Where the heck are we with the EU Pay Transparency Directive?!?

The fact that there is an EU Pay Transparency Directive won’t have escaped the attention of any Reward or HR people. The Directive is designed to improve the gender pay gap and ensure that employers implement fairer and more transparent pay practices.

Implementation of the Directive by member states is due by June 7th 2026. Sounds ages, but that is less than 15 months now.

So how are they getting on and is this enabling organisations with operations in the UK to plan and ensure that they are ready?

From what we are seeing, most EU member states haven’t made significant progress on transposing the EU Pay Transparency Directive into their own legislation.

A few countries have made progress. Sweden was the first country to publish draft legislation, Belgium has transposed the Directive into their legislation for some public sector workers, Poland recently published draft legislation, and Ireland just announced a bill covering two measures included in the Directive.

Spain, France, and Germany all have some kind of pay transparency legislation of their own which was previously implemented and thus will need to be adapted to meet the requirements of the Directive. Ireland has Gender Pay Gap (GPG) reporting legislation which will also need to be adapted.

As with most EU legislation, how it is translated at country level does vary. This makes the task even harder for organisations with international operations.

Let’s go back to the start and remind ourselves of the headlines:

What is the EU Pay Transparency Directive?

On 30th March 2023, a significant majority in the EU Parliament approved the new ‘EU Pay Transparency Directive’ for member states. Member states have until 2026 to implement and then organisations have 12 months to comply.

The UK is no longer an EU member and so this legislation does not apply to employees in the UK. There is no sign of any similar legislation for the UK. However, many organisations will have operations in EU countries and hence will want to have fair practices globally.

The legislation is intended to reduce the gap between male and female earnings. It should also have wider benefits to help people feel they are paid fairly.

The exact implementation method is down to Member States, so there may be some differences. However, there are some broad themes which will be examined in more detail. The themes are:

·??????? Pay level / range must be published prior to employment

·??????? Transparency on pay setting

·??????? Right to information

·??????? Reporting pay gaps between male and female workers – both on a whole organisational level, and between 'categories' of workers

·??????? Taking action, and involving unions and similar

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How long have we got – here are some deadlines

Implementation of the Directive by member states: June 7th 2026

First GPG report for those with 250+ employees: June 6th 2027, then published every year

First GPG report for those with 150-249 employees: June 6th 2027, then published every three years

First GPG report for those with 100-149 employees: June 5th 2031, then published every three years

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Pay Level/Range published prior to employment

Employers will be required to publish information about the initial pay level or range in the job advert, or at least before the interview.

Employers will not be allowed to ask prospective employees about their pay history.

Transparency on pay setting

Employers with 50 or more employees are required to make information about the criteria used to determine pay, pay levels and pay progression easily accessible. These criteria must be objective and gender neutral.

NB original plan was only for those with 250+ employees so this does capture many more employers.

Right to information

Workers will have the right to request information from their employer on their own pay and on the average pay, by gender, for categories of workers doing the same work or work of equal value. Employers must inform workers of this right annually.

Reporting pay gaps between male and female workers

From 2027 employers with 250 or more employees will need to report on their gender pay gap (GPG) every year and employers with 150-249 employees will need to publish it every three years.

From 2031 employers with 100-149 employees will need to publish their gender pay gap every three years.

Employers must also submit information on the pay gap between female and male workers in the same category of workers and provide this information to all employees.

Taking action, and involving unions and similar

Where reporting for a category of workers reveals a gender pay gap of at least 5%, and the employer cannot justify the gap on objective gender-neutral factors, they must carry out a pay assessment, in cooperation with workers' representatives, and remedy unjustified gaps.

This is similar in structure to an equal pay audit so organisations must be clear on how their roles are graded, assessed, and determined to be of equal value.

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There is already a lot to take in here so we will share our understanding of what is happening in key EU member states in another article.

Whether the regulations apply to your organisation or not, we can expect to see repercussions, and we would urge all employers to begin the pay transparency journey. ?If you have missed any of our articles on that, and how we approach this for UK only businesses not impacted by the legislation, please reach out on [email protected]

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