Most of you have probably heard about EU’s new pay transparency directive, but what does it actually mean for employers, job seekers and employees? In this article, we have compiled the most important points related to the directive, which will come into force on national legislation level in 2026 at the latest. You can find more detailed information on the subject here.
What is it about?
The European Parliament has approved new pay transparency rules in March 2023. The decision is based on the implementation of the principle of equal pay between men and women by increasing openness and transparency in pay. In EU, women earned 13% less than men on average in 2021. In Finland, the pay gap was up to 16,5%. Although the pay transparency directive alone does not eliminate the gender pay gap, it is a step in the right direction.
Regular reporting on salary differences
Employers who employ at least 100 people must report and publish the pay gap divided by gender at least once every three years. Companies with more than 250 employees must report wage differences once a year.
If the pay report reveals more than 5% salary differences that cannot be explained objectively, the employer must carry out a salary review and reassessment together with the employees’ representatives. In front of the court, the employer has the burden of proof, i.e. it is their responsibility to show that the wage levels have been defined with objective criteria without discrimination.
Pay transparency encourages (and in part forces) employers to take an increasingly active role in diminishing pay gaps between women and men, as employers must constantly review their own operations. In this way, even small inequalities are noticed more quickly and can be addressed. Promoting an inclusive and fair culture in the workplace is of course an advantage for the employer also in terms of building the employer’s image. Employers’ contribution is important in creating a more equal society.
Pay revealed even before the job interview
The pay transparency directive stipulates that employers must in the future announce the salary level or at least the salary range for the position before the job interview. Therefore, the salary is more likely to appear already in the job announcement. In addition, the employer may not ask the job seeker about their previous salary.
This is a good reform, especially for students, because it is often difficult for students to define their salary expectations when they have not had time to accumulate much previous work experience. Therefore they will not immediately fall behind more demanding and experienced wage negotiators. With pay transparency, it is also easier for job seekers to make informed decisions regarding potential employers, when the salary is not always just “competitive” until salary negotiations.
In the future, the language used in job announcements must be gender-neutral, for example with regard to titles, and recruitment must be carried out without discrimination of any kind.
Increase pay transparency within the work place
Employees have the right to receive information about their own pay level and the pay level of colleagues doing work of equal value, divided by gender. This applies to companies of all sizes. Information about the salary of individual persons is not given, but the employer may not prevent the employee from disclosing his salary, for example by contractual terms.
The employee is entitled to compensation if wage discrimination occurs and this has caused damage to the employee.
Equality is one of the most important values in working life, also according to students. Learn more.