EU transparency directive moves forward, more employers address pay gaps

EU transparency directive moves forward, more employers address pay gaps

Author: Jill Barth

The widely awaited EU Pay Transparency Directive marks a significant stride in combating the gender pay gap throughout Europe, and employers are preparing for upcoming reporting deadlines. Experts say HR leaders serving global workforces must understand this legislation geared toward ensuring gender equality in compensation.

Traditionally, the burden of establishing pay discrimination rested on the employee, but Zurich-based reward consultant Rachel Gibbs says the EU directive amounts to an “enormous change,” putting the onus of proof on employers. Now, HR leaders will be more responsible than ever for helping demonstrate compliance.

Even organizations that don’t employ workers in the EU are cautioned to pay attention, as some experts believe this legislation will serve as a framework for other parts of the world. Christine Hendrickson, vice president of strategic initiatives at workplace equity platform Syndio, says that the directive will impact the rest of the world: “Laws do move the needle over time.”

Background of the EU Pay Transparency Directive

In April 2023, the European Council finalized the directive, requiring organizations with over 250 employees to submit an annual report detailing gender pay differentials. If this report exposes a pay gap exceeding 5% that can’t be justified by “objective, gender-neutral criteria,” companies will be penalized.

According to the directive, individuals subjected to gender-based pay discrimination are entitled to compensation, encompassing full reimbursement of withheld wages, bonuses or non-monetary benefits.

The gender pay gap currently hovers at approximately 13%, on average, across the EU, according to the European Council, and the absence of pay transparency is a significant barrier to righting this inequity.

Chris Martin, research economist at Syndio, gets more precise with a reminder that the gender pay gap varies throughout Europe. “In Luxembourg, women earn just as much as men do on average, though women earn less in all other European nations,” writes Martin. He found that pay disparities vary from 3.6% in Romania and 3.8% in Slovenia at the lower end to as much as 20.5% in Estonia and 28.9% in Belarus at the higher end.

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