EVA JESMIATKA: Hello, and thank you for joining us in the first video of our series, providing pay clarity and visibility. My name is Eva Jesmiatka, and I'm joined today by my colleague, Tamsin Sridhara. In today's video, we're going to talk about EU Pay Transparency Directive. And what we're planning to do is to provide you with an overview of the key provisions, anticipated timelines, but we're also going to cover some frequently asked questions that we're getting from companies.
Before we dive in, maybe helpful to provide a bit of an overview of the EU Pay Transparency Directive, the why, and maybe also where we reach to. So, Tamsin, can I ask you to maybe cover that to begin with?
TAMSIN SRIDHARA: Yeah. I think it's important to understand the why. So the Pay Transparency Directive sits within a suite of measures being introduced by the EU, all aimed at supporting gender equality, and this is in line with an EU strategy that's running from 2020 to 2025 focused on gender equality. So equal pay is a core part of that, because the EU, backed up by their own research, have clearly shown that over the last 70 years, the Equal Pay legislation has not been delivering equal pay. And they are looking to employers to do more, and the lever that they're using is greater pay transparency.
EVA JESMIATKA: Thank you. That's very helpful. And where we are today. So the Pay Transparency Directive was, in essence, first introduced to us about two years ago when the European Commission started to look into this. And it was last December when, actually, the commission reached agreement on the final text, which is the one that we're working with today. And what we're seeing in the directive is that the directive is very much focused on transparency and enforcement as key levers.
And, Tamsin, can you maybe provide a bit more information of what's in there, being it more from a summary perspective?
TAMSIN SRIDHARA: Yes, because we're going to cover it in more detail in later series, aren't we, Eva. So let's just start with the transparency. There are four key provisions. So the first provision is about giving more information to applicants during the hiring process about the rate or pay range. The next three measures all relate to current employees. So it's giving them more information about how pay is set and how pay progresses through their career.
The second is employees having the right each year to be provided with information on average pay rates within their peers, and the third is employees having access to more granular information on pay gaps each year. So that's pay transparency. When we then look at enforcement, the directive is providing that member states should arrange for the burden of proof to shift onto the employer. Secondly, that employee should have the right for restitution, and that would include back pay.
Thirdly, to the extent that there are any limitations about when employees can claim, that those limitations don't impact an employee when they couldn't reasonably have known that there was an infringement. And then, fourthly, that member states can introduce penalties that are proportionate and reasonable on employers.
EVA JESMIATKA: That's very clear and quite a big step change, of course, for companies that need to comply with this. I'm sure that a lot of people who are watching this video, they probably have a lot of questions, but maybe the first one that often comes to mind is, who will the directive apply to, and which companies will need to comply with this?
TAMSIN SRIDHARA: Thanks, Eva. Really important question. So the EU directive applies to all employers across the EU, whether they're in the private sector or the public sector. There are only certain provisions that have a threshold in terms of employees. Those are the more granular provisions about pay gaps, and the threshold is then a hundred employees. However, every employee across the EU must be familiar with these regulations and must be thinking about getting ready.
EVA JESMIATKA: Perfect. And then the natural next question would be, especially for those who are watching from the UK-- the UK, no longer part of the EU-- will the directive apply to UK companies as well?
TAMSIN SRIDHARA: Well, the way that directive works is that every EU member state has to transpose it into local law. As the UK is no longer a member, it doesn't have that obligation. However, for UK employers that operate both in the UK and across Europe, the obvious question is, is it going to be acceptable for employees in the EU and the UK to have access to different information about their pay? And we're already seeing our clients start to discuss that.
EVA JESMIATKA: And do we already know whether the provisions will be consistent across all EU member states?
TAMSIN SRIDHARA: Eva, you and I both wish they were, don't we? However, it is for member states to adopt into their own regulation, and some of those countries already have existing regulations. So it's unclear at the moment whether they'll start with a clean sheet of paper, or they'll put them on top. Certainly, WTW, you and I, we will be lobbying for member states to adopt them as consistently as possible to support employers who operate across multiple markets, but we wait to see you on that.
EVA JESMIATKA: Yeah. And you started to touch on another very important point and a topic that we have lots of questions about. What are the anticipated timelines for all of this to become effective? And what we know now is that we have a final text that the commission and the parliament have agreed on. What we also see in that text is that member states will have up to three years to transpose the directive international law, and then the expectation is that companies will have up to a year before they really need to comply.
So if we summarize that, we will realistically be looking at timelines of up to a maximum of four years from where we are to date, but it could also be that some member states might move sooner than that.
TAMSIN SRIDHARA: Yeah. I think we would recommend everybody be ready for 2026. You don't not want to be ready by then. And we've seen with companies we've helped, sometimes it can take more than three years, so I think our encouragement would be for no employer to be complacent about this, that you're starting to get ready from now.
EVA JESMIATKA: Yeah. Yeah. Thank you, Tamsin. That was really helpful. Hopefully, a helpful summary of the EU Pay Transparency Directive. Join us in our next videos as well, during which we're going to go into more details of each of the provisions, and in our next video, we're actually going to focus on the implications of the directive for both applicants and employees. So we hope to see you then.
