8. EU Pay Transparency Directive 2023/970 and work of equal value

This chapter opens by providing the background to the Pay Transparency Directive. This is followed by a review of pay reporting and publication requirements to enable comparisons between employers, sectors and regions. It then gives examples of how comparisons of equal work and work of equal value have been interpreted under the current pay survey provisions and the change brought about by the Directive. Finally, the issue of Member States’ responsibility for developing templates and analytical tools is addressed. It recognises the need to limit additional costs and administrative burdens.

The voluntary track has been abandoned – not just in the EU

On 10 May 2023, the EU Pay Transparency Directive 2023/970 was adopted. The design of the Directive is based on the realisation that, exceptional cases aside, litigation has been an unsuccessful route to correcting pay inequalities. At the same time, realisation of the need to develop new proactive approaches has grown not only in the EU, but also in countries such as Australia, Canada, Iceland and New Zealand. The development of legal regulations on pay transparency has thus been observed on a global scale.

The Directive must also be seen in the context of the objective of closing the gender pay gap in the European Union by 2020. To achieve this objective, the European Commission adopted recommendations in 2014 for Member States to take voluntary measures to increase transparency in pay structures and pay setting from a gender perspective.

European Commission, Commission Recommendation on strengthening the principle of equal pay between men and women through transparency, COM(2014)1405 final.

The 2014 recommendations can be described as a toolbox consisting of four key measures: individual rights to information on pay setting, reporting at company level, pay audits and equal pay in collective agreements.

Fransson and Stüber (2019) Nya metoder för jämställda löner – insyn, rapportering och certifiering (New approaches to equal pay – transparency, reporting and certification).

The adoption of the Directive means that the voluntary route has been abandoned. The new binding regulation is fairly comprehensive. It aims to strengthen the application of the principle of equal pay in various ways compared to how it has been expressed until now in Directive 2006/54. Examples of changes include the right to information for individual job applicants or employees, requirements for company- or establishment-based pay analyses related to the concepts of equal work and work of equal value, requirements for employers to report key figures on gender pay differentials to a national supervisory body and for parts of this data to be compiled and published. To improve the conditions for applicants in pay discrimination disputes, there are amendments concerning the limitation period and the burden of proof. In addition, the Directive also lists new forms of sanctions, makes links to public procurement and provides a legal definition of intersectional discrimination. The examples given here are far from exhaustive. The Directive is to be implemented in the EU Member States by 7 June 2026, although it has not been possible to obtain official information on the extent to which Iceland and Norway are following this timetable. At the end of May 2024, the Swedish commission presented its proposal for the implementation of the Pay Transparency Directive, SOU 2024:40.

Reporting and publication requirements

In the context of this report, commentary is provided on the Directive focused on the theme of work of equal value. Firstly, it should be noted that this is the first time that EU legislation has specified the criteria on which to assess if two jobs are of equal value. The criteria set out in Article 4.4 are skills, effort, responsibility and working conditions.

Employers with at least 100 employees are affected by a number of detailed provisions. For example, reporting key performance indicators on pay differentials to a monitoring body (Article 9.7), which is then tasked with publishing parts of this data. Employers have an obligation to inform employees about pay differentials based on the categories of equal work and work of equal value (Article 9.9 and 9.10). There are also requirements for consultation (Article 9.6) and joint pay assessments with employee representatives (Article 10). In Sweden, which has just over 10 million inhabitants, about 5,500 employers are affected by the ‘100 limit’ and in Norway, which has just over 5 million inhabitants, about 4,000 employers are affected.

https://www.ssb.no/virksomheter-foretak-og-regnskap/virksomheter-og-foretak/statistikk/virksomheter

Pay data, or rather key figures, which are made publicly available via a website under the responsibility of a monitoring authority, are not related to the concepts of equal pay and work of equal value. Instead, the data relates to pay differentials categorised as basic pay and various allowances or variable remuneration (Article 9.1.a-f). The publication of these pay differentials by the supervisory body is not only linked to the individual employer but also consists of summaries linked to sectors or regions (Article 29.3.c).

Work of equal value – reporting requirements but no publication requirements

The reporting requirement applicable to employers with at least 100 employees also includes the compilation of gender pay differentials broken down by basic pay and bonuses or variable remuneration, based on the categories of equal work and work of equal value. This is set out in Articles 9.1.g and 9.7. However, there is no requirement to publish this pay data, which is, in contrast, set out in Article 29.3.c. Employers with between 100 and 249 employees are required to report every three years (Articles 9.2-9.4).

Member States shall ensure that the information, analysis, and reporting obligations are combined with effective sanctions for non-compliance (Article 23.1). Non-compliance with reporting requirements should be easy to verify. The Directive proposes the use of sanctions or penalties as corrective tools.

Experience from Finland, Norway and Sweden shows that compliance with pay survey provisions has so far been very limited. Against this background, the Directive could bring about a qualitative change, provided that states make use of the ability (or requirement) to impose penalties for non-reporting. The reporting requirements to the monitoring body include providing data on pay differentials for equal work and work of equal value.

A key task for the monitoring body will be to develop easily accessible reporting tools and templates to minimise additional costs and administrative burdens. This will affect both individual employers and the work of the supervisory body in compiling pay data and statistics for publication.

Future supervision and research on work of equal value at establishment level

Pay data related to work of equal value at the establishment level is not subject to the mandatory publication requirements in Article 29.3.c. In countries where the principle of public access to information has a strong position, this means that, for example, researchers, labour market parties or journalists will be able to request documents received by the supervisory authority. According to Articles 9.1.g and 9.7, these documents include information on pay differentials for work of equal value at the establishment level.

To summarise, the Directive allows opportunities for individuals to access a wealth of new data on equal pay. How these opportunities will materialise in practice will depend on national legislation on public access to information and secrecy.

A comparison with existing pay survey provisions

As mentioned earlier, all the Nordic countries except Denmark have provisions on pay surveys. The basis for these surveys is the pair of concepts of equal work and work of equal value. The pay survey provisions in these countries are fairly similar in that the legal text is less detailed than the corresponding provisions in the new Directive. The level of detail in the Icelandic equal pay standard, on the other hand, is greater than in any other Nordic legislation. Only in Iceland is there a requirement to report pay differentials for equal work and work of equal value to a supervisory body. In Norway, employers are required to publish the results of pay surveys. A common denominator of the existing legislation on pay surveys is that there is no detailed description of the methodology for conducting pay analyses for work of equal value. Similarly, there are no percentages indicating more or less acceptable pay differentials in the existing legislation.

From the text of the Directive, it is possible to infer a two-step proactive procedure aimed at addressing unjustified pay differentials between women and men.

Step one is set out in Articles 9.6, 9.9 and 9.10. The employer must produce information on the gender pay differentials in consultation with workers’ representatives (Article 9.6). Subsequently, results showing pay differentials for equal work and work of equal value must be presented to all workers (Article 9.9). Furthermore, it states that the employer has an obligation to remedy, within a reasonable time period, pay differentials that cannot be objectively justified, i.e. on the basis of clear pay criteria or the provisions of collective agreements (Article 9.10). This step does not set a threshold for an unjustified pay differential to be corrected.
The second stage, also called ‘joint pay assessment’, is only triggered if all three conditions of Article 10.1 are met, namely
- there is a differential in the average level of pay of at least 5 per cent in any category of workers (i.e. equal work or work of equal value)
- the employer has not been able to justify the pay differential on the basis of existing pay criteria
- the pay differential is not remedied within six months from the date of submission of the pay report

Overall, a joint pay review under Article 10 (step 2) entails a more extensive undertaking from the employer’s perspective than if the pay differentials had been addressed under the procedure set out in Articles 9.6, 9.9 and 9.10 (step 1). In the case of a joint pay assessment, there are additional obligations, including providing information to the monitoring body.

In the Nordic countries, there are no provisions corresponding to the Directive’s 5 per cent rule. To illustrate the change from how existing pay mapping provisions have been interpreted,

The example is likely to be valid not only for Sweden but also based on equivalent legislation in other Nordic countries.

the first two pictures below use examples used by the Swedish Equal Opportunities Ombudsman and the Equality Ombudsman. In the company ‘Fictitious’, five different levels of work requirements are identified, with level 1 indicating the highest requirements and level 5 the lowest requirements. The first figure illustrates the pay analysis for equal work and the second figure illustrates the analysis for work of equal value. The third figure is based on the same pay data but linked to the new Directive’s threshold of a pay differential of at least 5 per cent.

Comparison – equal work
Requirement level	Work	Gender distribution				Average pay
		Number		Per cent		Women	Men	W+M	W’s pay as % of M’s
		W	M	W	M	Women	Men	W+M	W’s pay as % of M’s
1	Department Head	1	2	33	67	31000	35000	33700	89
2	Supervision	1	2	33	67	21000	24000	23000	88
3	Information officer	2		100		19000		19000
3	Engineer		2		100		22000	22000
3	Salesperson	2	2	50	50	20500	19500	20000	105
3	Economist	1	1	50	50	21000	22000	21500	95
4	Assembly	2	24	8	92	17500	19000	18900	92
4	Repairer		5		100		18500	18500
4	Secretary	2		100		18000		18000
4	Laboratory staff	8		100		17000		17000
5	Driver		2		100		16000	16000
5	Warehouse worker	1	3	25	75	15000	15000	15000	100
5	Cleaner	2	1	67	33	13500	13500	13500	100
5	Receptionist	1		100		16000		16000

In Figure 1 above, equal jobs performed by both women and men are marked in red. The green markings indicate women’s pay as a percentage of men’s pay for each different job. Pay data is compared across each row, i.e. for each job separately.

Work of equal value	Requirement level	Work	Gender distribution				Average pay
			Number		Per cent		Women	Men	W+M
			W	M	W	M	Women	Men	W+M
	1	Department Head	1	2	33	67	31000	35000	33700
	2	Supervision	1	2	33	67	21000	24000	23000
→	3	Information officer	2		100		19000		19000
	3	Engineer		2		100		22000	22000	←
	3	Salesperson	2	2	50	50	20500	19500	20000	←
	3	Economist	1	1	50	50	21000	22000	21500	←
	4	Assembly	2	24	8	92	17500	19000	18900	←
	4	Repairer		5		100		18500	18500	←
→	4	Secretary	2		100		18000		18000
→	4	Laboratory staff	8		100		17000		17000
	5	Driver		2		100		16000	16000	←
	5	Warehouse worker	1	3	25	75	15000	15000	15000	←
→	5	Cleaner	2	1	67	33	13500	13500	13500
→	5	Receptionist	1		100		16000		16000

Figure 2 above focuses on pay differentials between jobs of equal value. The starting point is to draw attention to the existence of structural undervaluation of occupations dominated by women, regardless of whether women or men are doing the work in the individual case. This is shown in the rightmost column, which indicates the average pay for women and men together. Jobs in which the share of women is more than 60 per cent are marked with a red arrow on the left, and darker shading. The pay levels for these jobs should be compared with the pay levels for jobs not dominated by women, marked with green arrows on the right.

Article 9.1g Pay differentials by employee category + art. 10.1a with max 5% diff. as limit value

Existing Jobs (equivalent jobs)	Number		Average pay		Category of workers (Requirement level of work of equal value)	Total pay in category of workers		Women’s pay as a percentage (%) of men’s pay in the category of worker
Existing Jobs (equivalent jobs)	Women	Men	Women	Men		Women	Men
Department Head	1	2	31 000	35 000	1	31 000	70 000
Total in category	1	2				31 000	70 000
Average pay in category						31 000	35 000	89%
Supervision	1	2	21 000	24 000	2	21 000	48 000
Total in category	1	2				21 000	48 000
Average pay in category						21 000	24 000	88%
Information officer	2		19 000		3	38 000
Engineer		2		22 000			44 000
Salesperson	2	2	20 500	19 500		41 000	39 000
Economist	1	1	21 000	22 000		21 000	22 000
Total in category	5	5				100 000	105 000
Average pay in category						20 000	21 000	95%
Assembly	2	24	17 500	19 000	4	35 000	456 000
Repairer		5		18 500			92 500
Secretary	2		18 000			36 000
Laboratory staff	8		17 000			136 000
Total in category	12	29				207 000	548 500
Average pay in category						17 250	18 913	91%
Driver		2		16 000	5		32 000
Warehouse worker	1	3	15 000	15 000		15 000	45 000
Cleaner	2	1	13 500	13 500		27 000	13 500
Receptionist	1		16 000			16 000
Total in category	4	6				58 000	90 500
Average pay in category						14 500	15 100	96%

Figure 3 above: As mentioned earlier, the Directive is based on a two-step model aimed at proactively addressing unjustified pay differentials for equal work and work of equal value. The novelty of introducing these steps is that individual workers do not have to initiate a legal process against their employer for pay discrimination. The above provides the necessary analysis to assess whether the pay differential within a category of workers is at least 5 per cent.

The meaning of the concept of a category of workers is set out in Articles 3.1.h and 9.1.g.

In the example, this is the case in all equivalent levels except level 5 (bottom). In this case, the differential between all women’s pay and all men’s pay is 4 per cent. Conversely, women’s pay is 96 per cent of men’s pay. Such an analysis becomes necessary if local parties have not addressed the unjustified pay differential under Step 1 (i.e. Article 9.10).

To summarise, Figure 3 highlights the new form of analysis introduced by the Directive, which can be described as a combination of the methods in Figure 1 and Figure 2. The pay differentials for levels 1 and 2 are exactly the same in Figures 1 and 3. As regards the calculation of the pay differentials for levels 3, 4 and 5, there are differences between Figure 2 and Figure 3, i.e. when there are several jobs of equal value for which pay is to be compared.

Responsibility of Member States – analytical tools and methods for analysing pay

Article 4.2 clarifies that Member States have a responsibility to develop analytical tools and methods for analysing pay from a gender perspective, with the aim of preventing pay discrimination. The text of the Directive recalls that each Member State has an obligation under the Treaty on the Functioning of the EU to ensure that the principle of equal pay is applied. It also emphasises the need to limit additional costs and administrative burdens for employers, with particular regard to micro, small and medium-sized enterprises. Article 29.3.b also refers to “tools” for assessing pay inequalities and in this context is linked to the tasks and needs of the monitoring body. The same article refers to the fact that guidance or specific help can be obtained from the analytical work and tools of EIGE. EIGE is the EU expert body on gender equality issues. In addition, Article 11 states that Member States shall provide support, in the form of technical assistance and training, to employers with fewer than 250 employees and to the workers’ representatives concerned.

The use of the term tool in the Directive is vague and can be assigned a number of different meanings. This is not helped by the fact that EIGE, referred to in Article 29, has not yet developed any form of pay analysis tool. According to email communications between the Swedish Gender Equality Agency and EIGE in January 2024, development work on such a tool was planned to start in late spring 2024. According to EIGE, the aim of such a tool would be to support the work of local parties. Consequently, the results of EIGE’s work cannot form the basis for the ongoing national implementation processes, as the work of preparing legislative proposals has already started in several of the Nordic countries.

The administrative support that employers will need is not just about guidance on the assessment of work requirements and the comparison of work of equal value. Support or templates are also needed for the reporting of a range of pay data, as described earlier. This pay data from thousands of employers must then be scrutinised by the supervisory body, compiled, transformed into statistics and in some cases published. Overall, therefore, there is a need to develop analytical tools and templates for use at the establishment level (local level), to deliver data to the central level (the monitoring body), among other things, and tools for analysing pay differentials and producing statistics carried out at the central level, i.e. by the monitoring body. These different analytical tools and templates for use at the local and central levels need to be developed in parallel and harmonised with each other.

Equal work and work of equal value – two concepts gaining importance

In summary, the Pay Transparency Directive aims to strengthen and clarify the principle of equal pay under EU law, which is based on comparisons of equal work and work of equal value. Employers with at least 100 employees need to apply these concepts when formulating their pay criteria and pay policy statements. Furthermore, these employers must be able to account for gender pay differentials linked to equal work and work of equal value – to their own staff, in consultation procedures with trade union representatives and in mandatory reporting to the monitoring body. In all the Nordic countries that already have pay survey provisions, the thresholds for written documentation are between 10 and 50 employees. Compliance with existing provisions is likely to be strengthened as a result of the implementation of the Directive.

8. EU Pay Trans­parency Directive 2023/970 and work of equal value