The EU Pay Transparency Directive came into effect in June 2023, and the member states have three years to incorporate it into domestic law.
Key points:
1. Pay ranges must always be disclosed in job ads.
2. Companies cannot ask about previous or current pay.
3. Companies cannot prohibit employees from disclosing their pay details.
4. Employees can request information about their pay level, and average pay levels broken down by gender and category of workers doing the same or equal work.
5. Companies must report average pay gaps between women and men annually. This information must be public.
6. Companies must report to the workers' representatives on any gender pay gap in each category of workers doing the same or equal work.
Source: https://ec.europa.eu/commission/presscorner/detail/en/speech_21_1033
The Directive is mostly good news for workers, yet it has deficiencies:
1. Pay audits are limited to companies with 250+ employees.
2. Companies can define what "work of equal value" means.
3. Refers to ‘workers representatives’ instead of trade unions, which opens a door to yellow unions and "representatives" appointed by the company.
4. The Directive does not address other categories of pay discrimination, such as discrimination based on age, disability, migrant status, being LGBTQ+, and other forms.
5. Pay information does not guarantee the ability to self-advocate for fair compensation. If the individual bargaining powers of employees are low, the benefits of learning how much the employees are underpaid are limited. Relevant read: https://hbr.org/2014/06/why-women-dont-negotiate-their-job-offers
Unionization and collective bargaining are associated with a dramatic increase in lifetime earnings for individuals, see this article: https://journals.sagepub.com/doi/10.1177/00197939221129261
They are also effective mechanisms to address a systematic issue of a gender pay gap, see the OECD report: https://www.oecd-ilibrary.org/sites/eba5b91d-en/1/3/5/index.html?itemId=/content/publication/eba5b91d-en&_csp_=c4d781ebd7ae527d3e8f943290ceaa76&itemIGO=oecd&itemContentType=book#section-d1e9997
The Pay Transparency Directive is an imperfect step in the right direction.
Proper labor laws combined with #unionization are powerful tools against rising inequality in our world.
Red Hat Workers