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As an employer, it is important to be prepared for the changes that the Pay Transparency Directive will bring. This EU directive, adopted in March 2023, aims to reduce gender pay gaps and increase fairness in the labor market by promoting greater transparency in pay setting. Although Sweden already has a strong tradition of gender equality in the labor market, the directive means that you as an employer may need to take additional measures to ensure compliance with the new requirements. According to the Swedish inquiry's proposal, the legislative changes based on the directive are set to take effect on June 1, 2026.
Who does the Pay Transparency Directive apply to?
The Pay Transparency Directive applies to all organizations operating within the EU, regardless of industry. However, the requirements may vary depending on the size of the company, with larger companies facing more extensive reporting obligations.
Gender pay gap reporting vs. the Pay Transparency Directive
In Sweden, employers are already required to conduct gender pay gap reporting to highlight and reduce pay differences between men and women. Therefore, there is already a strong foundation for when the Pay Transparency Directive comes into effect, with some changes, such as the fact that job seekers are included in the directive.
Core requirements of the directive
Pay transparency in recruitment
Job seekers have the right to obtain information about starting salaries or salary ranges, as well as relevant collective agreement provisions, before employment. This information must be provided in a way that ensures informed and open salary negotiations.
The purpose of this provision, according to the inquiry's proposal, is to ensure that job seekers have enough information to conduct balanced and fair salary negotiations when entering into an employment relationship.
It‘s not permitted to ask a candidate about their current or previous salary. This is intended to prevent unjustified wage differences from carrying over to new workplaces.
Right to information for employees
Employees have the right to request written information about their own salary and the average salary of employees performing equivalent work at the same employer. The employee has the right to get this information presented separately for men and women. Employers must inform employees about current salary provisions and the employer’s applicable practices.
Reporting to the Diskrimineringsombudsmannen (DO)
Employers with 100 or more employees must report gender pay gaps in various key metrics to DO. Most of these metrics will be made public by the DO, such as the proportion of women and men receiving salary supplements or variable compensation.
If the salary reporting reveals a pay gap of more than 5% that is not justified or rectified within six months, the company must also submit its gender pay gap report to DO.
Changes to gender pay gap reporting
The directive adds an additional analysis to the gender pay gap reporting. To prevent, identify, and address wage discrimination for employees who have been on parental leave, have taken leave to care for a relative, or have been absent due to urgent family reasons, their wages must be compared with employees who have not taken such leave.
Measures to take now
To meet the requirements of the Pay Transparency Directive and ensure your organization is well-prepared, consider taking the following actions:
1. Evaluate your current situation
Review and, if necessary, update your salary policy to ensure it includes clear criteria for setting and increasing salaries. The directive requires that all pay differences must be justified by objective and gender-neutral criteria. This means you must be able to demonstrate that pay setting is based on clear and fair criteria, such as experience, education, responsibility level, and performance, rather than gender. Ensure that all decision-makers involved in wage setting are aware of these requirements and trained to apply them correctly.
2. Prepare for reporting to the DO
If you have 100 or more employees, you must report pay gaps to the DO. According to the transitional provisions, the first reporting will take place at different times and intervals depending on the number of employees. Employers with 150 or more employees start reporting in June 2027, and those with between 100 and 149 employees must report for the first time in 2031.
3. Communicate with employees
Ensure your employees are aware of their rights under the new directive and what they can expect in terms of pay transparency. This can be done through internal communication campaigns, training, and meetings.
4. Review recruitment processes
Adjust your recruitment processes to ensure that salary information is communicated clearly and correctly at an early stage.
Conclusion
The Pay Transparency Directive introduces new requirements that will affect how you, as an employer, handle pay setting and salary information. By taking proactive measures and starting to adapt your processes now, you can ensure that your organization not only complies with the upcoming legal requirements but also strengthens its reputation as a fair and transparent employer. Gender equality and fairness are not only legal requirements but also key to attracting and retaining talent in today's competitive labor market.
Your wage mapping is an important cornerstone of a company's work on sustainability issues, which is also important for customers, investors, and other stakeholders.
If you have Azets as your payroll partner, we can offer everything from services related to gender pay gap reporting to extracting data from the payroll system. Don’t hesitate to contact us if you want to get started.
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