Bridging the gender pay gap: EU's new Directive explained

In recent times, the gender pay gap has become a pressing issue, drawing attention from policymakers and the public alike. Despite being illegal since 1957, the wage disparity between men and women persists, with a corrected gap of 6.9% still evident in 2022 in the Netherlands. In 2023, the corrected gap even increased again to 7.4% (see results here). This persistent inequality has prompted the European Union to introduce a new directive aimed at promoting wage transparency and ensuring equal pay for equal work.

Why Address the Gender Pay Gap?

The gender pay gap poses significant risks to organizations, including reputational damage and financial liabilities. A notable example is a recent case in the UK where female employees of the retailer Next successfully challenged their pay disparity, potentially costing the company ￡30 million. Such cases underscore the urgency for businesses to address pay inequalities proactively.

EU Directive: A Step Towards Transparency

The EU's directive seeks to dismantle four major barriers that have historically hindered pay equality:

1.?????? Lack of Transparency: Without visibility into pay practices, discrimination often goes unnoticed.

2.?????? Defining Equal Work: Clarity on what constitutes equal or equivalent work is essential for enforcing equal pay.

3.?????? Procedural Barriers: Legal and financial obstacles often deter individuals from pursuing claims.

4.?????? Insufficient Enforcement: Strengthening enforcement mechanisms is crucial for accountability.

Key Measures of the Directive

The Directive imposes the obligation to Member States to introduce tools to determine equal work. In addition, the directive introduces several measures to enhance pay transparency and accountability:

·?????? Rights for Job Applicants: Employers must provide information on starting salaries based on gender-neutral criteria and cannot ask about previous salaries.

·?????? Employee Rights: Workers gain access to criteria used to determine pay and can request specific salary information, fostering transparency in pay practices.

·?????? Publication Requirements: Larger companies (starting at 100+ employees) must publish pay gap reports, with specific obligations based on company size, to highlight and address disparities.

Addressing Pay Disparities

When a gender pay gap is reported, employers must collaborate with employee representatives (for the Netherlands most likely unions or works councils) to rectify the issue. If the disparity exceeds 5% and remains unexplained within six months, a comprehensive pay evaluation with unions or works councils is mandated. This is time-consuming and potentially costly.

This should result in measures to solve the gap, for example adjustment of the company's job evaluation system based on gender-neutral criteria. Depending on the exact measures, there might be consultation obligations for the employer with for example the works council.

Empowering Employees

The directive also empowers employees, potentially supported by unions or works councils, by shifting the burden of proof in discrimination cases if the employee made it plausible that they suffered wage discrimination or when employers breached their obligations under the Directive. The Directive also ensures full compensation for affected employees. This approach alleviates the pressure on individuals to prove discrimination, fostering a more supportive environment for challenging pay inequalities.

Advice for HR Professionals

HR departments must adapt to these new requirements by implementing gender-neutral pay practices and ensuring compliance with the directive's transparency obligations. By doing so, they not only avoid legal risks but also contribute to a more equitable workplace. I am pleased to guide you through such process from legal perspective. Just leave me a note or send me an email.

In conclusion, the EU's directive on pay transparency represents a significant step towards closing the gender pay gap. By fostering transparency and accountability, it aims to create a fairer work environment for all.