Among a plethora of global legislative proposals on pay equity, the EU Commission has proposed a new directive that would apply to all 27 member states of the European Union – including several states that don’t currently have any mandatory pay gap reporting. Baker McKenzie is predicting that if adopted, the new rules will not come into effect before late 2024.
The new rules are wide-ranging and would require the following:
- Employers with at least 250 employees must report on the gender pay gap both from an “equal pay for equal work” perspective and the unadjusted median gap by quartile pay band and for the company as a whole. This is similar to the current requirement in the UK.
- Employers must provide pay transparency for job seekers and may not ask about pay history.
- Employers must provide information to workers upon request on average pay levels by sex for employees doing the same jobs.
- If there is a gap of 5% or more that cannot be explained by “gender neutral factors,” the company must create a joint pay assessment with workers’ representatives.
- Enforcement procedures must include the right to back pay, lost opportunity and “moral prejudice” compensation for victims of discrimination.
The proposal will next go to the EU Parliament and Council, along with the national parliaments of each member state. If agreement is reached on the text, the measure will be adopted and implemented within two years (based on prior practice). For companies with significant numbers of employees in the EU, the new rules could constitute a substantial additional compliance burden if adopted.
