Accepted in May 2023, the Transparency Directive is already in force and affects employees and employers in both the public and private sectors. The EU member states have 36 months to implement it into national law.
Objectives
This directive requires companies to disclose the percentage gap in pay between men and women. It also requires the disclosure of the total compensation ratio of the highest paid individual to the average total compensation for all employees. On the other hand, it entitles the employees to certain rights of information and equal treatment at work.
The most general aim of the EU Pay Transparency Directive is to reduce the gender pay gap in the EU. Across the EU, the gender pay gap averages 13 percent. In Bulgaria it is slightly lower and averages 11.8 %. Data for 2021 only available https://www.nsi.bg/en/content/3976/gender-pay-gap. However, a closer look at data shows disturbing deviations in certain sectors such as Manufacturing 22.2%, Information and communication 22.1%, Financial and insurance activities 33.5%, Human health and social work activities 26.4%, Arts, entertainment, and recreation 22.2%, where the “gender pay gap” is significantly higher. Here, women earn on average 25 percent less than their male colleagues.The EU directive on pay transparency brings about far-reaching changes for employers. In the event of non-compliance, it provides for dissuasive sanctions, non-consideration in public tenders and compensation for employees.
Employers can expect these specific effects:
Reporting obligation of the organization
- Employers with more than 250 employees must report annually on the extent of the gender pay gap.
- For smaller organizations (initially with 150 or more employees) the reporting requirement applies every three years.
- If a pay gap of more than 5 percent is identified that cannot be justified by objective, gender-neutral criteria, organizations must take action. This happens in the form of a joint pay assessment in collaboration with employee representatives.
Pay transparency before employment
- Employers must inform job seekers about the starting salary or pay range of the advertised position. Both must be based on objective and gender-neutral criteria.
- Employers are no longer allowed to ask applicants about their current salary/wages or their salary development in previous employment relationships.
Right to information in an ongoing employment relationship
- Employees have the right to information about the average pay levels for the group of employees who do the same work or work of equal value as them. This must be broken down by gender.
- Employers must disclose criteria used to determine pay and career development. The criteria must be objective and gender-neutral.
- Employers must inform all employees annually about their right to information.
The directive provides, among other things, for compensation for employees in the event of violations by employers. This includes full additional payment of lost wages and associated bonuses and benefits in kind. The burden of proof in the event of violations of the required wage transparency lies with the employer.
The obligations imposed on employers by the Directive will also have to be complied with as part of the applicable environmental, social and labor law obligations when awarding public contracts.
Outlook
Employers therefore not only have to ask themselves the question of whether there is a gender pay gap, but also to what extent measures are being taken to prevent it.
The EU directive on pay transparency can be used as an opportunity to question and redesign existing HR processes. Employers have to consider whether their current compensation systems can reflect the requirements resulting from wage transparency. Employers who are aware of the extent of the gender pay gap and have already taken measures to eliminate the gender pay gap have a double advantage: not only do they have a head start in implementing the obligations under the EU Pay Transparency Directive, but they will also be perceived as a more attractive employer.
