Pay Transparency Update: European Commission Publishes FAQs

The European Commission published FAQs in August addressing a number of practical questions around incoming pay transparency obligations.

Although they are not legally binding, the FAQs provide useful guidance for Organisations preparing for the Directive as the Irish legislation progresses towards implementation.

The FAQs and a summary of the Commission’s guidance are set out below.

How does the Pay Transparency Directive benefit workers?

The Commission explains that pay transparency empowers Employees to claim their right to equal pay by providing a new range of rights for Employees and for jobseekers that will provide greater access to certain pay information.

How does the Pay Transparency Directive benefit Employers?

The Commission explains that benefits for Employers will include increased job applications, reduced recruitment costs, talent attraction, Employee engagement/retention as well as consistent pay practices.

Do pay transparency measures apply to all Employers?

The Commission explains that certain obligations in the Directive like Employee pay information rights apply to all Employers while the scope for gender pay gap reporting and joint pay assessment is limited to Organisations having at least 100 Employees. Ireland’s existing gender pay gap regulations apply to Organisations with 50 Employees or more and it remains to be seen if this will change under the forthcoming domestic pay transparency legislation.

Does the Directive apply to self-employed workers?

The Directive does not apply to self-employed workers, but bogus self-employed workers may have recourse to pay transparency rights if they can establish that they are misclassified Employees.

Does the Directive provide flexibility to Member States in the implementation?

The Commission’s guidance includes a provision that Member States may exempt Organisations with fewer than 50 Employees from the obligation to make accessible to their Employees the criteria that are used to determine pay progression. Member States may also introduce or maintain provisions that are more favourable to Employees than those laid down in the Directive.

Does the Directive apply to Employers and workers covered by collective agreements?

Yes. The principle of equal pay for the same work or work of equal value applies to Employers even where pay is determined through collective bargaining. Employers covered by collective agreements are therefore not excluded from the scope of the Directive.

Which elements of pay must be included for the purposes of pay transparency measures?

The FAQs indicate that ‘pay’ extends beyond basic or minimum salary to include any other consideration received directly or indirectly in respect of employment, including complementary or variable pay and benefits in kind.

For pay transparency purposes, the starting point is that all elements of pay relating to Employees during the relevant reporting period should be included. Employer contributions to occupational schemes must also be taken into account.

Certain universally available benefits with no eligibility conditions or exceptions, such as lunch vouchers, smartphones, laptops and Christmas gift cards, may not need to be included. Voluntary benefits available without eligibility criteria may also be excluded. Statutory social security benefits are not considered to be pay.

Does pay transparency comply with the General Data Protection Regulation (GDPR)?

The FAQs indicate that pay transparency measures can operate alongside GDPR requirements. The Directive does not require the disclosure of individual pay data; rather, Employees are generally entitled to information about average pay levels within relevant categories.

The FAQs also note that Member States may introduce additional safeguards where disclosure of aggregated information could result in an individual being identified, particularly where there are very few comparator Employees.

What is a category of workers?

A category of workers is based on the value of the work performed within the Organisation. Employees performing the same work will fall within the same category, but Employees performing different roles may also fall within the same category where their work is of equal value.

The FAQs indicate that categories should be established in a non-arbitrary way using gender-neutral criteria, including four mandatory criteria which are skills, effort, responsibility and working conditions. Employers can use weighted criteria and may establish categories in cooperation with workers’ representatives where they exist.

Are the updated EU-wide guidelines on gender-neutral job evaluation mandatory?

The Commission and European Institute for Gender Equality (EIGE) have produced EU-wide guidelines and a practical toolkit to support Organisations with gender-neutral job evaluation and classification, but these are voluntary.

Organisations must, however, ensure that their pay structures comply with the principle of equal pay and that work is assessed using objective and gender-neutral criteria, including the four mandatory criteria in the Directive.

Can there be other factors used to assess work of equal value going beyond the four criteria mentioned in the Directive?

Skills, effort, responsibility and working conditions are the four mandatory minimum criteria. Employers may also take account of other relevant factors where appropriate.

Any additional factors should be capable of being justified as relevant, be gender-neutral and non-biased, and be applied proportionately. The FAQs specifically note that market conditions may influence pay levels but may be less directly related to the intrinsic value of a job and should therefore be treated with caution.

Will Employers or social partners lose their discretion to negotiate and set pay due to the Directive?

The FAQs indicate that the Directive does not remove the discretion of Employers or social partners to negotiate or set pay.

Who can assist workers in case of alleged pay discrimination?

The Directive is intended to strengthen access to justice for potential victims of pay discrimination. Employees may be assisted or represented, with their approval, by relevant associations, Organisations, equality bodies, workers’ representatives and other legal entities with a legitimate interest in promoting equality between women and men.

How is the Commission supporting the implementation of the Directive?

The Commission services have been working with Member States and social partners through implementation workshops and technical assistance to support the transposition and consistent implementation of the Directive.

What should Organisations be doing now?

The Commission’s FAQs provide a useful indication of the areas Organisations should be considering ahead of implementation. Organisations should consider:

• reviewing pay structures, job families, grades and pay bands
• reviewing job evaluation methodologies and ensuring that objective, gender-neutral criteria are being used
• auditing payroll and benefits data, including variable pay and benefits in kind
• considering how Employees will be grouped into categories of workers performing the same work or work of equal value
• preparing for salary or pay-range disclosure during recruitment
• removing questions about applicants’ current or previous pay
• reviewing confidentiality clauses relating to pay
• ensuring HR and payroll systems can provide the information required by the Directive
• establishing processes for responding to Employee requests for pay information
• considering GDPR requirements when processing and disclosing pay information, and
• considering the Organisation’s position in relation to the Directive’s pay reporting and joint pay assessment requirements, where applicable.

The FAQs are not legally binding and expressly state that they contain the preliminary views of Commission services rather than an official position of the European Commission. The final position in Ireland will depend on the domestic legislation implementing the Directive.

If you have any additional questions, please contact us at info@adarehrm.ie.