In this month's First Tuesday Q&A, Bernard Martin, Senior Associate in A&L Goodbody's Employment Practice Group, provides an overview of the Pay Transparency Directive and what it means for employers.

Along with the Work Life Balance Directive and the Gender Balance on Boards Directive, the new Pay Transparency Directive aims to address the root causes of the gender pay gap and economic empowerment of women. The Directive will come into force on 7 June 2023, giving Member states three years to implement new rules to fulfil its requirements.

What are the requirements of the new Directive?

Key requirements include:

• Gender pay gap reporting
• Joint pay assessment
• Work of equal value
• Pay transparency for jobseekers
• Right to information
• Pay secrecy

How will gender pay gap reporting in Ireland change under the Directive?

Gender pay gap reporting is already in place in Ireland. Currently, employers with 250 or more employees must publish details of their pay gap, with this threshold decreasing to 150 in 2024 and 50 in 2025.

The new Directive will require employers with 250 or more employees to report on their gender pay gap on an annual basis and those with 150 or more employees to report every three years. Employers with 100 to 149 workers will also eventually have to report every three years.

The Directive will also require the gender pay gap by category of employees to be provided to employees and employee representatives. The accuracy of this information will need to be confirmed by the employer’s management. Employees, their representatives, the Workplace Relations Commission (WRC) and the Irish Human Rights and Equality Commission (IHREC) will have the right to ask the employer for clarifications, details and explanations regarding such information.

Under what circumstances will an employer be required to carry out an equal pay audit?

Where the gender pay gap report indicates a gap which:

(i) is at least 5% in any category of workers,

(ii) has not been justified by objective and gender-neutral factors, and

(iii) has not been remedied within 6 months of the date of the gender pay gap report,

 the employer will have to carry out a pay assessment (i.e. an equal pay audit).

This involves a detailed assessment, the results of which must be made available to employees, their representatives and the monitoring body. Employers should note the code of practice on equal pay published by the IHREC in 2022, which contains guidance on conducting an equal pay audit.

How will employers determine what constitutes ‘work of equal value’?

Member states will be required to make tools or methodologies available and accessible to guide the assessment of “work of equal value” – i.e. work that is determined to be of equal value in accordance with objective, gender neutral criteria, such as skills, effort, responsibility and working conditions. Employers will need to have pay structures in place which ensure equal pay for equal work. Guidance can be found in IHREC’s code of practice on equal pay.

What obligations will employers have in relation to pay transparency for jobseekers?

Employers will be obliged to indicate, prior to interview, the initial pay level or range to be paid for a specific position and will not be permitted to ask prospective employees about their pay history. This provision will not limit the bargaining power of either the employer or the employee to negotiate a salary outside the indicated range. It is aimed at equipping workers with the necessary information to engage in fair negotiations regarding their salaries upon entering an employment relationship.

What rights will employees have to information about pay levels and what obligations will an employer have?

Employees will have a right to request information from their employer on their individual pay level and on average pay levels broken down by gender for employees doing the same work or work of equal value. They will be allowed to request the information through their representatives or through an equality body. The information must be supplied within two months of the request.

Employers will have to inform employees on an annual basis of their right to receive the information and how they may go about doing so. Employers with 50 or more employees will have to make information regarding the criteria (which must be objective and gender neutral) used to determine employees’ pay, pay level and pay progression easily accessible.

What effect will the Pay Transparency Directive have on redress in equal pay cases?

Currently, an employee needs to establish a prima facie (apparent) case of discrimination prior to the burden of proof shifting to the employer to defend the claim. This will change under the Pay Transparency Directive - where an employer is not compliant with the obligations set out by the directive, the burden of proof will automatically be placed on them.

Currently, the WRC may award up to three years’ arrears of pay, make an order for equal pay from the date of referral and/or direct a specified course of action where a claim in respect of equal pay is successful. The Circuit Court may award up to six years’ arrears of pay, make an order for equal pay from the date of referral and/or direct a specified course of action. Under the Pay Transparency Directive, members states will be obliged to ensure that compensation includes full recovery of back pay.

What are the next steps for employers?

New laws will be required to align Irish law with the requirements of the Directive. The Directive will undoubtedly lead to an increase in employee and representative involvement in addressing pay equity and it contains potentially arduous requirements to conduct equal pay audits and assessments of work of equal value. It will increase the profile of equal pay and pay transparency across EU member states and likely lead to a rise in equal pay claims. Employers should examine their existing pay practices and take steps to address any issues identified at an early stage. Employers should consider how the Directive will impact their recruitment, pay and gender pay gap reporting practices and plan their compliance strategy accordingly.

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