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Special thanks to co-authors, Stephen Ratcliffe, Monica Kurnatowska and Rob Marsh.

The European Parliament has now formally adopted the Pay Transparency Directive having reached political agreement on its provisions with the Council of the EU at the end of 2022. Its provisions are likely to enter into force in most EU member states in 2026.

The measures in the Directive are significant and touch on many aspects of the employment lifecycle. They include pre-employment pay transparency requirements, broad worker and representative rights to workforce pay information. The most significant and onerous requirement is likely to be the requirement to conduct detailed pay audits in certain circumstances, including an equal value assessment, and to address pay gaps in co-operation with worker representatives.

The EU Commission has deliberately applied a longer transposition period for the Directive than normal with the stated aim of “ensuring that employers will have non-discriminatory pay structures in place so as to ensure full application of the new rules at the time of transposition”. Significant advance planning will be required to address both the basic compliance steps required by the Directive, and to mitigate the substantial risk of equal pay liability arising as a result of the joint pay assessment provisions of the Directive.

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