Vulcan Insight

Commission proposes new Directive on pay transparency

12 March 2021

“Equal work deserves equal pay. And for equal pay, you need transparency. Women must know whether their employers treat them fairly. And when this is not the case, they must have the power to fight back and get what they deserve.”

These were the words of European Commission President, Ursula von der Leyen when the European Commission presented a proposal on pay transparency last week. The legislative proposal focuses on two core elements of equal pay, firstly measures to ensure pay transparency for workers and employers, and secondly, better access to justice for victims of pay discrimination.

It hopes to address the fact that despite the fundamental right to equal pay for the same work or work of equal value being enshrined in EU law for more than 60 years, discrimination persists. The gender pay gap accumulates to 14% in the European Union overall.

Even when the ‘statistically explained’ part of the gender pay gap is controlled for (i.e. differences in average characteristics like sector of activity, age, occupation, full vs. part time status) the ‘statistically unexplained’ part, which examines financial returns between men and women with identical characteristics, accounts for 2/3 of the gender pay gap in Member States.

Oftentimes, women may not know they are earning less than their male colleagues for the same work and that is what this Directive seeks to address. Transparency therefore is key. Under the proposal:

  • Employers will have to provide information about the initial pay level or its range in the job vacancy notice or before the job interview.
  • Employers will not be allowed to ask prospective workers about their pay history.
  • Workers will have the right to request information from their employer on their individual pay level and on average pay levels broken down by sex, for categories of workers doing the same work or work of equal value.
  • Employers will at least 250 employees will be obliged to publish information on the pay gap between male and female workers in their organisation.
  • Where pay reporting reveals a gender pay gap of at least 5% and when the employer cannot justify the gap on objective gender neutral factors, employers will have to carry out a pay assessment in cooperation with workers’ representatives.
  • Workers who suffer gender pay discrimination will be able to get compensation, including full recovery of back pay and related bonuses or payments in kind.
  • The burden of proof to show there was no discrimination in relation to pay will fall on the employer.
  • Member States will be asked to establish specific penalties for infringements of the equal pay rule including a minimum level of fines.

The proposal will now go to the European Parliament and Council for approval and then once adopted, Member States will have two years to transpose the Directive into national law. The Commission will carry out an evaluation of the proposed Directive after eight years.