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Date added: 02.09.2024

Directive on equal and transparent pay – how to prepare for the implementation of new regulations?

After implementing the directive on whistleblowers, the European Union member states must begin preparations for the implementation of regulations on transparency and equal pay. The provisions of the directive are to apply not only to public sector entities but also to private ones. This will involve not only ensuring transparency of pay in a given organization but also a number of formal and reporting obligations. Companies employing more than 150 employees should begin preparations for the implementation of new regulations in this area now, as these entities will be obliged to do so.

How big is the pay gap?

Although the equal pay regulation was introduced in the Treaty of Rome in 1957, the differences in pay still differ according to gender. According to Eurostat data, women working in the EU earn on average 12.7% less per hour than men. These figures vary between European Union countries. In 2021, the pay gap in Austria was 18.8%, in Germany it was 17.6%, in Belgium 5% and in Poland 4.5%. However, a lower percentage does not mean that the pay gap is low or almost non-existent in these countries. Low pay differences may be caused, for example, by women’s low participation in the labour market, taking up occasional work that is not registered anywhere and working part-time due to childcare. Women are also much more likely to take longer career breaks, which is why they are often overlooked in pay raise processes. It is also a fact that women hold fewer managerial positions and in the case of employment in higher positions, the difference in pay between female managers and male managers is about 23%. Changes can also be seen in terms of age. The pay gap is usually low for those starting work but deepens with age. This also translates into later retirement for women, which is about 28% lower.

What is Directive 2023/970?

Directive 2023/970 on strengthening the application of the principle of equal pay for men and women for equal work or work of equal value through pay transparency and enforcement mechanisms, as its full name reads, should be implemented into the legal system of each Member State by 7 June 2026. The aim of introducing regulations in this area is primarily to reduce the pay gap between women and men, but also to equip employees and candidates with new rights. The directive also indicates that the current regulations do not allow for a proper assessment of equal treatment of employees, because we are not dealing with sufficient transparency of pay systems.

The definition of “pay” that we can find in the directive itself should be perceived very broadly. According to the provisions, it means not only the basic salary but also “any other benefits, in cash or in kind, which employees receive directly or indirectly from their employer in connection with their employment”. This means all the components paid to employees, such as bonuses, additional benefits, travel reimbursements, and meals. Therefore, it is very important for employers to ensure that all additional components of remuneration paid to employees ensure equal treatment.

What rights for employees and obligations of employers does the directive entail?

Employers must be prepared, first and foremost, for information obligations towards employees. A new right will be the possibility of submitting a request to the employer to provide information on the level of their remuneration, as well as the average level of remuneration compared to other employees performing the same work, broken down by gender. This information may not prove the existence of a pay gap in the enterprise, but it may indicate to the employee the existence of other irregularities, such as the lack of clear criteria for pay differentiation. It is quite common for employees with long service and extensive experience to have similar pay conditions to newly employed people, especially during periods of large deficit on the labour market, when finding a specialist is difficult and employers are trying to attract new people with attractive remuneration. The employer should be ready to provide the requested information within 2 months from the date of submission of the application by the employee.

Another obligation on the part of employers is the obligation to report the levels of remuneration broken down by gender in a given organisation. If the pay gap is higher than 5%, the employer will be required to implement appropriate measures to eliminate the pay gap.

Employers will also be required to periodically prepare pay gap reports, which will be verified by the responsible state authorities. This obligation will be introduced gradually, starting from entities employing more than 150 employees (the obligation to submit the first report by 7 June 2027) to companies employing between 100 and 149 employees (the obligation to submit the first report by 7 June 2031).

In addition, when posting new job offers, employers must ensure that the advertisements are gender neutral. At the recruitment stage, they should inform the candidate about the starting salary or its range based on objective, gender-neutral criteria – provided for in relation to the given position. This information is provided in such a way as to ensure informed and transparent negotiations on remuneration, for example in the published vacancy announcement, before the interview or in another way. It should therefore be assumed that the candidate may be informed about them, e.g. during a job interview at one of the recruitment stages. However, it is important for the employer to be able to prove that the information obligation towards the candidate has been fulfilled, so as not to be exposed to negative consequences.

The directive refers only to the concept of an employee, so its provisions will not cover other forms of employment, e.g. persons employed on the basis of a contract of mandate. However, we must wait for specific solutions until the provisions are implemented into the Polish legal system.

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