Pay transparency reporting requirements could soon be mandatory

The European Union (EU) has recently passed a pay transparency directive which EU member states must introduce as national law within three years. The Directive will apply to employers with more than 149 workers and its key requirements are:

employers will have to inform job seekers about the starting salary or pay range of advertised positions before interview;
employers will be prevented from asking candidates about their pay history;
workers will be entitled to ask their employers for information about pay levels by gender and the criteria used to determine pay and career progression; and
employers with a gender pay gap of 5% or more will have to conduct a joint pay assessment in co-operation with their workers’ representatives.

Employers who fail to comply will be subject to penalties (although it is not clear what level these will be set at).

Currently, the UK’s pay reporting requirements don’t go as far and are limited to reporting gender pay gaps for employers with at least 250 workers. Employers must publish their gender pay gaps on their website and the government’s portal. Those who don’t comply don't face a financial penalty but may face enforcement action from the Equality and Human Rights Commission.

The EU’s stance on pay transparency is now on a different path to that of the UK’s. There had been talk from the current UK government of increasing this threshold to 500 employees but that appears to have been side-lined. A labour government on the other hand would make this their top priority according to the Shadow Chancellor’s recent comments, suggesting that the current threshold could be lowered.

At first glance one might think that because the UK has left the EU, it will have no obligation to implement the Pay Transparency Directive. However, that doesn’t necessarily mean UK employers can ignore it altogether. Those who supply goods and services to the EU may find themselves being compelled to comply with the requirements as part of their client’s supply chain due diligence.

According to the Office for National Statistics, the UK’s gender pay gap for all employees (full-time and part-time) in 2022 was 14.9%. If UK employers were forced to follow the Pay Transparency Directive by their clients, most employers would find themselves having to conduct pay assessments with worker representatives.

If you have any concerns with pay transparency or your organisation’s gender pay gap strategy, please contact Charlie Barnes.