Close the Gap – How the Pay Transparency Directive impacts HR work

Published on 03 April 2024

Although the principle of equal pay for women and men for equal work or work of equal value has been enshrined in legislation for decades, the gender pay gap is shrinking only slowly. The purpose of the Pay Transparency Directive (EU) 2023/970 is to achieve equal pay more quickly, entailing significant legal changes for day-to-day HR work.

The Member States must transpose the Pay Transparency Directive into national law by 2026. However, employers should not sit back and wait, but instead prepare for the new legal situation now to avoid difficulties later.

The directive includes the following key elements:

• Workers have a right to information on the average pay levels for workers performing the same work as them or work of equal value to theirs, broken down by sex. Employers must respond to such requests for information within two months from the date on which the request is made. Moreover, employers must provide workers with information on the criteria that are used to determine workers’ pay and pay progression. Those criteria must be objective and gender neutral.  
  ⇒    Employers must prepare an analysis of pay to comply with the right to information.
• Employers will have to submit pay reporting on the gender pay gap in their organisation to the competent national authority. Pay reporting must include, inter alia, information on differences in pay between women and men by categories of workers performing equal work or work of equal value, broken down by basic wage or salary and complementary or variable components. This can reveal potential gender pay gaps in the organisation.
   ⇒   Employers must prepare for data collection as the basis of pay reporting.
• If there is an objectively unjustified difference of at least 5% in the average pay levels for any category of workers, the employer must remedy it within six months. If the employer fails to do so, they must carry out a joint pay assessment in cooperation with workers’ representatives in order to identify and remedy unjustified differences in pay.
  ⇒    As the gender pay gap in Austria is currently 12.4% on average, it is likely that many employers will identify a difference of at least 5%.

Therefore, employers should review their pay systems without delay, especially as regards wage setting outside collective agreements, and adjust them where necessary, so as to make them sufficiently transparent and objectively justified by the time the directive is transposed in Austria. Otherwise, employers may have no choice after a joint pay assessment but to adjust their pay systems “upwards” at great cost. Moreover, they might face claims for back pay, since the principle of equal pay for equal work or work of equal value is already in force.

In our CMS Employment Snack podcast “Close the Gap – How the Pay Transparency Directive impacts HR work”, available for free on Spotify, iTunes, and Podbean, our experts in employment law and non-discrimination, Andrea Potz and Daniela Krömer, speak with Christoph Wolf about the requirements in the Pay Transparency Directive, the right to information, and pay reporting, as well as legal consequences for employers who fail to reduce their gender pay gap.

You can depend on us for advice and guidance on implementing transparent and non-discriminatory pay systems.