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Pay transparency directive approved by the European Parliament

The European Parliament's approval of the EU pay transparency directive on 30 March 2023 represents a significant development in the EU's efforts to promote wage equality and combat the persistent gender pay gap. The directive is a legal instrument that seeks to promote wage transparency and address the persistent gender pay gap that currently stands at an average of 13% in the EU.

Under the directive, companies with at least 250 employees will be obliged to disclose information on the pay gap between female and male workers annually, while employers with 149 to 249 workers shall only fulfil this transparency obligation every three years. The obligation threshold will gradually decrease over time. If the disclosure reveals a gender pay gap of 5% or more and the employer cannot provide an objective and gender-neutral justification for it, they will have to conduct a joint pay assessment with the participation of workers’ representatives. In addition, the directive prohibits companies from asking job applicants about their previous salary, which can perpetuate pay disparities from previous jobs. Pay secrecy will be prohibited, and workers and their representatives will have the right to receive clear and complete information on individual and average pay levels, broken down by gender. For the first time, intersectional discrimination and the rights of non-binary persons are also included in the scope of the new rules.

The directive provides measures for better access to justice for pay discrimination victims. It requires Member States to allow workers who suffered gender-based pay discrimination to claim compensation, with full recovery of back pay and bonuses. The burden of proof will shift from the worker to the employer in cases of pay-related issues, requiring the employer to prove that there has been no discrimination, and Member States can establish fines and penalties for violators. Equality bodies and workers' representatives may act on behalf of workers, with collective actions on equal pay.

The directive also reflects the EU's commitment to promoting fairness and social justice and is part of a wider range of measures designed to address gender inequalities in the workplace. While some critics have raised concerns about the administrative burden that the new law will place on companies, the potential benefits of achieving greater wage transparency and promoting gender equality make the EU pay transparency directive a positive development for the EU and its citizens.

The EU pay transparency directive is an important step towards achieving gender equality in the workplace, as it provides greater transparency and accountability around pay practices. By requiring companies to disclose information about their pay structures, the directive aims to promote wage equality and help reduce the gender pay gap in the EU.

The directive is awaiting Council approval and will be in effect 20 days after its publication in the Official Journal, with a 3-year period for transposition into national law.