The EU wants equal pay for men and women: what does this mean for entrepreneurs?
August 2024 - The European Union is taking an important step towards equal pay for men and women with Directive 2023/970. Transparency of pay and enforcement mechanisms to close the pay gap are essential. For entrepreneurs, this means a number of new obligations and opportunities in the context of ESG (Environment, Social, Governance)...
What does the directive cover?
It aims to ensure equal pay for men and women for work of equal value. This measure is necessary because women in the EU still earn 14.1% less than their male counterparts... The pay gap not only affects wages, but also translates into a later pension gap... By improving transparency and tackling pay discrimination, the EU aims to reduce this inequality...
Impact on contractors
The new regulations apply to all employers, whether in the private or public sector... Contractors need to be prepared for a number of changes:
1. Information rights for job applicants and employees
As an employer, you must now inform job applicants of their starting salary or pay scale. At the same time, it is no longer permitted to ask job applicants about their current or previous salary. Employees have the right to ask for information about their own pay and average pay levels for similar positions within the company, broken down by gender...
2. Reporting obligation
Companies with 100 or more employees must report on the pay gap within their organisation. The frequency of these reports depends on the size of the company. Where a significant pay gap is identified (more than 5%) and cannot be objectively explained, you are required to take appropriate action in cooperation with employee representatives...
3. Protection against dismissal and right to compensation
Employees who feel they have been wronged can take legal action. As a company director, you should be aware that employees and their representatives are protected against dismissal or other unfavourable measures. In addition, a system of compensation may be imposed in the event of a breach of the rules on equal pay.
4. Penalties
Breaches of the Directive may result in sanctions. These may range from an obligation to put an end to the infringement, to the compulsory application of equal pay, to the payment of a penalty payment. In addition, the burden of proof now lies with you as the employer; you must be able to demonstrate that you are complying with the rules on pay transparency.
What should you do now?
The directive has been published and must be transposed into national law by 7 June 2026. As a company director, you still have a few years to adapt your organisation to these new regulations. In any case, it is becoming essential to properly document and justify pay differentials, promotions and bonuses using objective, gender-neutral criteria.
While the new European directive poses challenges, it also offers opportunities to create an inclusive working environment and strengthen your company's position in terms of social responsibility... Business leaders who proactively comply with these guidelines can not only avoid legal complications, but also boost the confidence of their employees and customers...
