employers will be required to provide a description of the gender-neutral criteria used to define their pay and pay progression to employees. Criteria may include, for example, individual performance, skills development and/or seniority. The Directive allows Member States to exempt employers with fewer than 50 workers from this obligation.
• Employees will be given a new right to request information from their employer on their individual pay level and on average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value.
• Employees will not be prevented from disclosing their pay to others for the purpose of enforcing the principle of equal pay. Member States will be obliged to prohibit contractual terms containing such restrictions.
• Where an employer does not fulfil its transparency obligations and the employer cannot show that any infringement was manifestly unintentional and minor, the burden of proof will shift to the employer. In such circumstances, it will be for the employer, not the employee, to prove that there was no discrimination in relation to pay.
• Member States will be obliged to establish specific penalties, including fines, for infringements of the equal pay rules. Member States must also enable courts to award costs where a claimant is successful or where a claimant is unsuccessful but found to have had reasonable grounds for bringing a claim.
• Member States will be required to establish tools or methodologies to enable employers and/or social partners assess what constitutes work of equal value and establish and use gender-neutral job evaluation and classification systems. This will be in accordance with a non-exhaustive list of objective criteria including skills, effort, responsibility and working conditions and any other factors which are relevant to the specific job or position.

The Directive also provides for gender pay gap reporting which was introduced into Irish law in 2022. The Irish Gender Pay Gap Information Act and accompanying Regulations contain many of the basic pay reporting requirements in the Directive (and indeed, goes beyond these requirements in certain cases). However, the Irish rules will require some amendment and updating to ensure compliance with the Directive, once transposed. This includes provisions around publication of pay gaps by categories of worker doing the same work or work of equal value.

The Irish gender pay gap reporting regime requires companies to provide a narrative explaining the reasons for any pay gap and including an action plan of the measures which will be taken to eliminate or reduce any gender pay gap.

Once the Pay Transparency Directive is transposed into Irish law, further action by impacted employers will be required. Where pay reporting reveals a gender pay gap of at least 5% in any category of workers doing the same work or work of equal value and where the employer cannot justify the gap on the basis of objective gender-neutral factors or remedy such unjustified difference within 6 months of the pay report, employers will be obliged to carry out a pay assessment, in co-operation with employee representatives.

Next steps

This political agreement is now subject to formal approval by the co-legislators. Once agreed and published in the Official Journal, Member States will have 3 years to transpose the Directive into national law.

Members might also note two Private Members’ Bills on gender pay transparency which are currently before the Houses of the Oireachtas; Sinn Fein’s Employment Equality (Pay Transparency) Bill 2022 and Fianna Fail’s Remuneration Information and Pay Transparency Bill 2023. While these remain at an early stage of the legislative process, Ibec will continue to monitor their progress and update members on any relevant developments,

At the 2023 Ibec Employment Law Conference, “The age of change – keeping pace with increasing regulation of the employment relationship” our team of expert speakers, will provide practical guidance and advice on these changes and more. I encourage you to join us at the new Royal Dublin Convention Centre on 20 April by booking online here.

Nichola Harkin, Head of Employment Law Services, Ibec