Legal development

Reporting on the gender pay gap is spreading to the EU

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    Reporting on the gender pay gap is spreading to the EU

    The gender pay gap is a societal concern which has gained a considerable amount of attention in the past years among law makers.

    In the UK, mandatory gender pay gap reporting was introduced in 2017 and requires employers with 250 or more employees to publish data on their gender pay gap. 

    Within the EU, the Pay Transparency Directive came into force on 6 June 2023, introducing new gender pay gap reporting obligations for EU Member States. The 27 countries now have three years to implement the Directive and adapt their national legislation if necessary as some EU Member States already have in place gender pay gap requirements that go above what the new Directive requires.

    Q&As

    Below is a series of Q&As explaining how the new Directive operates in comparison with the current UK legislation. 

    What are the current reporting obligations in the UK?

    Currently, employers with 250 or more employees must publish an annual gender pay gap report. Employers must publish the following six pieces of information:

    1. The difference between the mean hourly rate of pay of male and female relevant employees;
    2. The difference between the median hourly rate of pay of male and female relevant employees;
    3. The difference between the mean bonus pay of male and female relevant employees;
    4. The difference between the median bonus pay of male and female relevant employees;
    5. The proportion of male and female relevant employees who were paid bonus pay during the bonus pay period; and
    6. The proportions of male and female relevant employees in four pay bands.

    How does this compare with the new EU Directive?

    The Directive provides for very similar reporting obligations to the current ones  in the UK since the same six pieces of information must be published. However, there are also a few differences. Similarly to the UK, both public and private sector employers with 250 or more employees must report on their gender pay gap annually. However, the Directive goes further by requiring employers with 150-249 employees to report every three years. The first reports for companies with over 150 employees are to be published in 2027, relating to the 2026 calendar year. 

    The employee threshold will then be lowered to  100 employees from 2031, with the requirement to report every three years. As far as we are aware there are no plans for the UK to follow suit for mandatory reporting in relation to employers with less than 250 employees, although there is nothing to stop employers from doing this voluntarily. 

    Importantly, the Directive provides that if the report documents a pay gap of more than 5% that can't be justified by objective, gender-neutral criteria and the gap isn't rectified within 6 months, employers will need to undertake a "joint pay assessment", carried out with employees' representatives. After the compulsory equal pay audit, the employer has to rectify the difference within a "reasonable" period of time (currently there is no guidance on what "reasonable" is). No such obligation exists in the UK to-date.

    What else does the Directive introduce?

    The Directive also includes various other pay transparency measures to narrow the gender pay gap between men and women, including the following:

    • Employers have to inform job seekers about the starting salary or pay range either in the job vacancy or before the job interview.
    • Employers are prevented from asking job candidates about their pay history and/or existing salary, something that isn't currently prohibited in the UK.
    • Employees can receive compensation, including full recovery of back pay and any relevant bonuses or payments in kind, if they have been subjected to gender pay discrimination. In the UK, an equal pay claim can be brought.
    • Employees can disclose their pay to others and any contractual terms related to salary secrecy will be prohibited. By comparison, in the UK, salary confidentiality clauses may be included in employment contracts. However, the Equality Act 2010 provides employees with the statutory right to disclose a difference in salary if there's an equal pay issue.
    • Employees have the right to request, from their employer, information on both their individual and the average pay levels broken down by gender for employees doing either the same work or work of equal value. They also will have the right to request information on criteria used to determine both pay levels and pay progression. Importantly, these rights will exist for all companies, not just those with a certain threshold of employees. 

    What should employers with European operations be doing?

    Although there is some breathing time to allow implementation of the Directive at national level by June 2026, there are a number of issues which affected employers may want to start thinking about to prepare for the new reporting regime. 

    Importantly, companies with operations across several jurisdictions will need to ensure compliance with all national laws that implement the Directive. In some jurisdictions such as France, French employment law is already stricter and broader than the Directive. In contrast in Spain although there is an existing obligation for employers of any size to have a remuneration register for example, Spanish law will need to take into account certain additional obligations in the Directive. 

    Other issues that affected employers should keep in mind include:

    • putting in place the appropriate systems to collect gender pay data (where these do not already exist);
    • conducting a gender pay audit now to identify any gaps and take steps to close it before the first report has to be made; and
    • considering how they will comply with reporting obligations as well as with data protection legislation.
    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.
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