EU: Negotiations on Pay Transparency Directive can Begin
Author: Chris Van Olmen
Early in 2021, the EU Commission submitted a legislative proposal for a Directive to strengthen the application of the principle of equal pay for equal work, or work of equal value, between men and women through pay transparency and enforcement mechanisms (The Pay Transparency Directive). The EU parliament has now approved its position on the proposal and will start the negotiations with EU member states in the Council, which adopted its own position in December of 2021.
The gender pay gap in the EU stands at around 14%; this means that women earn on average 14% less than men, per hour. The EU wants to decrease the gender pay gap by enforcing a high degree of transparency regarding pay within companies.
The EU Parliament demands that companies with at least 50 employees (instead of 250 as originally proposed by the Commission and defended by the Council) be required to disclose information that makes it easier for those working for the same employer to compare salaries and expose any existing gender pay gap in their organisation.
National tools to assess and compare pay levels should be based on gender-neutral criteria and include gender-neutral job evaluation and classification systems. The workers have a right to clear and complete information on an individual basis. This relates to the information regarding their own job or similar functions within the company, as well as to the gender pay gap between workers employed by the same employer.
If, based on the released information, a gender pay gap of at least 2.5% exists, employers, in cooperation with their workers’ representatives, have to conduct a joint pay assessment and develop a gender action plan. The Commission and Council propose a threshold of 5%.
According to the proposed text by the Parliament, job applicants shall have the right to receive from the prospective employer (without having to request it), information about the initial pay level or the range of an advertised position. Employers would be prohibited from asking about the current and previous pay of the job applicant.
Employers can also not prohibit workers from disclosing their pay (with e.g. pay secrecy or confidentiality clauses).
As both the EU Parliament and the Council support the purpose of the Directive, it mostly seems to be the question whether the Council will accept the more extensive proposals of the EU Parliament.
Key Action Points for Human Resources and In-house Counsel
- The negotiations will take time; a final adoption will be followed by a transposition period and so, there is still a lot of time to prepare your company.
- Nonetheless, it would be a good idea to carry out the exercise to map the internal pay structure of the company, if this shows a gender pay gap, it could be recommended to take preventive action.
- Rethink NDA’s and confidentiality clauses relating to pay information.