The aim of the European Commission’s 2021 proposal for a directive on pay transparency is to ensure that women and men in the EU get equal pay for equal work. By highlighting possible gender bias in pay systems and job grading that does not value the work of women and men equally and in a gender-neutral way, pay transparency enables workers to detect and prove discrimination based on sex. It can also raise employers’ awareness of the issue and help them to identify (often unintentional) discriminatory gender-based pay differences. The legislative proposal focuses on two core elements of equal pay: measures to ensure pay transparency for workers and employers, and measures to ensure better access to justice for victims of pay discrimination.
- European Commission: Proposal for a directive of the European Parliament and of the Council to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms
Background and status
In March 2014, the Commission published a recommendation on strengthening the principle of equal pay between men and women through transparency. Member States encouraged employers and social partners to adopt transparency policies based on one or more of three instruments: the right of employees to obtain information on pay levels, reporting on pay and pay audits.
- European Commission: Commission Recommendation of 7 March 2014 on strengthening the principle of equal pay between men and women through transparency
The most recent EU strategy on gender equality covers all sources of gender inequality and violence against women. It establishes the principle of the ‘inclusion of a gender perspective in all EU policies and processes’. Some measures relate specifically to reducing the gender pay gap through a proposal for a directive on pay transparency.
- European Commission: A union of equality: Gender equality strategy 2020–2025
Moves towards a directive on pay transparency
As the non-binding text of March 2014 had little effect, the Commission decided to ‘strengthen the rights of employees to get more information about pay levels’ without placing an excessive burden on companies. After consulting the social partners, the Commission launched a proposal for a directive that ‘aims at laying down minimum requirements strengthening the application of the principle of equal pay between men and women and the prohibition of discrimination on grounds of sex through pay transparency and reinforced enforcement mechanisms’. This directive would apply to both the private and public sectors and to all workers who have an employment contract or employment relationship. It would include several measures, such as a right of workers to request information ‘on their individual pay level and on the average pay levels, broken down by sex, for categories of workers doing the same work or work of equal value’. Companies with at least 250 employees would have to publish a report on data relating to the gender pay gap, based on seven criteria. Furthermore, a joint pay assessment would have to be performed in conjunction with employee representatives where the pay gap ratio showed a difference in average pay of at least 5% between female and male workers, across all categories of workers. The proposal may be adopted in 2022.
The general aspiration is that this directive will make the right to equal pay more effective and more universally applied. Even though this right already appears in the 1957 treaties of Rome and has been reaffirmed by gender equality directives, notably the 2006 Directive of Equal Pay, it continues to be ineffective. The Commission’s proposal, which identifies pay transparency as a key means of reducing this pay gap, clarifies:
Pay transparency is thus an essential tool for dispelling doubts on equal pay between men and women and for supporting the elimination of gender bias in pay practices. It can also foster change in attitudes towards women’s pay by raising awareness and stimulating debate around the reasons for structural gender pay differences.
Social partner reactions
The employers’ organisation BusinessEurope says that it is ready to accept ‘reasonable requirements on pay transparency’.  However, it emphasises that the proposals must (1) respect national social partners’ competences for wage setting; (2) allow pay to be determined according to individual performance; (3) fully respect the confidentiality of individual pay; (4) not complicate human resources management with excessive administrative burdens; and (5) not open the way to undue litigation. The view of the European Trade Union Confederation (ETUC) is that the proposal ‘contains many good principles but is let down by inadequate tools to make it work in practice’.  In particular, ETUC criticises (1) the threshold of 250 employees, considering it too high; (2) the fact that employers are left to decide which jobs are comparable when it comes to equal pay for work of equal value; and (3) the references throughout the text to ‘workers’ representatives’ only, rather than to ‘trade unions’.
Eurofound’s 2018 report reviews experiences in Austria, Denmark, Finland and Sweden, based on their company-level gender pay reports and audits. In addition, it has published a working paper that investigates three types of gender pay transparency measures that 13 EU Member States and the United Kingdom have put in place: the right to obtain information, gender pay reports and pay audits. Based on national research and 124 interview-based observations with management and employee representatives, the study aims to assess the costs of these instruments, whether the interviewed actors associated benefits with them, and the kinds of benefits identified.
- Publication: Pay transparency in Europe: First experiences with gender pay reports and audits in four Member States
- Publication: Measures to promote gender pay transparency in companies: How much do they cost and what are their benefits and opportunities?