Pay Transparency in the EU: New Obligations for Employers
The Pay Transparency Directive (hereinafter as: the Directive) was adopted in Strasbourg on 10th May 2023. Member States were given a deadline until 7th June 2026 to bring into force the laws, regulations, and administrative provisions necessary to comply with the Directive. The primary objective of the Directive is to ensure, through enhanced pay transparency, that there is no disparity in remuneration between women and men where they perform the same work in the same position with equivalent competencies. To this end, employers are required to establish pay structures that guarantee equal pay for equal work or work of equal value. As of today, Hungary has not yet enacted legislation transposing the Directive.
Conceptual and legislative background
The principle of equal pay for men and women for equal work or work of equal value has repeatedly been addressed in the legislative practice of the European Union. Articles 2 and 3 of the Treaty on European Union enshrine the fundamental value of ensuring equality between women and men. Article 11 of the United Nations Convention of 8 December 1979 provides that States Parties shall take all appropriate measures to ensure the right to equal remuneration, including benefits. Furthermore, Article 21 of the Charter of Fundamental Rights of the European Union prohibits all forms of discrimination, including discrimination based on sex. Article 23 of the Charter stipulates that equality between women and men must be ensured in all areas, including employment, work, and pay.
Key provisions of the Pay Transparency Directive
The Directive lays down minimum requirements, primarily through pay transparency, in order to reinforce both the principle of equal pay set out in Article 157 of the Treaty on the Functioning of the European Union and the prohibition of discrimination established in Article 4 of Directive 2006/54/EC. Pay transparency applies to employers in both the public and private sectors, and, on the employee side, to all persons who have an employment contract or employment relationship as defined by the laws, collective agreements, and/or practices in force in the respective Member States.
Member States are required to take the necessary measures to ensure that employers operate pay structures that guarantee equal pay for equal work or work of equal value. They must also ensure the availability of analytical tools or methodologies that provide guidance for assessing and comparing the value of work based on objective criteria.
Job applicants must be granted the right to receive information from prospective employers regarding the initial pay or its range for the position in question, based on objective criteria.
The Directive places particular emphasis on reporting obligations concerning the gender pay gap. Member States must ensure that employers, in accordance with Article 9(1) of the Directive, provide information relating to their organization, including, inter alia, the gender pay gap; the proportion of female and male workers receiving complementary or variable components of pay; and the proportion of female and male workers within each “pay quartile”. This data must be reported by employers (depending on the number of employees) between 7th June 2027 and 7th June 2031.
Finally, in order to ensure the effective protection of rights, Member States shall guarantee that judicial procedures for the enforcement of rights and obligations relating to the principle of equal pay are available to all workers who consider themselves wronged by a failure to apply that principle.
