New EU Directive on Pay Transparency: Key Requirements and Impact on Employers
On the 10th of May 2023, the European Parliament and the Council adopted Directive (EU) 2023/970, which aims to strengthen the application of the principle of equal pay for women and men for equal work or work of equal value. This new legal framework introduces important pay transparency mechanisms and concrete measures to improve fair pay in workplaces.
The Member States of the European Union have two years from this date to implement the provisions of the directive into national law. This means that by the 6th of June 2025, all Member States must have adopted the necessary measures to ensure full implementation of the new pay transparency requirements.
Key Clauses of Directive (EU) 2023/970
- Pre-employment transparency:
- Employers are obliged to provide information on the starting salary level or its range in job advertisements or before the job interview. This information must be made available to all potential candidates in order to avoid inequalities in entry-level salaries.
- Right to be informed about existing employees:
- Employees have the right to request information on individual and average pay levels, disaggregated by gender, for the same or similar positions in their organization. This measure is intended to enable employees to assess whether their salaries are fair and equal.
- Reporting and internal monitoring:
- Employers with more than 100 employees must publish annual reports on the gender pay gap in their organisations. These reports should include data on the pay disparities and what measures are being taken to reduce them.
- Pay audits:
- In cases of significant pay gaps, employers may be required to conduct pay audits. These audits should be carried out in collaboration with employee representatives and should result in concrete measures to address the inequalities identified.
- Prohibition of pay in confidential circumstances:
- The Directive prohibits clauses that restrict employees from revealing information about their salaries. This enables open discussion and comparison of pay among colleagues.
- Sanctions and compensatory measures:
- Member States are required to introduce effective, proportionate and dissuasive sanctions for violations of the Directive, including fines and compensation for affected workers.
Impact on Employers
EU employers will need to take concrete steps to conform to the new requirements of Directive (EU) 2023/970. This includes:
- Updating Policy and Procedures: Employers should review and revisit their pay policies and establish mechanisms for regular monitoring and reporting of pay data.
- Staff training: The setup of training programmes for managers and employees on equal pay principles and new transparency requirements.
- Cooperation with employee representatives: Induct mechanisms to consult and cooperate with employee representatives when conducting pay audits and developing measures to address inequalities.
Conclusion
Directive (EU) 2023/970 represents a significant step towards ensuring equal pay for equal work in the entire European Union. It imposes new transparency and accountability obligations on employers, while giving workers greater clarity and stronger protection against discrimination. Implementing these measures will require active participation and commitment from employers to ensure a fair and equal worksite for all.