In response to the EU Pay Transparency Directive, which requires employers operating in European Union member states to report on pay data, Trusaic will be evaluating the state of each country in the EU’s current gender pay gaps and the path toward compliance.
The impetus for the EU Pay Transparency Directive was to address the 12.7% gender pay gap in the European Union. Estonia had one of the highest pay gaps in the EU heading as of 2022, but made significant progress in the past year.
The gender pay gap in Estonia was 13.1% in 2023, a 4.6 percentage point decrease from 2022. What’s more, the pay gap has reportedly decreased 11.7 percentage points since 2013.
While Estonia has established several laws to address pay equity in the country, there are no formal pay data reporting requirements. Thus, employers in the nation will need to prepare for the stringent forthcoming requirements of the EU Directive.
Quick Action Items for Estonia Employers
Estonia employers should move swiftly to prepare for the upcoming pay transparency and reporting requirements under the EU Directive.
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Organizations will need to take preliminary measures to begin reporting on their mean and median gender pay gaps. They will then need to expand on measures they are currently taking to remediate unexplained pay gaps of 5% or more.
Additionally, Estonia employers will need to:
- Provide sufficient salary range information to job candidates.
- Not ask job candidates about their salary history.
- Report yearly pay gap and act when it exceeds 5%.
- Account for intersectional discrimination in pay practices and consider needs of workers with disabilities.
As we’ve previously noted, the EU Directive deliberately uses the wider term of “worker” versus “employee” to account for contractors.
Additionally, you should proactively evaluate their current pay practices and overall compensation philosophy. Employers can lean on pay equity software solutions to expedite this process and determine root causes of potential pay disparities.
In effect, by 2026, all large employers (250+ employees) must report gender pay gaps. By 2031, all smaller employers (100 or more employees) will have to comply.
Estonia employers have been pushed to implement effective equal pay policies in recent years, but will need to update, refine, or even overhaul their compensation processes to comply with what’s ahead.
Current Requirements for Estonia Employers
EU countries have until June 2026 to adopt the EU Pay Transparency Directive into law, which primarily introduces gender pay gap reporting measures.
Estonia employers are not currently required to report on their gender pay gaps. The 2008 Equal Treatment Act does outline various worker protections and prohibits discrimination in pay based on gender, race, disability, and other factors.
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Under the Act, an employer has the duty to provide an explanation (section 7 of the Gender Equality Act) if a person finds that he or she has received unequal treatment due to his or her sex:
- In the course of recruitment, promotion, task assignment, selection for training – a written explanation shall be given to the person within 10 days, indicating the length of service and education of the selected person, his or her work experience and other skills or reasons which give the person a clear advantage.
- In the case of remuneration and harassment, imposition of disciplinary sanctions (list in subsection 6 (2) of the Gender Equality Act) – within 15 days
Enforcement in cases of pay discrimination are not made clear under the Equal Treatment Act, but employees are able to file claims through the Equal Treatment Commissioner for investigation. Discrimination disputes are resolved by a court or a labor dispute committee.
Complying with the EU Directive
The EU Pay Transparency Directive was approved in 2023, establishing a clear framework for EU member states to apply the principle of equal pay for equal work or work of equal value.
EU member states have three years from June 7, 2023 to transpose the directive into law. Likely implementation dates are 2026, however, some countries may enact legislation earlier. All 27 member states are required to adopt the directive.
Employers operating in EU member states can take several preliminary steps to ensure compliance with the upcoming legislation. The EU Directive includes a requirement for a Joint Pay Assessment where pay gaps are higher than 5%.
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Estonia has indicated it is in the process of developing amendments to be transposed into law.
Applicable Estonia employers should reevaluate recruitment processes to comply with salary range and salary history ban requirements. One way to achieve this is to create equitable, explainable, and competitive salary ranges. For example, is the base salary competitive and commensurate with employee skills?
Other items include:
- Pay explainability. Prepare to explain how you differentiate and define performance in setting base salaries. Pay transparency legislation means workers must be given access to criteria used to define salary and pay raises.
- Analyze pay gaps. Identify the causes where pay disparities exceed 5%. If there is no objective justification, we recommend addressing any anomalies to remove those unexplained gaps.
- Intersectional pay equity audit. Intersectionality is essential to close the gender pay gap. It recognizes that individuals can experience discrimination and inequality based on the intersection of multiple identities, such as race, gender, disabilities, age, and more. As noted above, intersectional discrimination is defined in the EU Transparency Directive.
Trusaic is GDPR compliant and can assist any organization in any EU state in meeting its obligations under both the EU Corporate Sustainability Reporting Directive and the EU Pay Transparency Directive.
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