Employment and Industrial Relations Law

Examination of the Proposal for a Directive of the European Parliament and of the Council – 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 ‘Proposal’)

27 Jun 2023

11 min read

Authors: Ann Bugeja & Christine Borg Millo

The rationale behind the 2021 Proposal was namely due to the existence of a gender pay gap among men and women in the workplace, which has been determined to leave a long-term impact on;

  • The quality of women’s life;
  • Their increased risk of exposure to poverty;
  • Persistence in the pension pay gap.

The need was felt to tackle the persisting inadequate enforcement of the fundamental right to equal pay, to ensure that the right empowering employees to claim equal pay, is upheld across the whole European Union (EU).

The below is a summary of the proposal for a directive submitted by the European Parliament and of the Council (as of 2021).

i. Definitions

The proposed Directive introduced the concepts of pay and gender-based pay discrimination.

The former includes salary and any other consideration, whether in cash or in kind, which the employees receive directly or indirectly (‘complementary or variable components’), in respect of their employment from their employer. This includes any additional benefits such as bonuses, overtime compensation, travel facilities (including cars provided by the employer and travel cards), housing allowances, compensation for attending training, payments in case of dismissal, statutory sick pay, statutory required compensation and occupational pensions. It should include all elements of remuneration due by law or collective agreement.

It is defined as being: “the ordinary basic or minimum wage or salary and any other consideration, whether in cash or in kind which the worker receives directly or indirectly (‘complementary or variable components’), in respect of his/her employment from his/her employer;”

Secondly, gender-based pay discrimination may involve an intersection of various axes of discrimination: on the basis of sex on the one hand, and racial or ethnic origin, religion or belief, disability, age or sexual orientation on the other.

The proposed Directive includes both;

  • Direct discrimination; meaning here one person is treated less favourably on grounds of sex than another person is, has been or would be treated in a comparable situation; and
  • Indirect discrimination; meaning the situation where an apparently neutral provision, criterion or practice would put persons of one sex at a particular disadvantage compared with persons of the other sex, unless that provision, criterion or practice is objectively justified by a legitimate aim, and the means of achieving that aim are appropriate and necessary.

Discrimination also includes the following three categories or forms:

  • Harassment and sexual harassment, and less favourable treatment based on a person’s rejection of, or submission to, such conduct;
  • Any instruction to discrimination against persons, on the ground of sex;
  • Any less favourable treatment of a woman, related to pregnancy or maternity leave.

The Directive aims to lay down minimum requirements to strengthen the application of the principle of equal pay between men and women, for;

  • Equal work; or
  • Work of equal value

through pay transparency.

Applicable to all employers, whether in the public or the private sector, and to all employees who possess an employment contract establishing an employment relationship, or a collective agreement or other practice in force in that Member State (‘MS’).

ii. Equal work and work of equal value

Member States must:

  1. Take necessary measures to ensure that employers have pay structures, to ensure that women and men are paid equally for the same work and the work of equal value;
  2. Take necessary measures to ensure that tools are in place to access and compare the value of work, and to ensure, on the basis of objective criteria, whether employees are in a comparable situation. The following must be considered; educational, professional and training requirements, skills, effort and responsibility, work undertaken and the nature of the tasks involved. They should always exclude the category of the employee’s sex;
  3. Ensure that the assessment of whether the employees are carrying out the same work/ work of equal value and cannot be limited to individuals employed at the same time, and in situations where female and male employees work for the same employer. The comparison must be in a more general manner and focused more on the type of work being done;
  4. Job evaluation and classification systems must be used for determining pay, and must be based on the same criteria for both men and women, and must exclude any discrimination on grounds of sex.

iii. Pre-employment Information Transparency

Prior to employment, those applicants for employment have the right to receive from the prospective employer, information about the initial pay level, or its range. And this must be based on objective, and gender-neutral criteria (which unfortunately are not defined), to be attributed for the position concerned.

Moreover, the employer shall not ask applicants about their pay history during their previous employment relationships, whether orally or in writing, personally or through their representative.

iv. Duties of the Employer

The employer must:

  • Make easily accessible, to employees, a description of the criteria used to determine pay levels and career progression;
  • To inform all employees of their right of information;
  • To provide the information within a reasonable period of time upon an employee’s request.

The employer may require that any employee in possession of information shall NOT use that information for any other purpose, other than to defend their right to equal pay for the same work carried out as a similar employee.

v. Rights of the Employee

  • To receive information on the following:
  • their individual pay level;
  • average pay levels (broken down by sector, for categories of employees carrying out the same work or work of equal value);
  • To have the possibility to request information about the above on their own accord;
  • To not be prevented from disclosing their pay to enforce the principle of equal pay between men and women for equal work.

An employer who has, at least 250 employees needs to report on pay gap between female and male employees as follows:

  1. Pay gap between ALL female and male employees;
  2. Pay gap between ALL female and male employees in the complementary or variable components;
  3. Median pay gap between male and female employees;
  4. Median pay gap between male and female employees, in complementary components/variable components;
  5. Proportion of female and male employees receiving complementary or variable components;
  6. Proportion of female and male employees in each quartile pay band;
  7. Pay gap between female and male employees by categories of employees, broken down by ordinary basic salary and complementary or variable components.

vi. Joint pay assessment

This assessment must be carried out by employers with 250 employees or more, where both:

  1. The pay reporting demonstrates a difference of average pay level between female and male employees, of at least 5 %, in any category; and
  2. The employer has not justified such difference in average pay level by objective and gender-neutral factors.

It must include:

  1. An analysis of the proportion of female and male employees, in each category of employees;
  2. Detailed info on average female and male employees’ pay levels, and complementary or variable components for each category of employees;
  3. An identification of any differences in pay levels between the employees in every category;
  4. Reasons for such differences in pay levels – with objective and gender neutral justifications;
  5. Measures to address the differences if not justified by the employer.

The proposed Directive also protects the data of employees collected by employers, in that it shall not be used for any other purpose other than to implement the principle of equal pay for equal work or work of equal value.

vii. Duty of Member States

  1. To ensure that judicial procedures for the enforcement of rights and obligations related to principle of equal pay are available to ALL employees, who feel wronged by a failure to apply this principle. These procedures must be easily accessible to employees, and those acting on their behalf.
  2. To ensure that associations/organisations/equality bodies/workers representatives which have a legitimate interest in ensuring equality between men and women, may also engage in any judicial or administrative procedure to enforce the above rights of equal pay. They may act on behalf of or in support of an employee who is victim of an infringement. Equality bodies and employees’ representatives shall also have the right to act on behalf of or in support of several employees, with the employees’ prior approval.
  3. To ensure that any employee who suffered harm due to their right’s infringement, will have the right to claim, and obtain, full compensation or reparation for that harm. This is to be determined by the MS. The compensation for the loss and damage sustained by the employee must be real and effective and must be dissuasive and proportionate to the damage suffered.
  4. To ensure that the courts and the competent authorities may order, at the request of the claimant (and at defendant’s expense) two injunction orders, to either;
    • Establish an infringement of any right related to the principle equal pay;
    • Ordering the defendant to take structural or organisational measures to comply with any right or obligation related to the principle of equal pay.
  5. To ensure that national courts or competent authorities are able to order the defendant to disclose any relevant evidence which lies in their control.
  6. To lay down rules applicable to limitation periods for bringing claims regarding equal pay between men and women, and their duration.
  7. To lay down rules on penalties applicable to infringements of national provisions; to be effective, proportionate and dissuasive.  The level of the fines shall take into account:
    • the gravity and duration of the infringement;
    • any intent or serious negligence on the part of the employer;
    • any other aggravating or mitigating factor applicable to the circumstances of the case.
  8. To ensure the consistent monitoring of the implementation of the principle of equal pay among genders and the enforcement of all available remedies. This shall be done by designating a monitoring body for support, which will have the following tasks:
    • Raise awareness among public and private undertakings and organisations and general public to promote equal pay;
    • Tackle causes of gender pay gap and devise tools to assess pay inequalities;
    • Aggregate data received from employers and publish it in a user-friendly manner;
    • Collect joint pay assessment reports;
    • Aggregate data on the number of, and types of, pay discrimination claims before the courts and pubic authorities;
    • (the above data needs to also be provided to the Commission on an annual basis)
  9. To provide the Commission (Eurostat) with up-to-date gender pay gap data, annually and in a timely manner. These are to be broken down by gender, economic sector, working time, economic control and age;
  10. To take active measures to ensure that any provisions adopted from this proposed Directive are brought by all appropriate means, to the attention of persons concerned.

vii. Other provisions and remarks

As a final remark, the law also allows the introduction of more favourable conditions to employees than those laid down in the proposed Directive. However, the implementation of the law cannot reduce the level of protection that this Directive proposes and covers. Moreover, the Directive will not affect the right to negotiate and conclude any collective agreements in line with national law, ensuring that collective agreements are still given their due deserved weight.

According to the proposed law, MS will ensure that national laws comply with the Directive by two years from its entry into force.

Concluding points

With the proposed law in place, the concept of ‘pay secrecy’ will be completely banned. This means that employees cannot be restricted in any manner, by any person, especially their employer, past or present, from disclosing their pay and even seeking information about pay of other employees. Another interesting remark which favours the employee, as the weaker party to the contract, is that the law will oblige the employer to prove that there was no pay discrimination, hence the presumption is in favour of the employee that discrimination was present.

The law tackles pay transparency among employers and employees, and employees among themselves, at all stages of employment; from work advertisements, and hiring, all through their employment agreement at the place of work. From this analysis, it can be seen that the proposed Directive protects:

  • The employees’ past payment history, in that employees can refuse to provide their past wage history to the employer, and their existing salary;
  • The employees’ right to receive information about the pay of other equal employees, in the same category of work;
  • The employees’ right to receive information from their employer on the gender pay gap at their place of work, through the gender pay gap reporting mechanism and the joint pay assessment; and this further keeps the employee in the loop regarding the salary of other employees without it being a ‘secret’;
  • The existence of non-discrimination at the place of work amongst male and female employees, with the possibility of employees seeking redress and compensation if they have suffered this wrongdoing, eliminating bias among employees.

The Council will have to formally approve the text before it is signed into law and published in the EU Official Journal. The new ‘rules’ will come into force twenty (20) days after their publication. Once the proposal is formally approved by the co-legislators, MS will have three (3) years to transpose the Directive into national law.