Understanding the EU Pay Transparency Directive
Since the EU Pay Transparency Directive was passed in 2023, Margrét and Henrike have been getting a lot of requests to explain its requirements in the simplest possible terms. So that’s the focus of this week’s coffee talk: the EU Pay Transparency Directive, simplified.
Basically, the Directive sets up a collection of tools to help EU organizations reach pay equity. We can sort these tools into three major “buckets:”
1️⃣ Pay structure and processes
The pay structure needs to be fair. Recruitment needs to be fair. There is a salary history ban, meaning that employers can’t ask job applicants about their salary history. Employers also cannot prohibit employees from talking about their pay.
Pay structure should “enable the assessment where workers are in a comparable situation and the value of work needs to be on the basis of objective, gender-neutral criteria.” In short, organizations need to make sure there are no hidden biases in their pay structure.
2️⃣ Pay transparency
Certain information must be given to job-seekers prior to employment, and current employees also have the right to certain information. There are some external reporting requirements, meaning that employers must send reports to the appropriate government agency.
3️⃣ Pay gap calculations
One of the external reporting requirements is that employers must report the unadjusted gender pay gap for each category of workers. Gaps of over 5% are acceptable if the employer can run a regression analysis showing that the pay gap can be explained by non-gender related factors. (For example, there might be one category where workers of one gender have much more experience.)
Check out the full coffee talk to hear Henrike and Margrét’s conversation. We have also put together some resources about the EU Pay Transparency Directive. The pocket guide offers a little more detail, or you can take a deeper dive by downloading our e-book.
Friday Coffee Talk from Planet Fair is a podcast/videocast series co-hosted by PayAnalytics founder Margrét Bjarnadóttir and Henrike Von Platen, founder and CEO of the FPI Fair Pay Innovation Lab in Berlin. It is available through all podcast platforms as well as on YouTube as a videocast.