Looking Ahead: preparing for pay transparency

Introduction

The EU Pay Transparency Directive (the Directive) came into force in June 2023 and Ireland has until 7 June 2026 to implement the new rules. It contains far-reaching new measures, such as gender pay-gap reporting across all EU member states, joint pay assessment obligations, a ban on pay secrecy, as well as information rights for employees and job candidates.

Transposition of the Directive

The Directive has not yet been transposed in Ireland, but the initial steps in the transposition process are underway.  In January 2025, the General Scheme of the Equality (Miscellaneous Provisions) Bill 2024 was published with two provisions aimed at enhancing transparency prior to employment and at transposing Article 5 of the Directive (which deals with pay transparency prior to employment). However, as the General Scheme is currently being revised, it remains to be seen whether the draft as it currently stands will become a formal bill and eventually law. Further, the government’s legislative programme states that the Heads of a Pay Transparency Bill are in preparation.  This article will explore what the Directive will mean for employers and consider the challenges employers are experiencing in looking ahead and preparing for its implementation. 

Key elements of the Directive

The Directive will require employers to implement significant measures designed to increase transparency in relation to employees’ pay.  The key elements of the Directive are briefly summarised below. Our previous briefings on this topic include further details on the Directive and can be found on ALG’s Gender Pay Gap Reporting and Pay Transparency hub.

Pay structures: employers will need to put in place pay structures ensuring equal pay for equal work or work of equal value.

Gender pay gap reporting: while gender pay gap (GPG) reporting under the Directive is similar to the existing Irish regime, there will nonetheless be some important changes on that front such as an obligation to report (to employees and their representatives) on the pay gap by category of employee. Another significant change to the current GPG framework is that the concept of pay under the Directive for the purposes of GPG calculations will be wider and will include all consideration, whether in cash or in kind, which an employee receives in respect of their employment.

Joint pay assessments: where the GPG report indicates a gap which:

• is at least 5% in any category of workers
• has not been justified by objective and gender-neutral factors
• has not been remedied within six 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) in co-operation with employee representatives, with the results to be made available to employees, their representatives and the monitoring body.

Ban on pay secrecy: measures will be put in place to prohibit pay secrecy clauses, permitting employees to disclose information about their pay. It is important to highlight that “pay” is very broadly defined under the Directive, covering an employee’s basic salary and any other consideration in cash or otherwise, including for example any sign-on or retention bonuses.

Information rights for employees: all 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.

Pay transparency for job candidates: employers will be required to indicate the initial pay level or range in a job vacancy notice or otherwise prior to interview.  Importantly, employers will not be permitted to ask applicants about their pay history (including their current salary). 

Compensation and penalties for non-compliance: under the Directive, employees will be entitled to full recovery of back pay and related bonuses and payments in kind, as well as compensation for lost opportunities and non-material damage with no fixed upper limit. This could be quite substantial, depending on how far back an equal pay issue goes. Member states must set down rules on effective, proportionate and dissuasive penalties for infringements of the right to equal pay. Member states are given significant latitude to determine the nature of these rules.

Workers’ representatives – will they be compulsory?

Integral to the effective functioning of the Directive will be workers’ representatives, who are positioned as key stakeholders in both the implementation and enforcement of pay transparency obligations. The Directive confers a range of rights and responsibilities on these representatives, which underscores the EU’s acknowledgement of their role as one of the driving forces in its practical operation.

While the Directive doesn’t expressly require employers to appoint or elect workers’ representatives, many of its provisions assume there will be workers’ representatives in place.  The recitals (which are not legally binding) state that workers should be able to be represented and if there are no workers’ representatives, workers should be able to be represented by a representative of their choice.  We will need to wait and see how the legislature decides to proceed on the question of whether workers’ representatives will be compulsory.  The recitals also state that the joint pay assessment should be carried out by employers in cooperation with workers’ representatives and that if there are no workers’ representatives, they should be designated by workers for the purpose of the joint pay assessment.

It is not entirely clear what will happen if an organisation does not already have workers’ representatives in place.  We will need to await the transposing legislation in the hope that it will clarify this key question for employers.

What is the role of workers’ representatives?

Some of the key powers and duties of workers’ representatives under the Directive are outlined below.

• Pay structures: pay structures will need to enable the assessment of whether workers are in a comparable situation regarding the value of work on the basis of objective, gender-neutral criteria.  These criteria will need to be agreed with workers’ representatives where such representatives exist.

• Right to pay information: workers may request pay information personally, or through their representatives or an equality body.
• Gender pay gap reporting: workers’ representatives will be involved in gender pay gap reporting in a number of ways, including the following:
  • management will consult with workers’ representatives on the accuracy of the information
  • the gender pay gap, broken down by categories of worker, will be provided to workers and their representatives
  • employers will co-operate with workers’ representatives and other bodies in remedying unjustified pay differences
• Joint pay assessment (if triggered/required): if a joint pay assessment is required, workers’ representatives will be involved in a number of ways, including the following:
  •  the joint pay assessment is to be conducted in co-operation with such representatives
  • the criteria on which reasons for pay differences are based will be established jointly by workers’ representatives and the employer
  • employers will closely co-operate with workers’ representatives in remedying unjustified differences in pay
• Limited disclosure: Ireland may decide that, where information could disclose the pay of an identifiable worker, workers’ representatives, the labour inspectorate, or the equality body shall have access to that information and shall have a role in advising workers of potential claims.
• Procedures on behalf or in support of workers: workers’ representatives, as well as organisations, equality bodies and other legal entities with a legitimate interest in gender equality, may engage in administrative or court proceedings concerning alleged breaches of equal pay rights.
• Protection against victimisation and less favourable treatment: workers and workers’ representatives shall not be victimised or treated less favourably for exercising their equal pay rights or for supporting another person in doing so.
• Technical assistance and training: we would recommend that employers procure training for workers’ representatives to ensure they understand their role.

Next steps

Despite the fact many of the details are yet to be determined, there is a lot that employers can do now, to look ahead and prepare for pay transparency.  Employers should take steps now to examine existing pay structures, recruitment, pay transparency and gender pay gap reporting practices, and address any issues, before they are forced to do so. 

While we wait with interest to see how “workers’ representatives” will be dealt with in the transposing legislation, employers should nonetheless commence preparation rather than adopting a ‘wait and see’ approach. Employers will be required to work in close cooperation with worker's representatives, where they exist.  Where worker’s representatives are in place, employers can prepare to provide or procure training relevant to the implementation of the Directive to help them understand their rights and duties. The highly awaited transposing legislation will hopefully provide much needed clarity for employers in organisations where representatives are not currently in place.

For further information in relation to this topic please contact Noeleen Meehan, Partner, Emer Murphy, Senior Associate, or any member of the ALG Employment team.