A lack of clarity on pay transparency?
The publication of more details on pay transparency proposals in the UK and EU appears to have incurred diametrically opposed reactions from affected employers. Duncan Brown provides more detail and suggests employers need to continue to implement greater pay transparency and understanding.
It all seemed to be going so well..
There’s barely ten weeks to go now to this year’s June 7 deadline for the EU’s Pay Transparency Directive’s passage into national legislation by each member state. Late last month the European Institute for Gender Equality, in co-operation with the EU Commission, published a useful set of guidelines, an employer toolkit really, on gender-neutral job evaluation. This is a key foundation for equal pay in the Directive, which will apply to employers from June next year. Or so we thought..
Coincidentally in the same week, the UK government published on March 25 its response to the consultation it ran this time last year on its own general election manifesto commitment to extend pay transparency here. The response confirmed that they will proceed with their plans for mandatory pay gap reporting on ethnicity and disability, as well as making the currently voluntary publication of action plans to address gender pay gaps in future, mandatory and more specific across all three categories.
UK pay gap reporting
Annoyingly for employers, their response contains no timetable or implementation roadmap. But it does include a set of legislative provisions to illustrate how the regime is expected to operate after it is passed as part of the Equality (Race and Disability) Bill, hopefully later this year, with implementation then commencing probably from April 2027.
More helpfully, the proposals closely mirror the current gender pay gap reporting framework which has been operating since 2017, for example: in terms of applying to employers with 250 or more employees; against the same snapshot dates and publication deadlines; and with the same required six statistics of mean and median pay gaps, bonus gaps and pay quartiles.
IES recommended this approach in our response to the consultation; and it is already explained and illustrated in the CIPD’s existing voluntary guidance on Ethnicity Pay Reporting. Ethnicity is of course multi-faceted and necessarily more complicated than binary gender pay gap reporting. But again, the government, as IES recommended, will require employers to report at the minimum a binary comparison between white and employees of all other ethnicities; and between the pay for their disabled and non-disabled employees using the current statutory definition.
Given the varied pay positioning of different ethnic groups in the ONS’s national comparisons however, where sufficient data is available in larger employers a more granular breakdown of the four broad BAME categories will also be required, compared to their white employees.
The government has also sensibly included in the proposed requirements some additional stats to better interpret the pay gaps, such as the proportion of employees who do and don’t declare their ethnicity and disability status.
Despite some additions, this general alignment with the current gender reporting regime should substantially reduce the workload for UK employers, both compared to the set-up-from-scratch preparation involved for complying with the 2017 regulations, and in comparison with European employers. Although UK employers with more than 100 of their employees in any EU country will of course also have to comply with that country’s legislation transposing the Directive’s requirements. And up to a couple of million employees are estimated to be working here for European multinationals who have decided to apply the Directive’s transparency requirements.
Delays with the EU Directive
In recent weeks the cracks in the EU’s much more detailed approach have suddenly started to appear. At the turn of the year the EU Commission published an update, acknowledging that ‘a number of member states are signalling delayed national application of the Directive’. But the Commission still apparently confidently asserts that ‘the transposition deadline of June 7 2026 remains unchanged’.
While, to be honest, we weren’t holding our breath awaiting the publication of initial draft transposition proposals in Victor Orban’s Hungary or in Greece, the announcement of implementation difficulties and delays last week by France, joining Ireland, the Netherlands, Denmark, Czechia and Sweden in missing this June’s deadline, is much more concerning. Aside from pushing back the ultimate deadlines for employers, these countries are generally some of the most supportive of such equality legislation and were furthest along the transposition process. France, for example, already publishes information from employers for ten of the 11 metrics specified in the Directive’s requirements. So, what’s the problem?
Detail
These countries furthest down the implementation path for the 30-page Directive have concluded like the Swedish government that, ‘the design of the EU’s Pay Transparency Directive is too administratively burdensome and risks reducing gender equality gains (the Directive’s key objective)’. Following lobbying by employers group Ibec in Ireland for example, arguing that uncertainty over the final legislation was making employer preparation impossible, the Department for Equality announced that the June deadline would be missed, with implementation then on a ‘phased basis’. Denmark and the Netherlands both published their national legislative proposals with an effective implementation date of January 1 2027.
In a letter to the Commission on February 27, BusinessEurope sought not just delayed implementation but wholesale renegotiation of the Directive’s requirements. And Sweden is now putting their whole process on hold, in order ‘to initiate a renegotiation of the Directive in a regulatory simplification direction’.
Lessons learned
What lessons can the UK and its employers draw from what one law firm describes as ‘this confusion and chaos’?
The UK government may conclude that its more limited proposals on extended reporting are much more practical and therefore impacting. But on that basis we might question why the more straightforward aspects of the Directive, which research suggests on their own can have a positive impact on pay gaps, notably banning discussion of salary history in recruitment and mandating publication of pay rates, have not been adopted in the UK? Especially when the UK’s own progress on gender equality was described by our diversity expert Meenakshi Krishnan in the IES workshop on womens’ career progression last month as ‘stubbornly slow’.
Mercers 2026 Global Pay Transparency report, appropriately titled ‘Pay Transparency under Pressure’ found that while more than three-quarters of employers had developed pay transparency strategies, only 14% had fully implemented these plans. Key concerns included: data and systems problems (46%); leadership buy-in (39%); and employee understanding (42%).
The EU pay transparency situation may lack clarity. But employers in the UK and Europe need to continue to progress their own transparency agendas, not just to ensure compliance with slowly emerging national legislation, but also to ensure their own employees are clear about what they are paid, why and how fairness in their pay setting is achieved. As Stuart Hyland from lawyers Ellason concludes his latest update, ‘keep going – keep calm, keep pushing, keep the faith!’
Any views expressed are those of the author and not necessarily those of the Institute as a whole.