In March 2023, the European Union (EU) adopted the Directive on Pay Transparency, a landmark piece of legislation aimed at addressing the right to equal pay through the establishment of pay transparency standards allowing workers to claim equal pay. Before the Directive is signed into law and published in the EU Official Journal, the Council must formally approve it. The new guidelines will then go into effect twenty days after they are published. EU member states will then have up to three years to build the new elements of the directive into their national legislation although there are some suggestions that local political timetables might drive some countries to act sooner than this.
This is certainly the case in Ireland with the Irish Congress of Trade Unions (ICTU) welcoming the suggestion by a spokesman for Minister for Equality Roderic O’Gorman urging for quicker implementation and tighter legislation in terms of companies with less than 50 Employees being subject to enforcement of this Directive[1].
Currently, there are two Private Member’s bills before the Houses of the Oireachtas seeking to address the rules covered by the Directive. Whilst still at the early stage of possible implementation it is likely that the Government will legislate within the timeframe.
What does this mean to an Employer?
Given the proposed legislation’s complexity and implications, Employers should begin preparing early to ensure an even transition from a considered, operational, and legal position. Especially as our own national legislation may impose stricter rules on Companies based on the number of Employees.
- Employers must provide information about the initial pay scale or pay range in the job vacancy notice or prior to the job interview. The directive prohibits Employers from asking prospective Employees about their pay history of their former and current employment relationship.
- Employers must make readily available information about the descriptions used to establish individual pay levels, pay progression and average pay levels, broken down by gender for any Employee doing or providing the same level of work. No matter what the company size all Employees have the right to be informed of this annually, however the Directive does allow for Member States to exempt Employers with fewer than 50 Employees from the obligation to make accessible to Employees a description of the criteria used to define their pay progression.
- Employees will not be prevented from disclosing their pay to others for the purpose of enforcing the principle of equal pay, however, Employers may request that the use of any information by an Employee, other than that concerning an Employee’s own pay or pay level, remains limited to the enforcement of the right to equal pay. Member States will be obliged to prohibit contractual terms containing such restrictions.
- There is an obligation for Companies with more than 250 Employees to report annually on any gender pay gap and for Companies with over 100 Employees every three years. This is required to also highlight and report on serious signs of pay inequalities.
- A pay assessment report will have to be conducted by an Employer if a gender pay gap is revealed of a minimum of 5% in any category of Employees doing the same work or providing the same level of work and where the Employer cannot substantiate the pay gap.
What is the implication of non-compliance?
If an Employer is found to not have complied with the new Directive, then sanctions will be imposed.
- Any Employee who alleges pay discrimination and/or an infringement of any right or entitlement of the Directive may receive compensation which will include back pay and any other payments in kind and/or relevant bonuses.
- The burden of proof will be on the Employer and not the Employee to prove that there was no discrimination in relation to pay.
- Protection from Victimisation – Employers will be prohibited from taking adverse actions against Employees who exercise their rights under the Pay Transparency Directive or supported another person in the protection of their rights.
- Specific penalties could be enforced by Member States on Employers for infringement of the Directive.
- Employee representatives and/or Pay Equality bodies may act on behalf of Employees in administrative proceedings.
“Equal work deserves equal pay. And for equal pay, you need transparency. Women must know whether their employers treat them fairly. And when this is not the case, they must have the power to fight back and get what they deserve.”
Ursula von der Leyen
President of the European Commission[2]
How can we help?
Preparation is key in the next three years before full implementation of the Directive is enforced.
Adare HRM strongly suggests Companies start by assessing their current pay structure and making sure that all payment records are accurate and current. Reviewing and updating pay policies, job evaluation processes and classification structures that support gender neutral based objective criteria will pave the way towards preparing for compliance. By being open and inclusive to Employees about this new Directive a more harmonious approach to explaining and working together can be adopted. The Directive is in place to promote a more inclusive and equitable workplace for all. The benefits of this new Directive are far more advantageous than the alternative in a modern and diverse society.
Our experts in Adare Human Resource Management are here to support and guide you through each step over the next number of years prior to implementation and beyond.