On June 6, 2023, Directive (EU) 2023/970 of the European Parliament and of the Council of May 10, 2023, entered into force. This directive concerns the strengthening of the application of the principle of equal pay for men and women for the same work or work of equal value through pay transparency mechanisms and enforcement mechanisms. Ensure that you are prepared for the upcoming changes introduced by the directive on pay transparency.
Why Are These Changes Necessary?
A lack of transparency regarding pay levels within an organization makes cases of pay discrimination particularly difficult to detect and especially challenging to prove in potential court proceedings.
It has become necessary to introduce measures that will enhance pay transparency to ensure equal pay for men and women performing the same work or work of equal value.
The new regulations apply to both public and private sector employers and cover all employees employed under an employment contract or any employment relationship as defined by law.
The introduced changes concern pay transparency both before employment and during the course of employment.
The deadline for implementing Directive (EU) 2023/970 is June 7, 2026.
Employer Obligations
Employers will be required to provide prospective employees, before the commencement of the recruitment process, with information regarding the initial salary or salary range, which must be based on objective, gender-neutral criteria applicable to the specific position. Additionally, employers will be prohibited from inquiring about a candidate’s current or past salary history.
For employees already employed within an organization, employers will be required to provide easy access to information regarding the criteria used to determine their salaries, as well as access to salary progression criteria.
The criteria used by employers to determine salaries must be objective and gender-neutral.
Employers will also be required to inform all employees annually of their right to obtain information regarding gender pay equality and the steps they must take to exercise this right.
The new regulations also impose reporting obligations on employers, particularly concerning pay gaps within the organization. This requirement will primarily apply to entities employing at least 100 employees (although member states may extend the reporting obligation to employers with fewer than 100 employees).
New Employee Rights
Employees will have the right to request information from their employer regarding the average pay levels categorized by gender for employees performing the same work or work of equal value.
Employees may also exercise their rights through equality bodies.
Moreover, employees must be ensured appropriate access to legal proceedings to enforce rights and obligations related to the principle of equal pay.
If an employee suffers damage as a result of a violation of any rights or obligations related to the principle of equal pay, they will be entitled to claim compensation or reparation for the full extent of that damage.
In judicial proceedings, the burden of proof will rest with the employer. Employers will be required to demonstrate that no direct or indirect pay discrimination has occurred.
Legal proceedings and administrative procedures concerning alleged violations of equal pay rights or obligations may be initiated on behalf of employees by associations, organizations, equality bodies, employee representatives, or other entities that have a legitimate interest in ensuring gender equality.
Penalties
Employers found to be in violation of rights and obligations related to equal pay will be subject to financial penalties. The amount of these fines will be determined by each member state.
Conclusion
As can be seen, the new pay transparency regulations introduce significant changes aimed at reducing pay gaps and addressing the ongoing issue of gender-based pay discrimination.
Preparing internal regulations in compliance with these new requirements will be a major challenge for employers. We recommend that employers start implementing pay transparency measures in advance to ensure that their adopted procedures comply fully with legal requirements.
