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Pay Transparency: companies must be ready by June 2026

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To combat the gender pay gap, the European Parliament approved the Pay Transparency Directive in 2023, which all Member States must implement by June 2026.

Directive (EU) 2023/970, adopted on May 10, 2023, marks a significant step towards the full enforcement of the principle of equal pay for equal work and for work of equal value between men and women.

This new legislation introduces clearer and more binding rules, with a strong focus on pay transparency.

The causes of pay disparities are manifold: gender stereotypes, unequal distribution of caregiving responsibilities (which predominantly fall on women), occupational segregation, and the undervaluation of care and support roles.

The Directive identifies three key issues to address:

–   the lack of transparency in pay systems;

–   the ambiguity surrounding the definition of “work of equal value”;

–   the challenges faced by victims of discrimination in asserting their rights.

One of the most significant provisions is the obligation for companies with more than 100 employees to produce an annual report on the gender pay gap. This report must be submitted to the competent authorities and shared with social partners.

A key element is the broad definition of “pay,” which includes not only base salary but also bonuses, allowances, benefits, and supplementary contributions. These components play a significant role in determining pay disparities.

From a procedural perspective, the burden of proof is eased for those alleging discrimination. Individuals can base their claims on circumstantial evidence, while the employer must demonstrate the absence of discrimination. If the employer fails to comply with transparency obligations, the full burden of proof shifts to them.

Another notable provision concerns public procurement: companies with a gender pay gap exceeding 5%, unless objectively justified, may be excluded from public tenders.

Lastly, the Directive provides for proportionate sanctions and full compensation for damages suffered, with no upper limits.

Our firm remains available for any further information or clarification.

 

 

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