The legislative proposal was submitted early in 2021, 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.

The principle of equal pay is laid down in Article 157 of the Treaty on the Functioning of the European Union (TFEU), but the gender pay gap persists and stands at around 13 per cent across the European Union (EU), with significant variations among member states. To decrease the gender pay gap by enforcing a high degree of transparency regarding pay within companies, the EP demands that companies with at least 50 employees (instead of 250 as originally proposed by the European Commission (EC) and defended by the Council of the EU) be required to disclose information that makes it easier for those working for the same employer to compare salaries and expose any existing gender pay gap in their organisation.

The proposal also provides that employers, in cooperation with their workers’ representatives, conduct a joint pay assessment and develop a gender action plan in case pay reporting shows a gender pay gap of at least 2.5 per cent (versus the 5 per cent proposed by the EC).

According to the proposed text by the EP, job applicants and current workers will be entitled to information about pay levels, while employers would be prohibited from asking about the current and previous pay of the job applicant.

Employers can also not prohibit workers from disclosing their pay (with for example pay secrecy or confidentiality clauses).

Moreover, members of EP re-affirmed the EC’s proposal to shift the burden of proof on pay-related issues: if a worker feels that the principle of equal pay has not been applied and takes the case to court, national legislation should oblige the employer to prove that there has been no discrimination.

The topic is very relevant and globally felt and it is important for member states and employers to start thinking in the direction proposed by the EC and implement the general principles contained therein and shared by the EP and the Council of the EU.

Business Europe, in its position paper on the proposal for a pay transparency directive in 2021, underlined that European employers agree that pay transparency can shed some light on existing pay differences and be a tool to discuss wages and the value that the individual worker contributes within the company.

If adopted, member states will have two years to implement the legislation in national law with 2024 as likely date for implementation. Although many jurisdictions will already have pay equality mechanisms in place, they will have to check that they comply with the directive. Employers should also review their non disclosure agreements (NDA) and confidentiality clauses related to pay information.