The impetus for the EU Pay Transparency Directive was to address the 12.7% gender pay gap in the European Union. The United Kingdom left the EU, the EEA and the single market on Dec. 31, 2020. However, UK organizations with operations or employees in EU member states will be required to comply with the EU Directive.

In the wake of the Labour Party’s election victory, employers should prepare for change. The new government’s election manifesto promised reforms on workers’ rights within 100 days as part of its New Deal for Workers.

In a pre-election interview, the then Shadow Chancellor Rachel Reeves promised to close the gender pay gap “once and for all.” That could extend to aligning gender pay gap reporting with the EU Pay Transparency Directive in the future. Furthermore, the Labour Party has stated goals to implement mandatory ethnicity and disability pay gap reporting.

Eliminate the Complexities of Global Pay Data Reporting

Since 2017, public, private, and voluntary sector UK organizations with 250 or more employees have been required to report on their gender pay gap. Based on current rates of progress, working women in the UK face a 45 year wait to achieve pay equity.

At 14.3%, the UK’s gender pay gap is slightly higher than the EU average. The UK’s Equality Act 2010 requires men and women to be paid the same for work of equal value.

UK employers with operations in the EU will need to begin updating their HR policy and practices to prepare for the more extensive requirements of the upcoming EU Directive.

Quick Action Items for UK Employers

UK employers operating in the EU are unlikely to be prepared for the in-depth reporting required by the EU Directive. Items include:

The EU Directive deliberately uses the wider term of “worker” versus “employee” to account for contractors. UK law applies to a broad range of employees, including agency workers, people on temporary contracts, and self-employed people.

Employers with operations in the EU 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.

UK Employers’ Current Requirements 

Applicable UK employers must provide a comparison of the median or average pay of women versus the median or average pay of men in their organization by calculating the following metrics:- 

  • Percentage of men and women in each hourly pay quarter
  • Mean gender pay gap of hourly pay
  • Median gender pay gap of hourly pay
  • Percentage of men and women receiving bonus pay
  • Mean gender pay gap of bonus pay
  • Median gender pay gap of bonus pay

An accompanying narrative to provide context to pay gaps may be included, together with an action plan setting out steps to address the pay gap. Neither are mandatory. Ethnicity pay gap data may also be voluntarily submitted.

All publicly listed firms with more than 250 UK employees are required to publish CEO pay ratios.

Access the UK’s Gender Pay Gap Reporting Guide

Updates to UK Gender Pay Gap Reporting Under Labour 

In addition to building on gender pay gap reporting, Labour has pledged to introduce new equal pay rights legislation to cover disability and race. Disability and ethnicity pay gap reporting is also expected to be introduced for large employers.

Where gender pay disparities exist, employers may be required to publish and implement action plans to close those gaps.

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. The first large organizations will need to submit pay data reports by June 6, 2027.

Access Our EU Directive Guide

The EU Pay Transparency Directive establishes minimum standards. Member states may implement more stringent measures or adapt existing requirements to comply.

UK organizations with operations or employees in EU countries can act now to ensure compliance by reviewing hiring processes to comply with pay transparency requirements and create equitable, explainable and competitive salary ranges.

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. In cases of alleged pay discrimination, the burden of proof shifts to the employer.
  • 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.

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.