New Legislative proposal promotes pay transparency and equal pay

On 10 May 2023, EU Directive 2023/970 was adopted. This directive requires Member States to implement measures by 7 June 2026 to ensure equal pay for equal work or work of equal value between men and women. The Dutch legislative proposal for implementation is now pending and has far-reaching consequences for employers. Once adopted, closing the gender pay gap will no longer be optional, but a legal obligation.

What will change for employers?

The proposal requires all employers, regardless of the size of their organisation, to be transparent about how pay is determined. Key obligations include:

• Structured pay systems: Employers must implement pay structures that allow assessment of whether employees are in a comparable situation in terms of the value of their work.
• Pay transparency before hiring: Employers must inform job applicants in a timely manner about the starting salary or salary range, including any applicable collective labour agreement provisions.
• Ban on salary history questions: Employers may no longer ask about a candidate’s previous salary to prevent past underpayment from affecting future compensation.
• Gender-neutral recruitment and pay structures: Job titles and descriptions must be gender-neutral, and remuneration must be based on objective factors such as skills and responsibilities.

Reporting and evaluation obligations for larger employers

Employers with 100 or more employees will be subject to additional obligations:

• Pay reporting: By 7 June 2027 (or 2031 for employers with 100–149 employees), companies must report on gender pay gap data, broken down by base pay and other benefits such as bonuses.
• Pay evaluation: If the report shows a gender pay gap greater than 5% for work of equal value, and this gap cannot be objectively justified, a pay evaluation must follow within six months.

Legal protections for employees

Employees will benefit from:

• The right to information about their own pay and the average pay of colleagues in equivalent roles, broken down by gender.
• Stronger procedural rights, including a (further) reversal of the burden of proof in legal proceedings.
• Protection against retaliation, for example when reporting unequal pay.

Role of Works Councils

Ondernemingsraden moeten betrokken worden bij het opstellen van beloningsstructuren, het beoordelen van rapportages en het plan van aanpak bij ongerechtvaardigde loonverschillen.

Final Remarks

The law will not only require employers to adjust internal policies and procedures, but also offers an opportunity to demonstrate good corporate citizenship. However, it is expected to increase administrative burdens, particularly for larger employers.