If you work in HR and recruitment you should be more than familiar with EU’s Pay Transparency Directive took effect this year, 2024. If you don’t but need to hire staff, this article is for you.

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This EU Pay Transparency initiative emerged from recognizing the significant barrier that lack of pay transparency posed to achieving equitable remuneration across the European Union. Initiated in March 2021, the Directive seeks to address this issue comprehensively. Fast forward to December 15, 2022, the European Parliament finalized an agreement on the measures for pay transparency. Consequently, it will soon be mandatory for employers to ensure a higher degree of transparency and information sharing, even before a candidate applies for a job.

This Directive isn’t an isolated effort; it’s part of a broader strategy aimed at narrowing the gender pay gap and enhancing work-life balance, alongside the Work-Life Balance Directive and the Directive for Better Gender Balance on the boards of companies listed in the EU. For instance, Malta has already put the Work-Life Balance Directive into action for parents and caregivers as of August 2, 2022.

On December 15, 2022, Helena Dalli, the Commissioner for Equality, highlighted the EU Pay Transparency Directive’s significance: “Ensuring equal pay is crucial for women’s economic, financial independence, and justice, especially during times of crisis. Pay transparency is a matter of fairness and has economic benefits, as it encourages more women to enter and stay in the workforce. Ending pay discrimination requires transparency.”

EU Pay Transparency Directive Measures. What are they?

• Transparency Before Employment: Job seekers will be privy to information regarding salary ranges within job ads or before the initial interview. Furthermore, inquiries into applicants’ previous salaries will be prohibited.
• Employee’s Right to Information: Employees can request details about their pay level and the average pay levels by gender for similar roles or work of equal value. This applies to all employees, regardless of company size.
• Gender Pay Gap Reporting: Companies with 100 or more employees will need to disclose any pay gaps between male and female employees. Initially, companies with 250 or more employees will report annually, followed by those with 150-249 employees reporting every three years. Five years post-Directive, companies with 100-149 employees will also report triennially.
• Joint Pay Assessment: Should reports uncover a gender pay gap of 5% or more that cannot be justified by objective, gender-neutral factors, employers must conduct a pay assessment in collaboration with worker representatives.

Member states are now tasked with incorporating these new requirements of the Pay Transparency Directive into their national laws within three years.

The principle of equal pay for equal work or work of equal value between women and men has been a cornerstone of the European Union since the Treaty of Rome in 1957. Despite a 2014 Recommendation to strengthen equal pay through transparency, its implementation and enforcement have been lacking. In response, the European Commission adopted a Gender Equality Action Plan for 2021-2025 following a 2019 Council directive to devise concrete pay transparency measures.

EU Pay Transparency. Next Steps for Hiring Companies

Businesses are encouraged to proactively adapt to this EU Pay Transparency Directive, making necessary adjustments to ensure fair treatment for all employees. The Directive also sets forth mechanisms for redress and penalties for non-compliance, including fines and compensation for discrimination victims. Employers failing to meet transparency requirements must prove the absence of pay discrimination.

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Further details on the EU Pay Transparency Directive are available on the European Commission’s website.

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EU Pay Transparency FAQs