May 30, 2023
Certain employers in the European Union (EU) will have to report annually on their organization’s gender pay gap, and employers will be prohibited from asking job applicants for their salary history prior to hiring, under measures included in EU directive 2023/970 that strengthens the principle of equal pay for equal work through pay transparency and enforcement mechanisms. The measures aim to improve pay transparency, encourage organizations to review their pay structures, and enable individuals to enforce their equal pay rights. Member states must implement the directive into national laws by 7 June 2026. The gender pay gap across the EU is 12.7% (as of 2021), with significant variations by member state.
- The directive applies to private and public-sector organizations. Employers with fewer than 100 workers will not have to report their gender pay gap, but member states could expand coverage to include smaller employers.
- The directive applies to most workers, including part-time or fixed-term workers, managers, and individuals employed through a temporary agency. Other types of workers — such as platform and on-demand workers — could be included.
- Member states will have three years to transpose the directive into national laws, following the directive’s publication in the EU’s Official Journal.
- Gender pay gap reporting will be phased-in depending on the organization’s workforce size, and will begin in June 2027, based on the previous calendar year. Employers with 250 or more workers will have to submit their first annual gender pay gap report four years after the directive’s entry into force date (7 June 2027); employers with 150 to 249 workers must submit their report four years after the entry into force date (7 June 2027), and every three years thereafter; and employers with 100 to 149 workers must submit their report eight years after the entry into force date (7 June 2031), and every three years thereafter.
- Member states could require employers with fewer than 100 workers to report, and they should not prevent smaller employers from reporting voluntarily. Member states will have to provide technical support to help smaller employers with fewer than 250 workers comply.
- Under the directive, workers are protected from victimization by their employers.
Gender pay report
- The gender pay gap report must include information on the organization’s gender pay gap; the gender pay gap in complementary or variable components; the median gender pay gap; the proportion of female and male workers receiving complementary or variable pay components; the proportion of female and male workers in each quartile pay band; and the gender pay gap between workers by category, broken down by ordinary basic salary, and complementary or variable remuneration components.
- Pay includes — but is not limited to — salary, complementary and variable components of pay, benefits (in cash or in-kind), bonuses, overtime pay, travel facilities, housing and food allowances, compensation for attending training, severance, statutory sick pay, and occupational pensions.
- Employers must submit gender pay gap information to the designated national authority, and publish the gender pay gap report on their website, or otherwise make it available.
- The European Commission could issue updated guidance on the objective criteria to use when assessing work of equal value.
Joint pay assessment
- Employers required to submit a gender pay report may have to conduct a joint pay assessment in cooperation with their workers’ representatives, if the organization has a difference of 5% or more in average pay level between female and male workers doing the same work, or work of equal value; has not used objective and gender-neutral criteria to justify such differences; and has not remedied any unjustified difference in average pay levels within six months of submitting the annual gender pay report.
- Joint pay assessments would be aim to identify, remedy and prevent pay differences between female and male workers, and employers must remedy unjustified pay differences within a reasonable period of time. Employers must give the joint pay assessment to their workers and their representatives, and submit it to the designated national authorities.
Information about pay
- Workers will have the right to request and receive written information on their individual pay level.
- Workers can request information on pay and the average pay level, broken down by gender, for the category of employees doing the same work, or work of equal value. Employers will have to annually inform their workforce of their right to request such information, and must provide the information within a reasonable period of time.
- Employers would havemust enable workers to access the criteria (such as individual performance, skills development, and seniority) used to determine the organization’s pay levels and pay progression.
- Employers will no longer be allowed to ask job applicants for their salary history, and will have to give applicants information about the role’s initial pay level or salary and its range to job candidatesbased on objective, gender-neutral criteria, prior to the interview or signing the contract.
- Workers cannot be prevented from disclosing their pay to others for the purpose of enforcing equal pay.
Compensation and sanctions
- Workers can claim and obtain full compensation (including back pay, related bonuses or payments, payment in kind, and compensation for lost opportunities) if their equal pay rights are infringed.
- Member states must ensure that the time limit for bringing equal pay claims is at least three years and does not disadvantage a claimant.
- Employers will be ordered to stop any equal pay infringement, and could face recurring penalties for noncompliance.
- Penalties for breaches of the law must be effective, proportionate and dissuasive, and member states must ensure they are a real deterrent.
- Directive 2023/970 of 10 May 2023 (EUR-Lex, 17 May 2023)
Mercer Law & Policy resource
- EU employers face pay transparency disclosure mandates (9 March 2021)