New Pay Transparency Law in Europe

The European Union has taken an important step in the fight for gender equality in the workplace with the approval of new legislation that obliges companies to be more transparent about their salaries. This wage transparency law in Europe aims to reduce the gender pay gap and ensure that all employees are paid fairly and equitably for their work.

Pay transparency seeks to correct hidden inequalities in jobs. These affect final pay and are related to gender inequalities that generally undervalue jobs that are performed by women. In addition to pursuing gender equality, pay transparency has certain benefits for both employers and employees. Pay Transparency has the following main objectives:

  • Promote equal opportunities in the workplace.
  • To close the pay gap between women and men in the same job or in work of equal value.

According to the International Labour Organisation, an equal working environment increases levels of employee satisfaction and commitment. This enhances motivation at work, leading to better performance and work climate, while reducing staff turnover.

What Will the Europen Pay Transparency Law Look Like?

According to this rule, companies have to give employees on request gender-disaggregated data on how much they are paid on average. They also have to show how much men and women doing the same job in different job categories are paid on average.

It should be noted that remuneration includes, in addition to salary, allowances such as overtime, bonuses, housing and transport allowances. Companies must provide information about the starting salary in the job offer, or at least before the interview.

The EU Directive includes an obligation for companies with more than 100 employees:

  • Companies with between 100 and 149 employees will have to provide, after consultation with employee representation, specific information on the pay gap and report it to the competent authority every 3 years.
  • For companies with a workforce of 150 to 249 people, they must update their pay gap information every 3 years to inform the national authority about the gender gap in their organisation.
  • Companies with 250 or more employees must update the information on an annual basis. If a gender gap of at least 5% is found without any justified reason, they will have to carry out a pay assessment with staff representatives or trade unions.

Wage Transparency in Spain

Spanish companies will have up to a total of 3 years to make a complete wage register of their workforce, including senior managers and executives. This register must include the average salary values, salary supplements and non-wage payments of the workforce disaggregated by sex, accessible to employees and workers’ representatives.

On 13 October 2020, new decrees were approved in Spain. Thus, RD 901/2020 on Equality Plans and their registration and RD 902/2020 on Equal Remuneration were created with the aim of improving the effectiveness of equality and clarifying points that were not regulated in previous regulations.

Measures to Avoid Complaints and Sactions for Wage Discrimination

The new pay transparency law in Europe represents a significant step forward in the fight for gender equality in the workplace. Companies must customise to these new regulations and ensure that all employees receive fair and equitable remuneration for their work. With the support of legislation and the cooperation of companies, it is hoped that greater pay transparency and a significant reduction in the gender pay gap will be achieved in the future.

To avoid complaints, inspections or sanctions in the future for not complying with equal pay, many companies are already starting to use HR solutions. To prove that there was no wage discrimination, the ideal is to have a wage recording tool, with the ability to generate reports of all kinds (salary history, gender pay, staff turnover…). Records and indicators that will not only allow you to comply with the law but will also prevent talent drain.

The European Pay Transparency Act is just around the corner, which is a big step towards achieving the much-desired equality. Thanks to HR software such as PROSFY, companies will be able to customise their policies in accordance with the law, as well as take advantage of the data generated in order to build more efficient, productive and fairer organisations.