The major innovation: information rights and reporting obligations
The Pay Transparency Directive is intended to put an end to unjustified unequal payment of employees in the future.
To ensure that the directive puts theory into practice, it grants (future) employees information rights and also stipulates reporting obligations for employers. The aim is to make pay information more transparent and provide employees with better access to pay-related information in order to actually ensure pay transparency and equality. Not least of all, employees must no longer be prevented from disclosing their salary.
This makes employment contract provisions stipulating confidentiality about salary, etc. a thing of the past …
Applicants also have rights
The directive includes more than just rights for employees. In future, job applicants will also be able to request salary information such as details relating to the starting salary or the salary range for an open position. At the same time, employers are not permitted to ask about an applicant’s wages from a previous or current job (Art. 5 of the directive).
Employers who get ahead of the game and ensure this level of transparency can expect an advantage in the war for talent.
Information rights in the employment relationship
Article 7 of the directive states that employees have a right to information about their individual pay and the average pay of colleagues who perform equal or equivalent work, categorized by gender – regardless of the size of the company! Employers are also required to inform their employees annually (!) about their right to information.
Moreover, employers must also inform their employees upon request about the objective, gender-neutral criteria used to determine their pay, pay levels and pay development (Art. 6 of the Pay Transparency Directive).
Read our following blog articles to discover more about comparison groups and equal/equivalent work:
“Pay Transparency Directive: The right comparison group”,
“Pay Transparency Directive: Equal or equivalent work”.
Reporting obligations for employers
The directive goes further and, in future, larger companies will be required to regularly report to the relevant bodies (such as supervisory authorities, equal opportunities bodies, etc.) regarding gender pay gaps and will also have to make this information publicly available (via the company website, for example).
These reporting obligations will apply to companies with 100 employees or more as of June 2027 and will become effective earlier or later, depending on the number of employees. The frequency of reporting obligations will also vary depending on the size of the company.
Lastly, a joint pay assessment in cooperation with the works council is mandatory if a gender pay gap of at least 5% is identifiable and yet there is no objective, gender-neutral justification for the disparity and the company fails to rectify the gender pay gap within six months. Much remains unclear at this point in time and the federal regulations have to provide clarity.
Damages, compensation, and fines
To make the Pay Transparency Directive more than a paper tiger, it specifically stipulates sanctions anchored in national law. This includes claims for damages or compensation for employees in the event of discrimination.
Conversely, employers must also reckon with (official) sanctions based on national law if they violate reporting obligations in future, meaning that fines are also a possibility.
What can we do for you?
Would you like to know how you can lay the groundwork now for future rights and obligations? Do not hesitate to contact us!
Summary of the key facts:
- Job applicants and employees will have a right to information about their (future) pay from their (future) employer.
- In the event of pay discrimination, applicants and employees may be entitled to compensation or damages.
- From 2027 onward depending on the actual number of employees, companies with 100 or more employees will be subject to reporting obligations regarding gender pay gaps, etc. Sanctions for violations are planned.