Goodbye Gender Pay Gap, Hello Equal Pay

The principle of equal pay is laid down in Article 157 of the Treaty on the Functioning of the European Union. However, the gender pay gap in the EU remains and currently stands at around 14%.

On the 30^th of March, 2023, the EU Parliament formally approved the Directive ‘to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms’ (hereinafter, ‘the Directive’) with the aim of ensuring that women and men in the EU are paid equally for equal work.

The Directive focuses on two central elements:

1. Measures to ensure pay transparency

The Directive introduces various measures to ensure pay transparency, some which stand out more than others. Amongst which is the requirement that employers must now provide details about the initial pay level in the vacancy posting itself or before the interview. Vacancy postings and job titles will also need to be gender neutral. Furthermore, employers will no longer be permitted to ask applicants about their pay history and the recruitment process shall be led in a non-discriminatory manner.

Another notable measure is the right given to all employees, regardless of the size of the company, to request information from their employer on their individual pay levels and average pay levels, broken down by gender, for employees performing equal work or work of equal value.

Thirdly, employers are now required to publish information on the pay gap between male and female employees. If the report shows a gender pay gap of at least 5%, and this gap cannot be justified on basis of gender-neutral factors, employers will be required to carry out a pay assessment in cooperation with their employees’ representatives. These compliance reporting rules, as found under Chapter II of the Directive, are initially targeted at employers having at least 250 employees in any Member State. After five years from the transposition of the Directive, the threshold will be lowered to businesses having 100 or more employees in any Member State, with the reporting rules and the frequency of reporting being dependant on the size of the workforce.

2. Providing victims of pay discrimination better access to justice

Chapter III of the Directive then deals with the remedies and enforcement of the gender-based equal pay rules, which apply to all businesses operating in the EU regardless of size, origin or industry, and this in order to ensure that the basic right of ‘equal pay for equal work or work of equal value between men and women’ will, at long last, be effectively enforceable throughout the EU.

To achieve this, the Directive includes clear rules which all Member States must introduce into their national law when transposing the Directive. One of the key measures introduced by the Directive is that Member States are now required to put in place effective and proportionate penalties for employers who infringe the Directive’s rules.

Another notable measure is the possibility for an employee, who has suffered discriminatory pay treatment, to have the right to claim compensation. Financial compensation in this regard shall include full recovery of back pay and any ancillary benefits, with interest, together with compensation for lost opportunities. With this being said, the Directive also protects claimants against hostile treatment, including against dismissal. In this context, whenever an alleged victim submits facts from which it can be presumed that there exists a hint of pay discrimination, the burden of proof will immediately shift upon the employer to prove that there has been no such discrimination.

A ground-breaking introduction within this Directive is that it also recognises people who identify as non-binary, making it the first time in EU legislation history that non-binary persons have been recognised and the intersectional discrimination will become an aggravating factor. On this note, Samira Rafaela (Renew Europe, NL), of the Women’s Rights and Gender Equality Committee, said:

“My priority was to ensure the most inclusive and impactful pay transparency measures for workers. Not only do we finally have binding measures to tackle the gender pay gap, but also all citizens of the EU are empowered, recognised and protected against pay discrimination. Non-binary people have the same right to information as men and women. I’m proud that with this Directive, we have defined intersectional discrimination for the first time in European legislation and included it as aggravating circumstances when determining penalties.”

Member States will need to transpose the Directive into their national legal system within two years, as laid down in Article 31 of the Directive.

About the Author

This article has been authored by Dr Luana Agius, Junior Regulated Industries Advisor. Contact us on https://www.csbgroup.com/contact-us/ for more information.