EU adopts rules for tougher penalties over pay discrimination

Large firms will have to report annually on gender pay gap

The EU has adopted new rules to combat pay discrimination and help close the gender pay gap, which will require companies to publish information on how much they pay men and women, and take action if the gap exceeds 5% for work of equal value.

The pay transparency directive was adopted by the EC Council this week. It also includes provisions on compensation for victims of pay discrimination and penalties, including fines, for employers that break the rules.

Under the directive, companies with more than 250 employees will be required to report annually on their gender pay gap to the relevant national authority. Smaller organisations, initially those with over 150 employees, will have to report the figures every three years.

If these reports reveal a pay gap of more than 5% that cannot be justified by “objective, gender-neutral criteria”, companies will be required to take action through a joint pay assessment carried out in cooperation with workers’ representatives.

The new directive also paves the way for access to justice for workers who have suffered gender pay discrimination. They will be entitled to receive compensation, including full recovery of back pay and related bonuses or payments in kind.

And the burden of proof in such circumstances will now move from employee to employers.

“While the burden of proof in pay discrimination cases has traditionally fallen on the employee, it will now be up to the employer to prove that they have not violated EU rules on equal pay and pay transparency,” said the EU.

“Penalties for violations must be effective, proportionate and dissuasive and will include fines,” it added.

The rules will also make it compulsory for employers to inform job seekers about the starting salary or pay range of advertised positions, whether in the vacancy notice or ahead of any interview. Employers will be prevented from asking candidates about their pay history.

Once employed, workers will be entitled to ask their employers for information about average pay levels, broken down by gender, for categories of employees doing the same work or work of equal value. They will also have access to the criteria used to determine pay and career progression, which must be objective and gender neutral.

And the directive broadens the scope of employees entitled to fair pay. For the first time, intersectional discrimination, which combines multiple forms of inequality such as gender, ethnicity or sexuality, has been included in EU rules. The directive also contains provisions ensuring that the needs of workers with disabilities are taken into account.

The pay transparency directive will come into force upon publication in the EU’s Official Journal. EU countries will then have up to three years to transpose the directive by adapting their national legislation to take account of the new rules.

Two years after the transposition deadline, the requirement to report gender pay information every three years will be extended to companies employing over 100 workers.

The EU said the right to equal pay between women and men for equal work or work of equal value is enshrined in Article 157 TFEU and in Directive 2006/54/EC on equal pay. But it said that implementation and enforcement of this principle has long been “challenging”.

“This is in part because pay discrimination often goes undetected due to a lack of pay transparency, meaning that victims are prevented from bringing claims,” it said.

Gender pay transparency was therefore included as a key priority in the EU Gender Equality Strategy 2020-2025. The EC said this issue needs to be addressed because women in the EU earn on average 13% less than their male counterparts. It added the gender pay gap has largely stagnated over the last decade.

“While a number of factors contribute to this difference, pay discrimination has been identified as one of the key obstacles to achieving gender pay equality. Unequal pay puts women at greater risk of poverty and contributes to the EU’s pension pay gap, which in 2018 stood at around 30%,” it said.

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