In light of the recent spate of international efforts to increase pay transparency, we discuss the European Council’s (the EC) new Directive and other international updates below. There is widespread hope that a move towards heightened pay transparency will decrease the gender pay gap.
What is the Directive?
The EC has recently adopted a new Directive “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” (the Directive). This is part of an effort to decrease the gender pay gap in the EU, which currently is an average of 13%.
The Directive will increase the reporting requirements for companies in the EU to include the amount that they pay for work of equal value. It also introduces a requirement for companies to undertake measures to remedy gender pay gaps of more than 5%.
The Directive obliges companies with more than 250 employees to report their gender pay gap statistics annually. Companies with more than 150 employees must report every three years. This obligation will also be extended to companies with more than 100 employees two years post-implementation of the Directive.
Employees who are negatively impacted by pay discrimination will be entitled to compensation (including back pay and bonuses) and the burden will fall on employers to prove that such discrimination has not taken place.
When advertising new roles, employers will be obliged to state the starting salary or pay range (either in the advert or in advance of an interview). Employers will also be prohibited from asking prospective employees about their pay history. Upon starting work with a company, employees may ask to see their new employer’s data on average pay levels for work of equal value, as well as their criteria used to establish both pay and career progression. Employers will be obliged to inform workers of this right annually.
In an interesting first, the Directive also acknowledges the need for national authorities to “take due account of any situation of disadvantage arising from intersectional discrimination”. This refers to the need to acknowledge that those who face discrimination on the grounds of sex who also belong to another group that is legally protected from discrimination (racial or ethnic minority, religion or belief, disability, age or sexual orientation) may face different, and often heightened, levels of discrimination.
EU members states will have a period of three years from publication of the EU’s Official Journal to implement the Directive in their respective jurisdictions by incorporating it into national legislation.
International pay transparency
This move from the EC follows a growing international emphasis on proactive initiatives to tackle the stagnating gender pay gap.
In particular, recent developments in the US include changes in California by way of the Broad Pay Transparency Law. This law imposes mandatory inclusion of pay range listings in job adverts for companies with more than 15 employees. Additionally, employees can ask their employer to provide the pay range for their own role and employers are obliged to keep records of job title and wage history for all current employees and for three years following the end of their employment. In other parts of the US, pay transparency legislation has been passed in Colorado, Maryland, Connecticut and New York (see: Responding to the calls for equality (14 November 2022)).
The UK perspective
The calls for heightened pay transparency have also been heard in the UK. Last year saw the government launch a pilot scheme in which participating employers include salary details on job adverts and must not discuss the prospective employee’s salary history (see: Recent government pushes for equality in the workplace (22 March 2022)). Other initiatives include last year’s “End Salary History” campaign from the Recruitment and Employment Confederation and the Fawcett Society (see: The end of salary history? Addressing pay disparity in the workplace (24 May 2022)).
More recently, Liberty Hive has launched a campaign known as the “Great Salary Reset”. This calls for a law which would prohibit a prospective employer questioning a candidate on their salary history and for job adverts to include salary information. Liberty Hive’s latest data found that 57% of women said their perception of an employer was negatively impacted when they had been asked about salary history. They also found that 75% of employees would be more inclined to apply for a job if a salary range was included in the advert.
Given that the most recent reports show the median gender pay gap in the UK to be 9.4% (according to analysis by The Guardian), with 80% of employers paying men more than women (according to analysis by The Financial Times), it seems that initiatives such as those we have seen in the EU and the US may be considered necessary in order to make the UK a more equal place to work. It is likely that such transparency would be welcomed given that a recent study (from software company, beqom) concluded that 62% of employees in the UK would disclose details of their salary if it resulted in more openness and fairness.
If you have queries on any of the points raised above, please do not hesitate to get in touch with a member of the Dentons team.
