How to prepare for the EU Equal Pay Directive: a guide for companies

Why is the Pay Transparency Directive important?

1. Transparency in starting salaries:

   • Employers will be required to state the starting salary or pay range during job interviews and in all job advertisements. This means that the employer's question about expected salary becomes irrelevant.

2. Ban on pay secrecy clauses:

   • The directive prohibits the use of confidentiality clauses that prevent employees from sharing information about their pay. Conversely, employees will gain the right to access information about the average pay for comparable positions within the company. This information must be provided anonymously.

3. Regular reporting on pay gaps:

   • Companies with 250 or more employees will have to report statistics on pay for women and men annually starting in 2027. Smaller companies with 100 to 249 employees will have this obligation once every three years, with the effective date starting in 2031. If a pay gap of more than 5% is found for any category of workers, the employer must justify this gap with objective criteria or rectify it within a six-month period. Otherwise, they will be required to conduct a so-called joint pay assessment.

4. Burden of proof on the employer:

   • If an employee provides evidence indicating unequal pay, it will be up to the employer to prove that no discrimination occurred. This includes the obligation to disclose all relevant evidence, including confidential information.

What is an equal pay audit and how does it work?

One of the key tools of the directive is the so-called equal pay audit, which should be applied in cases where a significant gender pay gap is found within a company. This audit involves a joint pay assessment, in which employee representatives and employers participate. The goal is to identify the causes of the gaps and propose measures to eliminate them.

Procedure for conducting an audit:

1. Identification of pay gaps:

   • The company must first determine whether there is a pay gap exceeding 5% for any category of workers. If so, it must either justify it or conduct an audit.

2. Assembling the audit team:

   • The audit is conducted by a team composed of employee representatives (trade unions) and the employer. It is recommended to also involve an independent expert on equal opportunities.

3. Pay analysis:

   • The team conducts an in-depth analysis of all components of remuneration, including basic salary, bonuses, allowances, and other benefits. The assessment must take into account all aspects that may justify any differences, such as experience, educational attainment, qualifications, and the complexity of the work performed.

4. Evaluation and proposal of measures:

   • If the audit reveals unreasonable differences, specific steps must be proposed to eliminate them. This may include revising the pay policy, introducing new rules for promotions, or training employees.

5. Implementation of corrective measures:

   • The employer must implement the proposed measures within six months of the audit's completion. Otherwise, they may face penalties.

How can companies prepare for the new rules?

Preparation for the new directive's entry into force should begin well in advance. Companies should take the following steps:

1. Conduct an internal pay audit:

   • Even if you are not yet required to report pay gaps, conduct an internal audit and assess whether you have any unreasonable differences. If so, propose measures to reduce these gaps.

2. Implement a transparent pay system:

   • Ensure that the criteria for pay, promotions, and bonus allocation are clear, understandable, and gender-neutral. These criteria should be accessible to all employees.

3. Train management and HR staff:

   • Prepare key employees for the new requirements. Focus on training in the areas of equal pay, gender neutrality, and transparency.

4. Communicate changes to employees:

   • Openly communicate your plans and steps towards achieving equal pay. Support from employees can increase trust in the new measures and facilitate their implementation.

5. Consider external consulting:

   • Given the new requirements for reporting and potential audits, it may be useful to engage external experts to help you set up the correct processes.

Conclusion

Implementing the Pay Transparency Directive can be a challenge for many employers, but the right approach to establishing equal opportunities and fair pay can increase employee satisfaction, attract new talent, and support the company's economic growth. Companies that prepare for the new requirements in a timely manner will gain an advantage and strengthen their market position as a fair and responsible employer.

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