Employee’s Right to Information & Transparency of Pay

The Directive gives employees and prospective employees a number of individual pay transparency rights. For example, it establishes employees’ right to request and receive in writing information relating to the average pay levels and the criteria that are used to determine workers’ pay, pay levels and pay progression which shall be objective and gender neutral. Employers shall inform all workers, on an annual basis, of their right to receive this information.

Pay transparency obligations take effect as early as the recruitment process since employers must provide prospective employees with information about the initial pay or pay range for the position concerned. Employers are prohibited from inquiring about prospective employees’ pay history and the recruitment process must be devoid of discriminatory or gender-biased elements. Further contractual clauses which restrict employees’ right to share information about their pay will also be prohibited.

Pay Gap Reporting

The Directive introduces an important reporting requirement which is that all employers with more than 100 employees must regularly report detailed information regarding the organisation’s gender pay gap across their organization as a whole, as well as within each category of employees who do the same work or work of equal value, broken down by ordinary basic salary and complementary or variable components. Employers with fewer than 100 employees can provide the report on a voluntary basis, unless Member States make this obligation mandatory.

Employers who are subject to pay reporting (i.e. with at least 100 workers), should conduct a joint pay assessment where all the following conditions are met:

§the pay reporting demonstrates a difference in the average pay level between female and male workers of at least 5 % in any category of workers; §the employer has not justified such a difference in the average pay level on the basis of objective, gender-neutral criteria; §the employer has not remedied such an unjustified difference in the average pay level within six months of the date of submission of the pay reporting.

Joint pay assessments should trigger the review and revision of pay structures in organisations with at least 100 workers that show pay inequalities.

Key Considerations for Employers

It becomes apparent that the transposition of the Directive into national law will, inadvertently, introduce important obligations for employers and affect business practices ranging from payroll structure and pay progression policies, to recruitment practices and internal reporting mechanisms. These provisions will require employers to establish systems for handling information requests by employees, including ensuring that transparent and accessible data on salary levels, pay gaps, and justifications for any discrepancies are readily available. At the same time, employers should review and update internal policies and employment contracts to ensure that any clauses or company practices which prohibit employees’ right to discuss their pay are eliminated.

The Pay Gap Reporting obligation will present a significant compliance challenge for employers across the EU, further complicated in cases where a Joint Pay Assessment becomes necessary. Employers will need to have a clear understanding of existing pay structures within their business, classify categories of workers and their average pay levels broken down by gender, and identify any applicable pay progression criteria.

How we can assist

Our firm provides full legal advice on regulatory and compliance considerations. In collaboration with expert associates, we offer various solutions to help organizations comply with the new rules, while enhancing their overall pay equity practices. Employers can benefit from specialised support in conducting thorough pay audits and building the necessary documentation to justify pay differentials.

Advanced data analytics and pay benchmarking tools will further assist in accurately assessing current pay structures and identifying any gender-based discrepancies. In this way, employers and organizations will be better equipped to develop gender-neutral evaluation systems and reporting frameworks, thus simplifying the process of complying with the Directive’s pay gap reporting obligations.