Implementation of the EU Pay Transparency Directive: Stronger enforcement of the right to equal pay
As a result of the EU Pay Transparency Directive (Directive (EU) 2023/970), employers will be given a new set of tasks in the field of ensuring equal pay.
The Directive, adopted on 10 May 2023, builds on existing regulations within the EU on the right to equal treatment between men and women. The right to equal pay for equal work in particular is enshrined in Article 157 of the Treaty on the Functioning of the EU and had been previously elaborated on in the Equal Pay Directive (2006/54/EC).
Nevertheless, there is still a significant pay gap in the Netherlands. According to Statistics Netherlands, there is still a pay gap of almost 7% between men and women in the Dutch private sector, even when corrected for factors such as age, education, contract type and position.[1] In the public sector, the adjusted pay gap is smaller (2%), but women are still not equally represented in top positions.[2]
The new Pay Transparency Directive makes it easier to exercise existing rights. The baby teeth have been exchanged, as it were, for a new – sharper – set. For example, reporting and transparency obligations are imposed on employers, employees are given the right to information and compensation, and fines can be imposed on companies that do not comply with the obligations.
Member States have until June 7, 2026 to implement the Directive. On 26 March 2025, the Dutch Ministry of Social Affairs and Employment published a draft bill to implement the Directive.
New obligations for employers
The most important obligation that employers are given is the obligation to report on the pay gap within their organization. This obligation specifically targets larger companies. When companies have to comply with this obligation and how often they have to report depends on the size of the company:
- Employers with 250 employees or more must report annually, starting June 7, 2027,[3]
- Employers with 150-249 employees must report every three years, also starting 7 June 2027,[4]
- Employers with 100-149 employees must report every three years, starting 7 June 2031,[5]
- Employers with fewer than 100 employees do not have a reporting obligation under the Directive, but this obligation can be imposed by Member States. [6]
Employers are not just obliged to report on the pay gap, but also on the gap in variable salary components such as bonuses, and on the share of men and women in different salary ranges.[7] The report must be shared with the representative of employees, in the case of the Netherlands the works council.[8] In addition, the works council has the right to have access to the methodology applied.[9] The report is also shared with an authority in charge of monitoring the gender pay gap in the Member State.[10]
If this report shows a pay gap of more than 5% without an objective justification, companies must take action in the form of a “joint pay assessment“, drawn up in collaboration with the works council.[11] Part of the joint pay assessment is the evaluation and preparation of measures to reduce the pay gap.
This system forces large employers to pay attention to the pay gap within their organization. Currently, 78% of Dutch employers do not measure whether there is a pay gap within their organization. Despite that and the proven pay gap, 78% of employers think that they do pay equally.[12] Making information available internally could go a long way towards closing the pay gap. The Directive forces employers to provide insight into the pay gap and to correct course if there are unjustified differences.
In addition, a number of other obligations are imposed on all employers, regardless of the size of the organization. For example, job titles and descriptions must now be worded in a gender-neutral way.[13] Furthermore, it will be forbidden for employers to ask about the pay history of an applicant.[14] The latter should prevent inadvertent continuation of previous inequality because women are offered salaries on the basis of their previous salary. This type of remuneration policy exacerbates the existing pay gap.[15]
Transparency & information
Employers must provide information about the salary (or a bandwidth) that the applicant would earn if they are hired, prior to the application procedure.[16] In other words: if an employer posts a vacancy online, for example, a salary bandwidth might be included immediately in that vacancy.
Once employed, employees also have the right to receive information about the average salary – broken down between men and women – for employees in the same job or a job of equal value.[17] In addition, employees must also be able to turn to the works council or the national monitoring authority for this information.[18] That information must be provided on request within a reasonable period of time, but in any event within 2 months.[19]
The Directive also creates a right to discuss pay with colleagues to the extent that this is done to ensure the right to equal pay. This may not be prohibited by employers.[20] However, employers may stipulate that the information that employees obtain as a result of these rights may only be used to ensure the right to equal pay.[21]
Compensation and enforcement
The Directive entails a supervisory role and a monitoring role for public authorities.[22] In addition, there is a role for the judge, since the rights must be enforceable in both administrative and civil proceedings.[23]
The Directive provides a number of enforcement methods. For example, fines must be imposed on employers who do not comply with the rules.[24]
In addition to possible fines, the rights in the Directive can also be enforced through private law. Article 17 of the Directive stipulates that it must be possible for judges to order employers to comply with the obligations. If necessary, such a judgment can be enforced through penalty payments.
In addition, the Directive clarifies what the right to compensation for pay discrimination entails. Employees who are victims of discrimination are entitled to the full recovery of backpay, including bonuses or payment in kind, compensation for lost opportunities and compensation for non-material damage.[25]
Under the Directive, the burden of proof lies with the employer. The employee only has to establish that they are potentially underpaid as a result of direct or indirect discrimination. The employers must prove that there was no discrimination. We already have such a provision regarding the burden of proof in the Netherlands,[26] but proving discrimination is also made easier for victims in other ways.
Proving wage discrimination is usually done by means of a salary comparison between the victim and a reference employee with a position of equal value. This wage comparison is now made easier for victims. For example, a salary comparison does not necessarily have to take place with an employee who works in the same place at the same time as the victim of discrimination.[27] This way, the salary of a predecessor could also be used for the comparison. If no comparison is possible at all, the Directive also provides that it must be possible to base a judgement on statistical evidence or on evidence of discrimination in a comparable situation.[28]
The consultation period on the draft implementation law ends on 7 May 2025, and the Directive must be fully implemented by 7 June 2026. Rubicon Impact & Litigation is following the developments on this topic carefully. Want to know more? Please contact Maxime Eljon (eljon@rubiconlitigation.com).
Endnotes:
[1] See the emancipation monitor published by the Statistics Netherlands: https://longreads.cbs.nl/emancipatiemonitor-2024/verdienen/.
[2] See the research published by economic research institution SEO regarding gender diversity in top positions in the (semi-)public sector: https://seo-monitor-website-p01.s3.eu-central-1.amazonaws.com/uploads/2025/03/2024-133-Monitor-Genderdiversiteit-2024-Grenzen-Verleggen.pdf.
[3] Article 9 par. 2 of the Directive.
[4] Article 9 par. 3 of the Directive.
[5] Article 9 par. 4 of the Directive.
[6] Article 9 par. 5 of the Directive.
[7] Article 9 par. 1 of the Directive.
[8] Article 9 par. 9 of the Directive.
[9] Article 9 par. 6 of the Directive.
[10] Article 9 par. 7 of the Directive.
[11] Article 10 of the Directive.
[12] See research by Ipsos I&O Publiek: https://www.ioresearch.nl/actueel/werkgevers-zien-geen-loonkloof-tussen-mannen-en-vrouwen-maar-meten-het-niet/.
[13] Article 5 par. 3 of the Directive.
[14] Article 5 par. 2 of the Directive.
[15] See also the explanation published by Bureau Clara Wichmann about the case against the Dutch government regarding the salaries of female judges.
[16] Article 5 of the Directive.
[17] Article 7 par. 1 of the Directive.
[18] Article 7 par. 2 of the Directive.
[19] Article 7 par. 4 of the Directive.
[20] Article 7 par. 5 of the Directive.
[21] Article 7 par. 6 of the Directive.
[22] Article 23, 28 and 29 of the Directive.
[23] See for example Article 16, 17 and 20 of the Directive.
[24] Article 23 of the Directive.
[25] Article 16 of the Directive.
[26] Article 6a Wgbmv and art. 7:646 par. 12 DCC. Further, art. 10 AWGB.
[27] See Article 19 par. 2 of the Directive.
[28] See Article 19 par. 3 of the Directive.