The European Commission recently published a new directive to ensure equal pay for men and women across the EU. This directive is a new measure to address gender inequality in the workforce. The goal of the new directive is to help close the gender pay gap, which is still large in many EU countries.
What is the Pay Transparency Directive?
The European Commission released the pay transparency directive in April 2021 to narrow the EU gender pay gap that is currently around 14%. The directive aims to close the gender pay gap and provide better salary transparency across the EU.
Who is Affected by the Directive?
The directive requires companies with at least 250 employees to report on their gender pay gap and perform pay assessments if the gap exceeds 5%. Companies must also publish salary data for employees, to identify any gender pay gaps within the company. The directive also requires companies to take action to close any gender pay gap that is identified. Companies will have three years to close the gap or face possible sanctions from the European Commission. The new directive is expected to impact companies across the EU significantly, with estimated costs to companies of €2.7 billion annually.
How will the Directive Impact Businesses?
New rules will give jobseekers the right to information about the pay range and criteria of positions they apply for, and data to check whether women and men are paid equally for the same work or work of equal value. This is expected to have an impact on HR policies and practices going forward. Here are some key points for businesses to consider related to the new directive:
- The directive will require businesses to ensure that men and women are paid equally for work of equal value. This includes considering factors such as experience, qualifications, and skills
- Businesses will need to put in place systems and processes to assess whether there are any disparities in pay between men and women
- If businesses are found to be in breach of the directive, they could face significant financial penalties
- The directive will impact HR policies, so it is important to prepare for the new changes now
The directive will likely face opposition from some member states, particularly those with large gender pay gaps. However, it is expected to be approved by the European Parliament and go into effect in 2024. EU countries are encouraged to create gender pay equity laws specific to their country and support the directive, as it is a positive step forward for gender equality in the workplace. Parliament is also looking at pay discrimination on the basis of race, class and gender, including non-binary people into the new directive scope.
The Pay Transparency Directive will be enforced beginning in 2024, so there is still time for the European Commission to update recommendations before companies must begin reporting. If you need global HR support or would like to learn more about the new pay transparency directive, visit Global People Strategist