EU Transparency rules: What are they and how might they still affect the UK?

February 21, 2024

In 2023, the EU Parliament introduced Directive 2023/970 to “strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms”.

The most eye-catching elements of the Directive include:

  • Job applicants having the right, before an interview is held, to be told prospective salary levels (and, if relevant, details of any collective agreements);
  • Potential employers are not permitted to ask about an individual’s current salary;
  • Employers must make easily accessible to their workers the criteria that are used to determine workers’ pay, pay levels and pay progression, and those criteria must be objective and gender neutral;
  • Introduction of gender pay gap reporting for companies with more than 100 employees;
  • Where there is a gender pay gap of more than 5% (without objective criteria to justify it) and no remedy of the situation has occurred within six months, a requirement is in place to hold talks with workers to identify, remedy and prevent discriminatory pay differences.

As with much EU legislation, it is for each constituent territory to draft suitable rules / legislation in order to implement the Directive (and this must occur within the next two years).

Whilst the requirement to implement this Directive no longer applies to the UK, there are at least three ways in which it could still affect your business going forward including:

  1. Locally drafted legislation may require subsidiary companies of sufficient size to be compliant with the Directive. This information will likely be publicly available and could be found by workers in other countries (including the UK) for general comparison purposes.
  2. If you are a business looking to hire in that territory, there may be an expectation that salary details are disclosed in advance as a “matter of practice”, even though there is no formal requirement.
  3. On an indirect basis, if these disclosures are seen to be commercially beneficial, then there may be pressure for them to be introduced into the UK. Even if they are not, they are likely to be an easily accessible source of information regarding remuneration levels.

Should you want someone to help you explore your thinking on this issue, please contact Stuart James in the first instance.

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