On May 17th, 2023, the 2023/970/EU directive was published, a new directive to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms. This will impose new obligations on all employers, albeit to different degrees, regardless of the size or business line of the concerned company. Member States will have to transpose the directive at the latest until 2026 June 7th.

The Directive seeks to make more accessible information related to salaries and bring solutions in the event of disparities between their male and female workers. The additional rules in labour litigation shall be kept in mind as the playing field is slightly beneficial for the party alleging discrimination. This directly implies new obligations for employers, who should start taking internal measures to gather all the information in cooperation with their payroll departments to prepare reports on their employees’ pay, and also implement further guarantees of ensuring pay transparency and equal pay.

That said, we divided this article into two sections. The first one is dedicated to the employer’s obligations, whereas the second one highlights some requirements that shall be achieved by Member States’ legislation in terms of labour litigation and the protection of the worker’s rights strengthened by the new directive.

Employers will be subject to pay transparency. They must make easily accessible the criteria for determining the pay setting and the progression, and they also must indicate the initial pay or its range to potential applicants, post the job titles in a gender-neutral way, and they will not be allowed to ask questions related to the applicants’ former or current salaries. 

Employees will also be able to request written information on their individual pay level and the average pay level listed by sex and categories of workers performing the same work, which shall be provided within two months. The directive also states that in general, workers cannot be prevented from disclosing their pay information.

For companies employing 100 or more workers, a new reporting obligation is introduced as well, concerning the pay gap between female and male workers. The report must indicate the gender pay gap and the median gender pay gap, the proportion of female and male workers in each quartile pay band, and the gender pay gap between workers by categories of workers (workers performing the same work or work of equal value) broken down by ordinary basic wage or salary and complementary or variable components.

  • For companies with 150 workers or more, this must be done first until the 7th of June 2027, and thereafter, depending on the size of the company, it must be repeated annually (250 workers or more) or in every three years (150-249 workers).
  • Companies employing 100-149 workers will have a longer transitional period: they must prepare the first report until 7th of June 2031, and after that, it must be repeated in every three years.

Entities such as worker’s representatives, labour inspectorate and equality bodies will have an important role as they will be entitled to ask for clarifications of this report, and the employer is obliged to give a response. Although the Hungarian national legislation is yet to be adopted, it can be expected that the labour authority and the Commissioner for Fundamental Rights will have this right. If the pay report proves that there is at least 5% unjustified difference between female and male workers that is not resolved within six months, the employer who is obliged to report also has to conduct a joint pay assessment together with the workers’ representatives, including the following:

  • An analysis of the proportion of female and male workers in each category of workers;
  • Information on average female and male workers’ pay levels and complementary or variable components for each category of workers;
  • Any differences in average pay levels between female and male workers in each category of workers;
  • The reasons for such differences in average pay levels, on the basis of objective, gender-neutral criteria, if any, as established jointly by the workers’ representatives and the employer;
  • The proportion of female and male workers who benefited from any improvement in pay following their return from maternity or paternity leave, parental leave or carers’ leave, if such improvement occurred in the relevant category of workers during the period in which the leave was taken;
  • Measures to address differences in pay if they are not justified on the basis of objective, gender-neutral criteria;
  • An evaluation of the effectiveness of measures from previous joint pay assessments.

It can also be expected that national litigation rules will be adapted to ensure the appropriate protection of the allegedly discriminated employee. Consequently, in terms of remedies and enforcement, judicial procedures shall be easily accessible, and it must be ensured that workers have the right to claim and obtain full compensation or reparation. In that way, the burden of proof will be reversed in two streams:

  • If the employer implemented the obligations set out in the directive: Workers must establish the facts on which they claim discrimination, and the employer has to prove that there is no direct or indirect discrimination in relation to pay and in second place.
  • If the employer has not implemented the obligations in the directive: The employer must prove that there was no discrimination.

In case of non-compliance, penalties are to be laid down by Member States, which means that in case of breach, consequences won't be the same. However, on the one hand, Member States shall ensure that fines are applied, and on the other hand, contracting authorities may exclude any economic operator from participation in a public procurement procedure in case of a failure to comply with pay transparency obligations, or a pay gap of more than 5 % in any category of workers which is not justified by the employer on the basis of objective, gender-neutral criteria. However, the specific national rules are yet to be adopted.

The Directive therefore aims to contribute to the enforcement of the principle of equal pay by sanctioning unjustified pay differences, making information on pay structures more easily available, and putting the party claiming the harm of the equal pay principle in a better position in court, which will also impose new obligations on employers.