The European Parliament has endorsed a directive on pay transparency aimed at reducing pay disparities between women and men and obliging employers to ensure greater transparency in remuneration. Companies employing at least 100 employees will be required to disclose pay information in a way that allows for gender-based comparisons. If the gender pay gap exceeds 5%, employers will be required to implement corrective action plans in cooperation with trade unions.

End of pay secrecy

The new regulations will allow employees to request clear and comprehensive information on pay levels broken down by gender. Pay secrecy will be prohibited—employers will no longer be allowed to contractually bind employees to keep their salaries confidential or restrict access to information about the pay of other employees in the same or a comparable category. Employers will also be required to provide information on the proposed pay for a given position.

Penalties for non-compliance

Member States will be required to introduce sanctions, such as fines, for employers who violate the rules. Employees who suffer harm as a result of such violations will be entitled to seek compensation.

Shift of the burden of proof

In disputes concerning pay, the burden of proof will shift from the employee to the employer. This means that if an employee believes that the principle of equal pay has not been applied and brings the case to court, the employer will have to prove the absence of discrimination.

When will the new rules enter into force?

The directive must now be approved by the Council. It will then be signed and published in the Official Journal of the European Union. The new regulations will enter into force 20 days after publication, and Member States will have three years to transpose them into national law.

Author: Agnieszka Orłowska (Managing Director at ESG Institute)

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