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Article | Global News Briefs

European Union: Agreement on Pay Transparency Directive

By Tamsin Sridhara and Eva Jesmiatka | January 31, 2023

Proposed EU Pay Transparency Directive clears a hurdle toward adoption, signaling to employers to start preparing for pay gap reporting requirements and delivering equal pay for equal work.
Inclusion-and-Diversity|Ukupne nagrade |Benessere integrato

Employer Action Code: Act

The European Parliament and European Union (EU) Member States’ negotiators have reached an agreement on amendments to the proposed Pay Transparency Directive, which will affect all private and public employers in the EU. The directive aims to ensure equal pay for equal work or work of equal value between men and women by giving employees extensive new rights to information about their own pay and the pay of male and female peers. Formal adoption and publication of the amended directive is expected in the first quarter of 2023. Under its terms, member states will have up to three years to transpose the requirements into local law, with another year for employers to comply, so there is at most a four-year window for employers to prepare their reward arrangements for a significantly higher level of transparency.

Key details

The main features of the Directive as initially proposed and amended include requiring:

  • Pay transparency prior to employment (including prohibitions on asking prospective workers about their pay history)
  • Transparency on pay setting (i.e., criteria used to determine pay, pay levels and pay progression)
  • Employee rights to information on their individual pay level and average pay levels for workers in the same category, broken down by gender
  • Reporting on pay gaps between male and female workers in the same category of workers as well as overall pay gaps annually for companies with 250 or more employees; every three years for companies with 150 to 249 employees; and, starting five years after transposition of the directive, every three years for companies with 100 to 149 employees (in addition, employers would need to disclose gender pay gap information by category of workers to their own employees; further public disclosure would be voluntary)
  • Joint pay assessment and action to redress where pay reporting reveals a gender pay gap of 5% or more by category of worker that can’t be justified by objective, gender-neutral factors

Employer implications

In terms of overall pay gaps, women's hourly earnings were on average 13.0% below those of men in the EU in 2020, ranging from a 0.7% gap in Luxembourg to a 22.3% gap in Latvia. Though not yet in force, employers should start preparing for the expected pay transparency requirements to ensure that their pay and benefits are ready for this level of transparency and that they are delivering equal pay. Many employers will need to carry out significant preparatory activity.


Europe Pay Equity Lead

Global Pay Equity Lead
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