The European Union's Pay Transparency Directive, passed on April 24, 2023, introduces strict new rules to tackle gender pay inequality. Employers must now make salary information public and close any unjustified gender pay gap above 5%.
A directive to close the gender pay gap
The directive's primary goal is to narrow the persistent pay gap between men and women in the European Union (EU). On average, women working in the EU earn 13% less than men. The gap widens even further when it comes to pensions — women's retirement income is about 30% lower than men's.
The directive aims to address these inequalities and enhance the rights of all workers within the EU, including expatriates and local citizens alike. It also takes into account the needs of workers with disabilities, ensuring more inclusive employment practices. Employers who fail to comply may face penalties.
Employer obligations:
Under the directive, employers across the EU must comply with several new transparency and reporting requirements:
- Inform job applicants about the starting salary or salary range offered for a given position.
- Refrain from asking candidates about their previous salary or their salary expectations.
- Report gender pay gap data annually to the relevant national authority if the company has at least 250 employees. Smaller companies must report every three years. Those with fewer than 100 employees are exempt from this obligation.
- Conduct a joint pay assessment with workers' representatives if the company's gender pay gap exceeds 5% and cannot be justified by objective, non-discriminatory criteria.
Workers' rights after hiring:
The directive also strengthens the rights of employees once they are hired:
- Employees have the right to request average pay levels, broken down by gender, for the same or similar roles.
- They have the right to know the criteria used to determine salary progression and career advancement, which must be objective and gender-neutral.
Legal recourse and compensation
If a pay discrimination issue arises, the directive ensures that affected workers are entitled to financial compensation. Importantly, the burden of proof now shifts from the employee to the employer, meaning it is up to the company to demonstrate compliance with EU law. The directive also requires “dissuasive” sanctions, such as fines, for companies found to be in violation. Moreover, it recognizes “intersectional discrimination”, which occurs when multiple forms of discrimination overlap, for example, based on gender, ethnicity, or disability.
Resistance from employers
EU member states have until June 7, 2026, to incorporate the directive into their national legislation. However, not all employers are on board. Some, including major European corporations, argue that the deadline is too soon. They claim that pay differences often depend on multiple factors, including regional variations; for example, salary levels in a major city differ from those in smaller towns. Other employers have gone further, calling the directive “illegitimate”, arguing that it will disrupt recruitment processes, job postings, and workplace organization.For instance, job ads will no longer be allowed to include vague phrases such as “salary based on candidate profile,” as this criterion is not objective and could be discriminatory. Critics say more analysis and preparation are needed before implementing the directive. Some member states appear receptive to these concerns, notably the Czech Republic, which is considering delaying the directive's enforcement.
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