Article 157 of the Treaty on the Functioning of the European Union contains the principle of equal pay. EU efforts to abide by this principle have resulted in the recent adoption of the Pay Transparency Directive. It was adopted by the EU parliament on the 30th of March 2023 and introduces several changes. A problem identified with the older Recast Directive which contains the requirement to ensure equal pay is that in practice it remains challenging for law enforcers to ensure pay transparency. The pay directive aims to combat the practical issue by enforcing pay transparency standards.
A big part of the directive’s solution is establishing a reporting system for larger employers accessible by employees. Workers will have the right to request information on the different pay levels and on the mechanism adopted for ensuring equal pay in their institution. Employers with more than 100 workers will have to report information related to equal pay obligations. Specifically, they will need to report information on the company’s pay gap comparing female and male employees’ salaries. Significantly, the employees will not only have access to the result of the report but also the method used to report the pay gap. In addition, although the reporting requirement applies to employers that employ more than 100 workers, employers with at least 250 employees will need to report annually while employers between 100 and 249 employees will need to report triennially. Employers must provide the information to the designated by their Member State body and their employees.
The Pay Transparency Directive not only regulates pay transparency for current employees but it aims for transparency in the candidacy stage. Employers are prevented from asking potential future employees about their pay history. Employers are also required to present the initial pay level to future employees. Regarding current employees, employers must indicate the criteria used to define their pay, as well as their pay level and potential progression. Member States can exempt employers with fewer than 50 workers from the latter. Employees or their representatives can also request access to the comparative reporting between their salary and the salary of employees of the opposite sex completing work of equal value.
The pay transparency directive also proposes a joint pay assessment in light of pay discrimination. If the pay gap results to at least five percent, is not justified, and has not been resolved within six months of the report the employers must carry out a joint assessment with workers’ representatives. The assessment will be carried out to compare opposite-sex workers, identify the difference and impose measures to remedy the pay gap. Compensation will also be given to workers whose rights have been infringed. Compensations will include not only loss of pay but the loss of opportunities, interest on arrears, and any harm caused by relevant factors.
Employers must keep in mind that in light of a claim of pay discrimination made by the employee, the burden of proof will fall upon the employer to to prove that there was no wage discrimination. This provision shifts the existing burden of proof from the employee to the employer. In light of a breach of the directive, the penalties will be decided and enforced by the Member States and must be effective, proportionate, and dissuasive. Once adopted by the Council the Directive will enter into force 20 days after publication and the Member States will have three years to implement it. Employers with 150 workers will have a year to adopt the directive after implementation whereas employers with fewer will be given five.
In Christys, we advise on all aspects of employment law, from appointment to dismissal. We advise both employers and employees. This gives us valuable insight into the employment relationship and the need to provide effective, commercial, and imaginative solutions. Our team keeps up with developments around the Pay Transparency Directive and can provide comprehensive advice to employers on fulfilling their obligations and employees on claiming their rights.
Author: Chloe Tofarides, Advocate.