On 30 March 2023, the European Parliament adopted the Pay Transparency Directive with the aim of eliminating the gender pay gap by providing workers with access to information necessary to assess whether they are being paid fairly compared to other workers in the same organization. The directive also introduces enforcement mechanisms enabling workers to claim their right to equal pay.
New legal requirements
Member States have a three-year period to implement the directive into their national law, giving organizations in scope ample time to prepare. In our previous alert of December 2022 (the directive on pay transparency: what you need to know), we’ve already informed you about the expected obligations the directive would introduce.
Private and public sector employers will have to comply with minimum standards on pay transparency (incl. prior to employment). The directive introduces an annual gender pay gap reporting obligation for companies with more than 250 employees. For companies with more than 100 employees, the reporting obligation should be done every three years. A joint assessment with workers’ representatives is required if the pay gap exceeds 5%. The directive also includes measures to ensure better access to justice for victims of pay discrimination.
How to get it right?
While pay transparency can bring various benefits like promoting fairness and equity in the workplace, companies will need to carefully prepare to get the most of it.
The timeline to prepare for pay transparency depends on several factors such as the size and complexity of the organization, the current level of pay transparency, and the specific needs and goals of the organization.
Laying the groundwork for pay transparency as an employer involves several steps:
- Conduct a comprehensive pay audit and review HR policies
- Set clear goals for pay transparency
- Develop clear policies and procedures on pay transparency (what information will be shared, how it will be shared, and with whom)
- Implement pay transparency gradually (if done before it is legally required)
- Communicate with employees and train your managers
- Monitor and adjust
While pay transparency can help identify and address gender pay gaps, it is however unlikely to close the gender pay gap on its own. The gender pay gap is a complex issue influenced by a range of factors, including unconscious bias, systemic discrimination, and differences in education and career choices. By taking a multi-faceted approach to addressing the gender pay gap, organizations can work towards creating a more equitable workplace that supports the success of all employees, regardless of gender.
How can we help?
We help organizations in the journey towards fairness by clearing the ground to pay transparency, by understanding if and how they are contributing to the gender pay gap, and by designing solutions that lead to continuous improvements. Please contact us for more information on our solutions.