The EU Pay Transparency Directive (2023/970) [1] was published in the Official Journal of the EU on 17 May 2023 (the "Directive"). It comes into force on 7 June 2023.
Designed to promote equality and fairness in the workplace, the Directive introduces measures aimed at reducing the pay gap between men and women and improving the transparency of pay within the Member States.
1. Aim of the directive
The Directive aims to guarantee equal pay for equal work within the EU. It recognises that pay differentials persist between women and men, undermining the principle of equal pay for equal work or work of equal value. Accordingly, the Directive promotes a fairer and more inclusive working environment, in which employees are valued on the basis of their skills and contribution.
Employees, particularly women, should benefit from the changes introduced by the Directive. Greater transparency will enable them to assert their right to equal pay, challenge discriminatory practices and seek redress for any pay disparity suffered.
2. Implications for employers
The Directive applies to all employers, both in the public and private sectors, and covers all employees, civil servants and even job applicants.
It requires employers to take a proactive approach to reviewing their pay structures, carrying out gender pay audits and promoting transparency in pay policies.
The main provisions of the Directive are:
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Pay transparency obligation: to promote greater transparency, employers will have to disclose information to employees about pay levels, pay progression and pay structures, which will enable employees to determine whether they are being paid fairly. Job applicants will have the right to be told the pay or pay range for the vacancy, and employers will no longer be able to ask candidates about their pay history in their current or previous roles.
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Right to information: employees will have the right to request information about average pay levels for categories of workers performing similar work. The aim of this provision is to give employees the means to address pay differentials and enter into discussions with their employer with a view to remedying them. Clauses preventing employees from disclosing information about their remuneration will be prohibited.
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Pay comparison: employers will have to establish objective criteria for assessing pay, taking account of the tasks, responsibilities and requirements of the role. Gender-neutral job classification systems must be implemented in order to eliminate discriminatory practices.
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Gender pay gap reporting: companies with 100 or more employees will have to report on the pay gap between men and women, including within categories of workers. The relevant competent authorities will be able to request further clarifications.
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Mandatory corrective measures: if an employer’s gender pay gap is 5% or more, the employer will have to carry out a joint pay assessment if they have not justified the difference on the basis of objective, gender-neutral criteria and they do not remedy the unjustified gap within six months.
- Remedies and sanctions: the Directive provides for remedies to compensate employees who suffer a pay gap, along with sanctions designed to ensure compliance. These measures include a reversal of the burden of proof in favour of the injured party, penalties for employers who fail to comply with the legislation and legal protection for employees against retaliation.
Luxembourg must implement the Directive into national law within three years, that is, by 7 June 2026. However, we encourage employers to start preparing now for the significant changes which the new rules will introduce.
[1] Directive (EU) 2023/970 of the European Parliament and of the Council of 10 May 2023 to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms.
