2023 Pay Equity Regulatory Update

Employer implications

These developments mean that employers must be confident they offer equal pay. This is part of being a responsible, as well as compliant, employer. It supports a company’s DEI and ESG agendas. WTW can support you all the way on pay equity and pay transparency, from building your roadmap, through the analytics and pay management improvements, to communication. We also offer a readiness health check for the EU Directive.

Common themes to equal pay regulation

1. Applicant rights on hire: the requirement for applicants to be provided with salary range information automatically or on request. Included within the draft EU Pay Transparency Directive and applying (or about to apply) in eight U.S. states and five cities, most notably New York City.
2. Employee rights to information: employee right to request information each year on the average pay for their employee group, including average pay by gender. While this right has not led to significant requests in Germany over the last five years (since its 2017 Pay Transparency Act), the new round of provisions in, for example, Israel and the draft EU Directive may lead to more employee requests because the right is coupled with increased company disclosure of pay gaps and/or reminders of this right.
3. Employer disclosure of gender pay gaps for entity: the obligation on the employer to disclose gender pay gaps on a whole-entity basis is familiar from the U.K., has been recently introduced in Ireland and Japan. It is often misunderstood as a measure of equal pay but is more a measure of equal opportunity; reducing the gap involves moving a higher proportion of female employees into senior/higher-paying roles.
4. Employee disclosure of gender pay gaps by employee group: a key new development. It is present in the new regulations in Israel and the draft EU Directive. It is important because this gap is much more a measure of equal pay. This level of transparency requires companies to be confident on equal pay and able to explain any gaps. The EU has confirmed that gaps over 5% that cannot be explained by objective reasons must be addressed.
5. Employer action plans: most of the new regulations have moved away from simply asking companies to calculate and/or disclose gaps, they are requiring employers to take action, publishing their action plans. This is the case in Canada (federally regulated employers), Spain, Ireland, Italy, Japan and the draft EU Directive.

• EU Pay Transparency Directive: updated text agreed by the European Council and Parliament in December 2022. Formal approval is expected in early 2023. Member states have up to 3 years to adopt. Companies must be ready by 2026.
• EU Minimum Wage Directive: to reduce working poverty, EU member states will be required to bring their minimum wage levels in line with prevailing market rates (target of 60% of the gross median national wage). Member states have till November 2024 to adopt.
• U.S.: pay range disclosure to applicants when posting a job is now required by the following states: California, Colorado, New York (Sept 2023), Washington, and the following cities or counties: Albany County, NY (March 2023), Ithaca, NY, Jersey City, NJ, New York City, Westchester County, NY.
• U.S.: pay range disclosure to applicants during the hiring process is required by Connecticut, Nevada and Rhode Island, and upon an applicant’s request in Maryland, Cincinnati, Ohio and Toledo, Ohio.
• U.S.: current employees have the right to request and be provided with pay range information in Connecticut, Illinois, Rhode Island and California; and the right to receive this information on promotion or transfer in Colorado, Nevada, Washington and New York (Sept 2023), as well Jersey City, NJ and all New York cities and counties.
• Australia: sweeping changes have been introduced to the Fair Work Act to restrict the use of fixed-term contracts and pay secrecy clauses; strengthen provisions on gender pay equity, anti-discrimination and sexual harassment protections; and improve access to flexible work arrangements.
• Japan: new provisions from July 2022 require employers with 301 or more employees to disclose gender pay gaps and action plans with first disclosure within 3 months of the company’s year-end following introduction of the new provisions (e.g. disclosure by end June 2023 if fiscal year ends in March 2023).
• Canada: six provinces have introduced pay equity and transparency provisions for provincial government employees; Ontario, Quebec and Newfoundland & Labrador have extended these to private companies, or plan to extend. British Colombia has just announced pay transparency requirements for all employers, effective 1 November 2023. This is in addition to the equal pay for work of equal value requirements for federally-regulated employers.
• Brazil: In March 2023, the President has announced a new bill to strengthen current equal pay legislation, including new pay transparency provisions.
• France: specific provisions of the Rixain Law on workplace equality continue to come into effect. In 2022, this included disclosure of the gender composition of senior executive staff and board members for employers with a 1000+ employees and the payment of employee salaries into accounts of their name, to strengthen the financial independence of women.
• Ireland, Israel, Italy: 2022 was the first year of mandatory gender pay gap disclosure requirements in Ireland and Israel. In Italy, the requirement to report on a range of gender equality measures and actions was extended to employers with over 50 employers with additional voluntary certification available. Certification results in lower social security contributions up to a cap.

Existing regulation

• European Banking Authority: application of updated Sound Remuneration Principles and gender-neutral pay policies, including measuring pay gaps from Jan 1, 2022.
• Markets with additional equal pay/gender pay regulations: Australia, Canada, Germany, Belgium, France, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, UAE, U.K..
• U.S. – salary history ban: 23 U.S. states have provisions forbidding employers requesting salary history.