A deeper-dive look into the draft transparency directive globally.
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EU – draft pay transparency directive
The EU Commission has issued a draft directive of Pay Transparency as part of the EU’s Gender Equality Strategy 2020-2025 and its commitment to a gender-equal Europe. The Commission views as inadequate the implementation of current measures to ensure delivery of equal pay.
The directive comprises a far-reaching set of measures to secure equal pay through (a) significantly increased pay transparency obligations for employers and (b) significantly enhanced rights for employees. It goes far beyond recent provisions of member states.
The directive means that every employer, regardless of size, will need to be confident that their pay structures and processes are delivering equal pay for the same work and work of equal value in each EU member state.
The draft directive is currently being reviewed by the European Parliament (representing EU citizens) and the European Council (representing member states). Once amended and/or approved by them, member states will have two years to transpose the directive into national law. Compliance may therefore not be required until 2024 or later.
Scope of the draft directive
Which employers: All employers in the EU in the public and private sectors. The provisions relating to pay gap disclosure and assessment only apply to employers with at least 250 workers.
Which employees: All employees and workers who have an employment contract or an employment relationship.
What pay: ‘Pay’ means ordinary basic wage or salary and any other consideration whether in cash or kind.
Pay structures: Employers should have pay structures in place to ensure women and men are paid equally for the same work or work of equal value on the basis of objective criteria including education, professional requirements, skills, effort, responsibility, work undertaken and tasks.
Employers obligations on pay transparency
Pay transparency for job seekers: 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.
Right to information for workers: Workers will have the right to request information from their employer on their individual pay level and on the average pay levels, broken down by gender, for categories of workers doing the same work or work of equal value.
Reporting on pay gaps: Employers with at least 250 workers must publish information on the pay gap between female and male workers in their organization. For internal disclosure, they should also provide information on the pay gap between female and male workers by employee category for the same work or work of equal value.
Pay assessment and action: Where pay reporting reveals a pay gap of at least 5% in any category of workers doing the same work or work of equal value and when the employer cannot justify the gap on objective gender-neutral factors, they will have to carry out a pay assessment, in cooperation with workers' representatives, with unjustified gaps remedied.
Employee rights for transparency and redress (subject to local legislation)
Compensation for workers: Workers who suffer gender pay discrimination can get compensation, including full recovery of back pay and related bonuses or payments in kind.
Burden of proof: It will be, by default, for the employer, not the worker, to prove that there was no discrimination in relation to pay.
Worker representation: Equality bodies and workers' representatives may act in legal or administrative proceedings on behalf of workers as well as lead on collective claims on equal pay
Penalties: EU member states should establish penalties and fines for violations of equal pay rules.
Other European and global developments
U.S.: a growing number of U.S. States and cities are requiring employers to provide job pay range information on recruitment and forbid pay history requests: California, Colorado, Connecticut (effective October 1, 2021), Maryland, Massachusetts (proposed), Nevada (effective October 1, 2021), Washington State, the City of Toledo and the City of Cincinnati. Reporting requirements: California and Illinois.
Canada: The new federal Pay Equity Act became effective from August 31, 2021 and will be phased in over a three-year period. The act applies to federally regulated workplaces with 10+ employees and requires equal pay for work of equal value for male and female employees. It requires employers to (a) establish a pay equity plan that examines any differences in compensation between positions of equal value that are mostly held by women and those mostly held by men; (b) eliminate differences in compensation identified in the plan; and (c) revise and update their pay equity plan at least every five years to ensure that no gaps have been reintroduced and to close gaps if they exist. These federal provisions are similar to current provincial requirements in Quebec and Ontario, for example.
Ireland: The Gender Pay Gap Information Bill 2019 which introduce Ireland’s first gender pay reporting and disclosure requirements has now been passed into law. The next step is for the implementing regulations to be published, with the key details. It is expected that the regulations will apply first to larger employers (those with 250 or more employees) from 2022 unless further time is allowed.
Israel: From June 1, 2022, employers with more than 518 employees must publish an annual report on the organization’s gender pay gaps.
Italy: A new Gender Pay Equity law is proceeding through Parliament and is expected to be published by the end of 2021. It is focused on reducing pay gaps related to gender with mandatory disclosure for companies with more than 100 employees.
Norway: The Equality and Discrimination Act was amended in 2020 to include more detailed requirements on gender equality in the workplace, including the introduction of mandatory gender equality disclosure. Companies with 50 or more employees are required, every two years, to conduct and report on an internal analysis of gender distribution and gender-based reward differences by type function and level.
South Africa: In May 2021 the government announced it was close to finalizing regulation requiring disclosure of the ratio between the lowest and the highest-paid employees.
UAE: Updated equal pay/equal value regulations that aim to strengthen the UAE’s commitment to gender equality in the workplace.
