While the principle of equal pay has been enshrined in EU law since 1957, data from Eurostat put the gender pay gap across the EU at 12.7% in 2021, a figure the European Commission says ‘has only changed minimally over the last decade’ and which remains ‘unexplained’ when factors such as education, occupation and working time are accounted for.
The Gender Pay Gap Information Act 2021 saw Ireland get to grips with the issue for the first time. Data from 2022, involving organisations with 250 or more employees, put the Irish gender pay gap at an average of 9.6% – lowest in the education sector (2.7%) and highest in financial, insurance and real estate (24.7%). Critically, this data was collated for organisations as a whole and not segmented by roles within them.
‘71% of employers would currently face a fine under the directive’
Broader and deeper
The EU’s introduction of a new pay transparency directive in April 2023 means, according to Sarah Klachin, a senior associate at law firm Pinsent Masons, Irish employers can expect to ‘face more onerous obligations regarding gender pay gaps and transparency measures’.
Under the EU directive, which member states have three years to translate into national law, companies with 100 or more employees will be required to share a range of data on pay levels, with the goal of bringing transparency to pay for those undertaking similar work or work of equal value. Analysis by EY says the disclosures include:
- gender pay gap
- gender pay gap in complementary or variable components
- proportion of working women and men receiving additional or variable wages
- proportion of working women and men in each of four groups of workers categorised by pay level, from the lowest to the highest
- gender pay gap by worker category broken down by regular basic wage or salary, and complementary or variable components.
Employers will also have to disclose salary ranges to prospective employees and will be prohibited from asking candidates about their pay history.
Employers found to have a gender pay gap of more than 5% will be required to conduct ‘pay audits’ in conjunction with employee representatives and face the prospect of fines if the gap is not closed. Employees with disabilities will also be included in the reporting requirements, and there will be remedies for employees where pay discrimination is uncovered.
‘Failure to show progress can cause reputational damage’
Meaningful change
Ailbhe Dennehy, employment partner at law firm Matheson, stresses that ‘organisations in Ireland should not underestimate the measures that will be required to ensure compliance’.
And while it will be June 2026 before these requirements come into effect, Ireland’s existing gender pay gap legislation is already providing challenges. Aoife Newton, director and head of employment law and immigration at KPMG, says: ‘If an organisation reports a gender pay gap of 10%, they need to know why that is the case.’
While there is currently no legal requirement to close that gap, ‘comparisons are going to be made between last year’s report and this year’s’, says Newton, adding: ‘Failure to show progress or make meaningful efforts to improve can cause reputational damage to an organisation and its employer brand.’
No room for complacency
With organisations of 150 employees or more coming into scope for reporting under the Gender Pay Gap Information Act in 2024, and those with 50 or more from 2025, the challenge will become pressing.
Sonya Boyce, director for people consulting at Mazars, says: ‘In Ireland, 71% of employers would currently face a fine under the directive, as they reported a gender pay gap figure of over 5% in 2022.’
Action plans to address this (see ‘What to do’ boxout) should involve updating recruitment and selection policies, as well as ‘new policies and procedures designed and implemented to accommodate pay scales and pay progression’, Boyce says. She warns, however, that this ‘cannot be driven by HR alone and requires genuine buy-in and drive from senior leaders if real action is to be delivered’.
‘Making it easier for workers to identify pay discrimination brings distinct benefits’
Will it work?
Sara Benedí Lahuerta, assistant professor in law at University College Dublin, argues that ‘pay transparency alone cannot address all the causes of the gender pay gap’, but points to evidence internationally that ‘making it easier for workers to identify and act against pay discrimination’ does bring distinct benefits.
She cites a UK study that found an 18% reduction in gender pay gap following the introduction of pay transparency legislation in 2017.
Meanwhile Kalina Arabadjieva, a senior researcher at the European Trade Union Institute, argues that a further gender pay gap frontier is the need to ‘address the fact that women still bear a greater proportion of care responsibilities at home’.
Employers for whom old habits die hard will find themselves under a harsh spotlight in the coming years as the battle for pay equality opens a new, and many will hope final, frontier.
What to do
How to prepare for the EU’s new gender pay gap legislation
- Analyse your organisation’s pay gap and take corrective action where necessary.
- Review your job architecture and pay structure. An up-to-date and accurate job architecture lays the foundation for roles and responsibilities to be reflected correctly on objective criteria.
- Assess and review your policies on equity, diversity and inclusion (EDI). Examining policies and procedures in recruitment, performance management, promotion and compensation is key to ensure they are unbiased and equitable.
- Raise awareness by training managers and HR staff on EDI policies to address unconscious bias and foster a culture which promotes equal opportunities for all.
Source: EY
New rules
Measures in the 2023 EU directive
A right to pay information. Existing employees will have the right to request information about their pay level and average pay levels, broken down by gender, for employees doing the same work or work of equal value. Employers will be obliged to remind employees of this right annually.
Pay transparency for employees. Employers will need to ensure there are no gender-based pay differences between employees performing the same work or work of equal value. Tools or methodologies to assess this will be provided by EU member states.
Accessibility of pay determination criteria. The criteria used to determine employee pay level and pay progression must be made easily accessible to employees.
Ending of pay secrecy. Employers will be prohibited from restricting employees from disclosing pay. Any existing ‘secrecy clauses’ are likely to be rendered void.
Pay transparency for jobseekers. Employers will be required to provide information about the initial pay level/range to applicants and prohibited from inquiring into an individual’s pay history.
Source: Matheson
