FAQ on the EU Pay Transparency Directive and the UK’s gender pay gap reporting regime

EU

The provisions of the EU Directive must be transposed into national law by 7 June 2026 at the latest. Although many EU countries have yet to begin this process, Sweden has already taken initial steps. In May 2023, the Swedish government initiated an investigation into how the EU Directive should be integrated into Swedish law, with the report completed the same month. This report is now under review by the government for further legislative action. Meanwhile, Germany is among the countries aiming to implement these provisions ahead of the deadline. A few months ago in the Netherlands, the former Minister of Social Affairs and Employment estimated that the legislative proposal for the implementation of the Directive could be submitted to the House of Representatives in the second half of 2024. However, this remains uncertain due to the lengthy formation of the new government and the subsequent summer recess.

UK

The EU Directive does not apply to the UK. UK employers who are in scope to report their gender pay gap have been required to collect and publish their gender pay gap figures since April 2017.

EU

The provisions apply to all employers, regardless of the size of the company. However, the number of employees affects both the start date and the frequency of the reporting duties. More on this under 6.

As the Directive is EU law, the provisions must be implemented in all EU member states and, therefore, also apply across borders.

UK

Private and voluntary sector employers with at least 250 employees at the snapshot date of 5 April each year are required to report under the Regulations. There is no ability to amalgamate companies or headcount in a group structure - each employing entity must report separately. This means that within an overall group structure those group companies that have less than the 250 employees do not need to report. However, many companies faced with this situation have chosen to report the gender pay gap of all the companies in their group.

EU

The EU Directive provides for several measures:

• Rules on how to deal with the job application process
• Individual right to information for employees
• Information duties for employers
• Reporting duties for employers
• Joint pay assessment
• Significant sanctions for employers if they violate the Directive

UK

In July 2024 the new UK government said they will introduce legislation requiring employers with more than 250 employees to publish their ethnicity and disability pay gaps. The draft Equality (Race and Disability) Bill has yet to be published and therefore at the time of writing we are not aware of the detail of the proposed legislation.

We may see changes to the gender pay gap regime in the UK. Employers may be required to publish an action plan explaining how they intend to reduce their gender pay gap. Under the existing regime, action plans are optional. The new government proposed introducing gender pay gap action plans before the general election, but since taking office we have yet to see details of what this may involve.

EU

Employers must provide job applicants with information on the starting salary or its range, for example, in job advertisements. In addition, employers are not allowed to ask applicants about their current or previous salary.

However, employees cannot be prevented from disclosing their pay for the purposes of equal pay. In particular, EU member states shall introduce measures to prohibit contractual terms that restrict employees from disclosing information about their pay.

UK

In the UK there are no rules relating to salary disclosure at the job application process. It is common for no salary to be mentioned in an advertisement and for the role to say that the salary will depend on experience.

EU

Employees can request information from the employer on the following points:

• The individual pay levels
• The average pay levels of employees who perform equal work or work of equal value, broken down by gender

Employers must also inform employees annually about this right to information and provide them with the objective and gender-neutral criteria for determining their pay. This information duty does not apply to companies with fewer than 50 employees.

UK

In the UK there is no individual right to information on pay levels to find out what a colleague earns. While the UK government did operate a pay transparency pilot scheme in 2022 involving salary details being included in job adverts and undertaking not to ask for pay details at interview, the pilot did not result in any further measures.

If an employee believes there is an equal pay issue (and not a gender pay gap issue) then they may ask their employer for information on the salary of a comparator. There is no obligation to provide this information pre-litigation.

There is Acas guidance which covers this issue. Asking your employer questions about equal pay terms and conditions. The Acas guidance advises employers to take any complaint about equal pay seriously, although employers are not legally required to respond to questions and should consider data protection issues before doing so.  

EU

Employers with at least 100 employees must report regularly on the gender pay gap:

• Companies with at least 250 employees must report annually from 7 June 2027
• Companies with 150 to 249 employees must report every 3 years from 7 June 2027
• Companies with 100 to 149 employees must report every 3 years from 7 June 2031

The reports must be made available to the employees, employee representatives and supervisory authorities and must be made public by the latter.

If there is a gender pay gap of at least 5 % in a group of employees who perform equal work or work of equal value, the reasons for this must also be analysed together with the employee representatives, and an action plan ("joint pay assessment") must be drawn up. More on this under 9.

UK

In the UK, the Regulations apply to private and voluntary sector businesses that employ 250 or more employees at the snapshot date which is 5 April each year. Separate regulations cover public sector employees in England and Wales, where the reporting date is 31 March each year.

Under the Regulations relevant employers are required to publish:

• The median and mean gender pay gap figure for pay
• The median and mean gender pay gap figure for bonuses
• The percentage proportion of men and women receiving a bonus
• The number of men and women in each quartile of their pay distribution

Publication involves uploading the information to the government’s portal. The pay gap figures are then published by the government and available to the public. Search and compare gender pay gap data - Gender pay gap service 

EU

In the event of gender-based pay discrimination, employees are entitled to compensation and damages, including back pay and, if applicable, variable remuneration. The burden of proof lies with the employer, who must prove that such gender-based pay discrimination does not exist. In addition, sanctions, including fines, may be imposed.

UK

In the UK if an in-scope employer does not comply with their reporting duties then the UK equality body, the Equality and Human Rights Commission (EHRC) would write to them with a warning notice, and advise them that they must comply or face an investigation and potentially enforcement action. If the EHRC does investigate the employer, then they will publish details of this on their website. If an organisation does not publish their gender pay gap by the annual deadline they are included in a list by the EHRC which is published online. There is no individual right of action by a worker if an employer has a high gender pay gap, or if the employer fails to take steps to reduce the pay gap. 

EU

If there is a pay gap of at least 5 % amongst a group of employees within the company who perform equal work or work of equal value and this cannot be justified by objective, gender-neutral criteria and has not been rectified within six months, employers will in future be obliged to work together with employee representatives to identify, correct and prevent discriminatory pay differences ("joint pay assessment").

The "joint pay assessment" includes:

• Analysing the proportion of employees in each group
• Information on the average pay levels and variable components
• The differences in the average pay levels between the groups
• The reasons for the pay differences based on objective and gender-neutral criteria
• The proportion of employees who have received pay increases after family leave
• Measures to eliminate differences in pay that are unjustified
• An evaluation of the effectiveness of the previous measures

These assessments must be made available to employees, employee representatives and labour inspectorates.

UK

In the UK, the legal obligation set out in the Regulations is to collect gender pay gap data and report. There is no legal obligation to take action of any kind, even if a significant pay gap is discovered. In practice most employers will take steps to reduce their pay gap, but there is no legal threshold which triggers any specific steps.

EU

Employers should take the following measures now:

• Carry out a specific survey of employee remuneration, including special remuneration components
• Evaluate the legal basis (collective bargaining agreement, works agreement, remuneration regulations, internal policies, employment contract, etc.)
• Create comparison groups to determine which employees perform equal work or work of equal value
• Examine the gender pay gap
• Adjust the remuneration structure taking into consideration the participation rights of employee representatives (works council, trade unions, ad-hoc representatives)
• Draft sample documents (e.g. information letters for employees, sample letters to supervisory authorities, sample documents for the joint pay assessment, if necessary, amend employment contracts, provide compliance training)

UK

In the UK there is no shortage of generic guidance to help employers reduce their gender pay gap. The essential first step is to tailor your approach by understanding why there is a pay gap in your organisation and then develop action plans using targeted solutions. There may be several reasons why there is a gap, each requiring different solutions. Examples of courses of action that employers may take involve:

• Include more than one woman in shortlists for recruitment and promotions
• Use skills-based assessment tasks in recruitment, rather than relying only on interviews
• Use structured interviews for recruitment and promotions
• Have diverse selection panels
• Encourage salary negotiation by showing salary ranges
• Widen the applicant pool

Further steps are set out in the government guidance Closing your gender pay gap 

Our support on this topic includes the following points, among others:

• Introducing/drafting remuneration systems
• Evaluating existing pay structures including special remuneration components and providing advice on the necessary adjustments (including evaluating existing collective bargaining agreements, works agreements or remuneration regulations)
• Defining employee groups according to equal/equivalent work
• Creating guidelines/policies for the implementation of non-discriminatory recruitment procedures
• (Sample) information letter to employees regarding criteria for determining pay/pay levels and pay trends; on individual pay levels and the formation of comparative groups
• (Sample) information letters to supervisory authorities, equality bodies and employee representatives on the gender pay gap and the proportion of employees receiving supplementary or variable components
• Drafting guidelines/policies for implementing the "joint pay assessment"
• Providing support in negotiations with works councils and collective bargaining partners, trade unions  on the introduction of remuneration systems, for example
• Legal advice with regard to the reporting requirements
• Legal advice in the event of allegations that the legal requirements have been violated
• Training measures for HR departments/decision-makers, in particular, with regard to methods on how to assess work and performance in a non-discriminatory manner.

In the UK, we have worked with employers on their gender pay gap reporting obligations since 2017. Over this period we have gained significant expertise in analysing a gender pay gap and drafting the narrative and action plan. We can assist you:

• If you choose to transpose the EU measures into UK operations, then we can explain how to do this in a UK context
• Draft your narrative to accompany your gender pay gap report
• Advise you on steps to include in an action plan 

Our CMS Pay Gap Compliance tool efficiently guides companies through the entire pay transparency process. It enables structured analysis and reporting in accordance with the EU Pay Transparency Directive and helps identify and eliminate gender-specific pay differences.

Overview of key functions:

• Importing of data: The tool enables personnel and salary data to be imported from various sources, creating a central database for analysis.
• Flexible evaluation structure: It uses customisable evaluation logic that can be adapted to the specific requirements of the company and the provisions of the EU Pay Transparency Directive.
• Formation of comparison groups: Based on job evaluations, comparison groups are automatically formed to ensure that the same or equivalent activities are compared with each other.
• Analysis of differences in pay: The tool analyses gender-specific pay differences within each comparison group for each remuneration component and presents them clearly.
• Recommended courses of action: It identifies areas where action is needed and presents simulations of possible changes to evaluate the impact of adjustment measures.
• Automated reporting: For the legally prescribed information and reporting obligations, the tool automatically generates comprehensive reports that can be updated and shared at any time.

With these functions, CMS Pay Gap Compliance supports companies in efficiently implementing the requirements of the EU Pay Transparency Directive and ensuring a fair pay structure.