As part of our summer 2024 employment trends series, we look at recent developments in pay transparency and equity.
EU Pay Transparency Directive
As part of our summer 2024 employment trends series, we look at recent developments in pay transparency and equity.
The EU is poised to enhance pay transparency through the EU Pay Transparency Directive, which member states must implement into their own law by June 2026. The Directive aims to address gender pay disparities and promote a more equitable workplace by introducing several key measures:
- Right to request pay information: employees will have the right to request information on pay levels, broken down by gender, for categories of workers doing the same work or work of equal value.
- Prohibition on salary history inquiries: employers will be prohibited from inquiring about prospective employees’ salary history during the recruitment process, a move designed to prevent the perpetuation of historical pay inequalities.
- Enhanced pay gap reporting: there will be an obligation for employers to provide more detailed reports on potential pay gaps within their organisation. This includes the requirement for a joint pay assessment, conducted by the employer in cooperation with workers’ representatives. The employer must accompany the assessment with appropriate action where a gender pay gap of at least 5% is identified and cannot be justified by objective gender-neutral factors.
UK pilot scheme for pay transparency
The UK government initiated a pilot scheme in 2022 where participating employers were encouraged to include salary details in job adverts and refrain from asking about salary history. This pilot was designed to test the waters for potential legislative changes. In May 2024, the UK government announced it was “pausing” the pilot to learn from the experiences of other countries that have taken similar measures.
Ethnicity/disability pay gap reporting
While the previous UK government acknowledged the value of ethnicity pay gap reporting in the past, it stopped short of making it mandatory, as detailed in the “Inclusive Britain” report from March 2022. However, the Labour Party’s pre-election Plan to Make Work Pay included a commitment to introduce mandatory ethnicity and disability pay gap reporting and the King’s Speech promised an Equality (Race and Disability) Bill. As well as making ethnicity and disability pay gap reporting mandatory for employers with 250 or more employees, this Bill will also create a “full right” to equal pay for ethnic minorities and disabled people. The government plans to publish the Bill in draft form for consultation.
