Demystifying the EU Pay Transparency Directive for UK employers

Published: 21 November 2023 | by Rocio Carracedo Lopez, international legal editor at Brightmine

To address the gender pay gap across its member states, the EU recently approved the Pay Transparency Directive (2023/970/EU). This introduces reporting requirements and obliges employers to take steps to address pay inequalities, and must be transposed into national legislation by 7 June 2026. Rocio Carracedo Lopez, international legal editor at HR & Compliance Centre, examines the new rules and discusses their implications for employers operating across the EU — and potentially in the UK too.

Gender equality has been a fundamental EU principle over the past 50 years, but legislation has proved unsuccessful in ensuring equal pay between men and women. According to Eurostat, women were paid, on average, nearly 13% less per hour than men in the EU in 2021, with the greatest difference (20.5%) being recorded in Estonia.

What are the key measures in the Directive?

While the Directive will ensure a degree of consistency across the EU, it does allow different approaches. Many member states currently have no or few rules in place and will require new legislation to comply with the Directive’s provisions. In countries with existing pay transparency rules, national governments will need to assess all the new obligations and work out how to address cases where domestic legislation conflicts with the Directive or where it falls short of the Directive’s minimum standards. This means global employers operating in the EU will need to pay close attention to how each country interprets and implements the Directive.

How does the Directive differ from current UK legislation?

In the UK, relevant employers in the public sector with 250 or more employees on the “snapshot date” of 31 March in the year to which the information relates, and in the private and voluntary sectors with 250 or more employees on the “snapshot date” of 5 April, are obliged to publish gender pay gap information annually. The report must include a written statement that confirms that the information is accurate and the report must be uploaded to the Government’s website.

Acas and the Government Equalities Office have produced non-statutory guidance on the Regulations and recommend employers to “take suitable steps to minimise” the gender pay gap. However, the Regulations do not impose any obligations on employers to do so and, although the Equality and Human Rights Commission may be able to take enforcement action, the Regulations do not include any specific penalties or enforcement mechanism in the event of non-compliance.

Further, the Regulations do not require employers to disclose initial pay levels or ranges in job adverts or prohibit inquiries about candidates’ pay history. Equally, workers do not have the right to request individual and average pay data by gender for comparable roles.

The EU Directive imposes stronger obligations in terms of employee and job candidate information, obliges employers to carry out joint pay assessments where necessary and establishes sanctions for non-compliance. The Directive is about more than reporting, however, introducing a broader range of pay transparency measures. It places more emphasis on the involvement of employee representatives and make employers more accountable for their pay structures.

What do employers operating in the UK need to do?

Nothing immediately since, following Brexit, the UK is no longer governed by new EU legislation.

However, as the new Directive goes beyond the requirements set out in UK gender pay gap legislation, it may be relevant for organisations that operate in EU jurisdictions or that wish to align to EU standards to update their policies accordingly.