Making progress on the pay gap

As a result, employers should start being more open about remuneration and eliminate gender pay differences. In other words, they need to make progress on eliminating the pay gap. Although the proposed directive of the European Parliament and of the Council to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms will only be implemented in the Netherlands in 2026, it is important to gather information about the entire HR process now in order to understand the potential gender pay gap and avoid fines, bad publicity and compensation.

What do you need to know about this Pay Transparency Directive (Richtlijn loontransparantie)?

The objective of the Directive is to facilitate transparency about remuneration within companies. This can help detect, demonstrate and eliminate the discriminatory pay gap. To facilitate this openness about pay and pay differences, employers will be subject to the following obligations:

• Even before the job interview, an employer must disclose the salary associated with the vacancy, for instance in the job posting text or the invitation letter for the interview;
• The employer may not ask an applicant about his or her previous salary;
• During employment, the employer must inform the employee of the gender-neutral criteria used to determine future pay and career advancement;
• Employers with 100 or more employees must provide regulators, such as the Netherlands Labour Authority (Nederlandse Arbeidsinspectie), with comprehensive information on the gender pay differences within the company. The report will be made public.

Reporting requirement

This reporting requirement will impact large employers the most and it is important in order to make progress on addressing the pay gap now already. It is prudent to conduct a baseline measurement of gender pay differences within job categories in the organisation as early as 2024. This will leave time to reduce any differences in the coming years before this information becomes public knowledge.

In the report, the employer must disclose the fixed salary as well as other pay components, such as lease cars and bonuses. This should be done within categories of employees performing equal work or work of equal value. If the report shows gender pay differences, however, the employer does have the option of providing justification for this. Based on objective and gender-neutral factors, a pay difference may be justified. But if there is a gender pay difference of more than 5% in a job category that cannot be objectively justified, the employer is given six months to eliminate this difference. If it fails to do so, the employer is obliged to carry out an evaluation of remuneration together with the works council/trade unions and must take corrective measures to remedy the pay difference.

Risk of liability for compensation

In addition to the enforcement of wage transparency obligations by the Netherlands Labour Authority, which can impose fines, an employee who is unequally remunerated can also pursue her rights more easily by means of the civil courts. Unequally remunerated employees will be entitled to full compensation for all years in which they were underpaid compared to male colleagues. It is also important to note that employers cannot withhold information or evidence about their pay structure and system. Employees can request this via the new right to information in conjunction with the right of inspection laid down in Article 843a of the Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering) and the employer can be ordered to provide this information either by the courts or by The Netherlands Institute for Human Rights (College voor de rechten van de mens).

Commencing preparations

In spring 2024, the Dutch legislative proposal that will implement the European wage transparency obligations will be presented. As mentioned above, the broad outlines of the obligations that will mainly affect large employers have already been defined. It is possible, however, that the Dutch legislator will extend the obligations to smaller employers as well! In anticipation of this, employers can already commence preparations, whether or not mandatorily in consultation with trade unions and works councils. These preparations could include:

• Making the job application process gender-neutral and mentioning the starting salary;
• Identifying and listing the criteria used to classify categories of employees;
• Identifying the gender neutrality of the criteria used for remuneration and salary trends;
• Outlining any existing gender pay differences by employee category and assessing whether the differences are objectively justified and gender-neutral;
• Creating a policy on diversity and inclusiveness.

More information

The lawyers at GMW will be happy to assist you in preparing your company to adapt to the Pay Transparency Directive, including in the form of training and workshops. Do you want to make progress on the pay gap? Please do not hesitate to contact us.