EU Pay Transparency Directive

Navigating the New EU Pay Transparency Directive

In April 2023, the European Union took a significant step towards promoting equal pay with the publication of the Pay Transparency Directive. Here's a breakdown of the key provisions and what they mean for employers and employees across the EU:

1. Transparency and right to Information:

   • Employees and prospective employees have the right to request and receive information on average pay levels, broken down by sex, for categories of employees doing the same work or work of equal value and the criteria used to determine pay and career progression, which must be objective and gender-neutral.

   • Employers are mandated to inform all workers annually about their right to access this information.

2. Pay transparency in recruitment:

   • During the hiring process, employers must disclose the pay range for the position and are prohibited from asking about the candidate's previous salary, ensuring the process remains free from gender bias.

3. Reporting and pay assessments:

   • Companies with more than 250 employees will be required to report annually on the gender pay gap in their organisation to the relevant national authority.

   • For smaller organisations the reporting obligation will take place every three years. Organisations with less than 100 employees won't have any reporting obligation and will remain voluntary.

   • If reports show a gender pay gap of at least 5% that cannot be justified by objective criteria and remains unaddressed for six months, a joint pay assessment with worker representatives is mandated.

4. Prohibitions and obligations:

   • Contractual clauses that restrict employees from discussing their pay are forbidden, promoting a culture of openness.

   • Employers must establish systems for handling pay information requests efficiently and transparently.

The Directive took effect upon its publication in the EU Official Journal in April 2023, with member states given a three-year period to incorporate it into national law. The deadline for transposition is 7 June 2026. 

Proactive Steps for Compliance:

While we await further details on Cyprus’s approach to transposing the directive, these steps can help your organization prepare for upcoming changes and demonstrate leadership in pay equity.

1. Conduct a detailed review of pay practices to identify any gender-related disparities and rectify them as needed.

2. Update and maintain a job architecture that accurately reflects each role's responsibilities and requirements, based on objective criteria. This will lay the groundwork for a transparent and fair pay system.

3. Review policies related to recruitment, performance management, promotions, and compensation to ensure they are fair and unbiased. Enhancing these policies can promote a culture of equity and attract and retain top talent.

4. Provide training to raise awareness among managers and HR personnel. This training will help ensure that these practices are implemented effectively and contribute to a workplace culture that supports equal opportunities for everyone.

For more detailed guidance on navigating these changes or for legal consultation, do not hesitate to contact us at info@2e-law.com