Complying with EUPTD
In 2021, the European Commission proposed a new Pay Transparency Directive to help make sure that workers receive equal pay for work of equal value, regardless of gender. In this effort, the Directive draws inspiration from pay equity legislation introduced around the world in recent years, including public disclosure of pay gaps, a focus on employees’ pay after return from parental leave, and placing the burden of proof on the employer, not the employee, during pay disputes.
The EU Pay Transparency Directive 2023/970 came into effect on June 6, 2023, and each EU Member State is translating the Directive into national law. The Directive applies to all workers in each EU Member State (extending to the EEA). The first reporting cycle is expected to begin in 2027—meaning that now is the time for companies to start getting systems, policies, and procedures in place to ensure compliance and avoid fines and penalties.
In this article, we will break down the EUPTD and help you to answer four questions:
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Please keep in mind that the articles in the PayAnalytics Help Center do not offer legal advice.
Who does it apply to?
The Directive applies to all EU member states (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden) and organizations operating within them.
The EUPTD mandates compliance for organizations established in the EU, covering all employees, regardless of nationality, working within EU member states.
Non-EU organizations with operations in the EU must comply with the directive concerning their EU-based employees.
The directive does not explicitly extend to employees of EU-based organizations who work outside the EU.
While the directive is geographically focused on employees working within the EU, its influence may encourage organizations with global operations to adopt similar transparency practices to maintain equity and coherence in their policies. This can lead to increased administrative efforts to ensure compliance and may prompt broader adoption of pay equity practices globally.
Refer to our EU Pay Transparency Directive Transposition by Country page to track the latest status by EU country.
What is the requirement?
The EU Directive aims to prevent pay discrimination on the basis of gender. It does this through legislation in two areas:
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Pay transparency requirements:
Starting pay must be provided to job applicants before the interview or in the job posting,
Ban on asking applicants about pay history,
All employer decisions about employees’ pay levels and career progression must be based on gender-neutral criteria that employees can reference,
Employees cannot be prohibited from talking about their pay,
Employees are entitled to information about pay ranges on request,
Employees are entitled to a personalized comparison of their pay to the pay of other comparable employees (doing the same work or work of equal value).
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Pay equity requirements:
Employers are required to measure and publish pay gap metrics (which can account for gender-neutral criteria). There are nine specific measurements required,
Employees have the right to see these measurements,
The gender pay gap should be below 5% (after accounting for objective, gender-neutral factors),
Employers bear the burden of proof in any pay dispute.
How does PayAnalytics help you to meet the requirement?
PayAnalytics by beqom helps you to manage pay equity in order to comply with regulations like the EU Pay Transparency Directive. Here are the key ways PayAnalytics platform assists with compliance:
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Automated pay audits to identify any pay disparities (outliers) within your employee compensation across different demographic groups using specific pay equity focused analytics and insights.
Refer to our Getting Started article Reviewing your data to gain initial pay audit insights including outlier views and the raw (unadjusted) pay gaps.
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Advanced pay equity analysis ensures that you can quickly uncover and explain your compensation drivers and identify any unjustified pay gaps and any potential issues related to pay discrimination.
Refer to our Getting Started articleUnderstanding & analyzing the compensation model to gain a deep understanding into pay drivers and your equal (adjusted) pay gaps.
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Built-in mandatory reporting enables your HR teams to generate detailed reports on pay structures, gender pay gaps, and other key metrics required by the directive. PayAnalytics includes built-in templates and customizable reports to meet global compliance requirements. This facilitates the preparation of required reports to regulatory bodies.
Refer to our Getting Started article Generating pay equity reports to discover our built-in report templates, which will be expanded based on transposed local regulations.
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Objective job evaluation: PayAnalytics can assist in implementing and maintaining gender-neutral job evaluation criteria, ensuring that all roles are assessed objectively. This helps eliminate any biases in pay structures and supports compliance with the directive’s requirements for non-discriminatory pay practices.
Refer to our Advanced Preparation article Job evaluation to implement frameworks that objectively compare jobs to support equal pay for work of equal value.
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Remediation recommendations: Set your pay equity targets and specific requirements to receive tailored recommendations to close identified pay gaps. This includes suggested compensation adjustments, ensuring that remediation actions are both effective at closing pay gaps and within budget constrains.
Refer to our Getting Started articleGetting suggested remediation actions to explore your options to reduce or even close pay gaps.
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Real-time monitoring of pay practices through hiring, promotions, transfers, and other organizational changes by making pay equity a part of every pay decision. PayAnalytics’ Compensation Assistant can be used by HRBP, talent acquisition, and people managers to identify any pay discrepancies and function as early warning signals before any potential pay gaps emerge, enabling proactive management of pay equity. This proactive approach helps organizations address issues before they become compliance problems.
Refer to our Getting Started article Using the Compensation assistant to explore how your organization can maintain pay equity in real-time.
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Compliance tracking: At PayAnalytics we help to track pay equity regulations including the transposition of the EUPTD into local laws. Through continuous monitoring of upcoming legislation and relevant updates to our built-in reports, we help to ensure your organization has the support to comply with the latest pay equity requirements. This is particularly useful given the evolving nature of pay equity laws.
Refer to our EU Pay Transparency Directive Transposition by Country page to track the latest status by EU country.
What steps should we take next?
To prepare for compliance with the EU Pay Transparency Directive 2023/970, companies and HR compensation teams can take several proactive steps:
Conduct a pay audit: Perform a thorough pay audit to identify any existing pay disparities within the organization. This involves analyzing pay data across different demographics (e.g., gender, race, job role) to pinpoint gaps.
Implement transparent pay policies: Develop and implement clear, transparent pay policies that outline how pay is determined, including criteria for pay levels and progression. Ensure these policies are communicated effectively to all employees.
Review and update job descriptions: Ensure that job descriptions and titles are gender-neutral and accurately reflect the responsibilities and requirements of each role. This helps in making objective pay comparisons.
Train HR and management: Provide training for HR professionals and managers on the new requirements of the directive, focusing on non-discriminatory pay practices and how to address pay transparency with employees.
Establish reporting mechanisms: Set up systems to regularly report pay data, including gender pay gaps and the proportion of men and women receiving different types of pay. Ensure that these reports are easily accessible to employees and comply with the directive's requirements.
Prepare for pay transparency requests: Create processes for handling employee requests for pay information, including their individual pay levels and average pay levels for colleagues performing similar work. Ensure that these processes are efficient and protect employee confidentiality.
Engage with employee representatives: Collaborate with employee representatives to identify, remedy, and prevent discriminatory pay practices. This involves working together to address any identified gender pay gaps and implementing corrective measures.
Utilize analytical tools: Invest in analytical tools and methodologies to assess and compare the value of different jobs objectively and gender-neutrally. This will help ensure that pay structures are free from discrimination.
Communicate changes: Keep employees informed about the changes being implemented to comply with the directive. Regular communication can help build trust and demonstrate the company's commitment to fair pay practices.
Plan for long-term compliance: Develop a long-term pay equity strategy to ensure ongoing compliance with the directive. This includes setting up periodic reviews of pay practices, continuous training programs, and staying updated with any additional regulatory changes.
By taking these steps, your teams can effectively prepare for compliance with the EU Pay Transparency Directive, ensuring fair and transparent pay practices across their organizations.
Conclusion and next steps
In the meantime, your organization can already start taking concrete steps to be ready for the Directive’s 2026 implementation.
If you would like further support around local requirements, please don't hesitate to reach out for assistance through the Help Center support channel or reach out to our pay equity consultants at clientservicespe@beqom.com.