The EU Pay Transparency Directive (the “Directive”) aims to enhance pay transparency for employees and candidates for employment and to improve access for redress for gender based pay-discrimination claims. Ireland has until 7 June 2026 to transpose the Directive. The Spring 2025 Legislative Programme suggests that transposition will be by way of the Pay Transparency Bill. Once implemented, Irish employers will be subject to new obligations which are designed to end pay secrecy, enforce the principle of equal pay between men and women and combat discrepancies in pay between men and women.
In this article in our ESG series, we outline the changes the Directive will introduce and what you can do to prepare within your business.
What changes will the Directive introduce?
The Directive, once transposed in Ireland, will introduce significant pay transparency measures on all employers including:
- Expansion of gender pay gap reporting: The Directive goes further than existing gender pay gap (“GPG”) legislation in Ireland by requiring employers to report on the gender pay gap between “categories of workers” that are do equal work or work of equal value by reference to basic and variable pay. Employees, their representatives, and an equality body to be determined by implementing legislation (which could potentially be the Workplace Relations Commission (WRC) and / or the Irish Human Rights and Equality Commission (IHREC)) will have the right to ask the employer for clarifications and details regarding such gender pay gap information, and the employer must respond within a reasonable time. Where gender pay differences are not justified by objective and gender neutral factors, the employer will be required to remedy the situation in close cooperation with employee representatives and the equality body.
- Joint pay assessments: The Directive introduces a new obligation to conduct a "Joint Pay Assessment" ("JPA") where there is:
- at least a 5% GPG in any category of workers;
- that has not been justified by objective and gender neutral factors; and
- has not been remedied within six months of the GPG report.
JPAs are an extensive pay audit which will require an in-depth assessment of pay practices. An employer will have to carry out detailed analysis of categories of workers where a pay gap exists, set out measures that are to be taken to address the pay difference, and report on the effectiveness of measures to reduce this gap. Once this joint pay assessment has been completed, it must be shared with employees and their representatives. The employer must then remedy the situation by establishing neutral job evaluations and classifications.
- Right to pay information: Employees will have a new right to receive information regarding their individual pay level and the average pay levels, broken down by gender for categories of workers performing the same work as them or work of equal value. Criteria for determining pay levels and progression must be objective and gender neutral. The information must be provided within two months of a request. Employees can request this information through their representatives or through the equality body. Member States may exempt employers with less than 50 employees from this requirement. Employers will also be obliged to remind employees of this right annually and how it can be exercised, which may trigger a larger volume of requests.
- Prohibition on pay secrecy: Employers will no longer be permitted to prohibit employees disclosing their pay. However, employers can require employees not to use that information for purposes other than to exercise their right to equal.
- Pay transparency for job applicants: Applicants for employment will have the right to receive information about the initial pay level or its range, based on gender-neutral criteria, for a position in a published job vacancy or prior to an interview. This information must be provided in a manner to ensure informed and transparent negotiation on pay. Employers will also be prohibited from asking job applicants about their current salary or pay history. Similar measures have already been introduced in some US states such as California and New York, and further information about how the government intends to transpose this is available in our recent article here.
What are the consequences of non-compliance?
- No upper limit on compensation: Employees are entitled to take a discrimination claim to the WRC and/or an equal pay claim to the WRC or Circuit Court. Currently, there is a limit of on the level of back pay or compensation that can be awarded by the WRC or Circuit Court. The WRC is empowered to award the greater of two years’ remuneration or €40,000 as compensation for gender based discrimination. Alternatively, the WRC may make another for equal pay / order a specific course of action or award up to three years’ arrears of remuneration. The Circuit Court has jurisdiction to make an order for up to six years' arrears in pay and / or an order for equal pay. Very significantly, the Directive provides that compensation in equal pay claims includes full recovery of all back pay including bonuses, payments in kind, compensation for lost opportunities, non-material damage and interest on arrears, with no fixed upper limit on compensation.
- Burden of proof on employer: Currently, an employee is required to establish a prima facie case of discriminatory treatment. Where such is established, the burden of proof then shifts to the employer to defend the claim. However, the Directive provides that, where an employer has not complied with its pay transparency obligations, the burden of proof will automatically be on the employer from the outset to demonstrate that there was no discrimination in relation to pay.
- Statute of limitations: Currently, employees have a maximum of six years to take an equal pay claim to the WRC or Circuit Court. The Directive provides that the statute of limitations does not begin to run before the employee claimant knows or could reasonably have been expected to know about the infringement. It also provides that Member States may transpose the Directive in a manner which provides that the limitation periods do not begin to run while the infringement is ongoing or before the end of the employment contract / relationship.
- No need for real comparator: Another change from the current position is the removal of the need for a real life comparator to bring a claim for equal pay. Employees will now have the option of using a hypothetical comparator where no real comparator exists.
- Penalties, including fines: Member States must establish rules on effective, proportionate and dissuasive penalties for equal pay infringements. The Recitals illustrate the EU's commitment to eliminating pay inequality in the workplace by providing that such penalties should include fines to be based on the employer's gross annual turnover or on the employer's total payroll. This is reminiscent of the fines under the GDPR and it will be interesting to see how this is transposed into Irish law.
- Access to Evidence: Competent authorities and national courts will be able to order the employer to disclose any relevant evidence or confidential information within its control in equal pay claims.
Employers should be alive to these major changes and the potential future use of the Directive by employees to strengthen equal pay claims.
Equal Pay Claims: Assessing Work of Equal Value
As demonstrated above, the Directive is closely linked with equal pay claims, which also include claims for equal pay on the basis of work of equal value. If workers are compared and work of equal value is found to exist, and there is no applicable defence, then the employee shall be awarded the same pay as the comparator.
Defining categories of employees for the purpose of GPG reporting obligations will also involve an assessment of whether employees are carrying out work of equal value. This is a difficult comparison to establish, as it necessarily involves an assertion that both jobs, which may be profoundly different, have equal value. Member states will be required to make tools or methodologies available and accessible to employers to assist employers in conducting an assessment of work of equal value.
Previous case law has established that many factors will be considered in order to determine whether two jobs are of “equal value”, including skill, physical and mental requirements, level of autonomy, responsibility and working conditions. However, this assessment must not be based on the employer’s subjective views on the relative value of the employees’ work. The IHREC Code of Practice on Equal Pay, published in 2022, also provides useful guidance. Employers should ensure they are in a position to support their assessments using objective criteria which is not connected with any discriminatory grounds.
What steps should an employer take now?
To ensure full compliance with the Directive, it is recommended that employers start their preparations early. We anticipate that the new obligations and entitlements introduced by the Directive will lead to an increase in the number of equal pay claims. There are a number of key steps that employers can take now to ensure they are best placed to comply with the new rules when they are in force and, importantly, to mitigate the risk of any pay related claims.
- Employers should assess current practices and consider measures required to ensure compliance: For example, consider how interviews are currently conducted in relation to seeking pay history information; review how salary information is set out in job advertisements and how the criteria for pay levels and pay progression are determined, what pay structures are in place to ensure no gender-based pay differences exist between employees performing the same work or work of equal value, etc.
- Review current policies and procedures: A review of policies and procedures across the business should be conducted to determine if there are any factors in any aspect of the business that may unintentionally create or contribute to a GPG. Employers with 50 or more employees will already be reporting on GPG, which will assist in preparation for the transposition of the Directive. Relevant policies and procedures may include remuneration, promotion and recruitment.
- Crunch the numbers in advance: By running the GPG data for each category of workers early, an employer may assess whether it is likely that a JPA will be required. This can constitute a high level exercise to identify red flags or the first step in a full pay equity audit.
- Categorise workers: Categories of workers will need to be prepared and analysed to determine if there is any GPG between categories of workers in the workplace. It is essential employers define categories of workers and work of equal value carefully so that employees can receive the proper information they are entitled to under the Directive. This is a critical phase of any pay equity audit. A strategic balance needs to be struck between preparing for the introduction of the Directive while also ensuring that any categories align with internal designations and do not preclude an employer from responding to implementing regulations across a number of jurisdictions.
- Prepare for information requests: Employers should upgrade their data processing and data management systems to ensure they are prepared for requests on pay transparency in the workplace and can respond to requests across various categories of workers within the two month deadline.
Proactive employers should seek to identify and remedy any potential pay gaps or issues with pay transparency in the workplace now to ensure ease of compliance in the future.
Companies who are reporting on their Gender Pay Gap for the first time in 2025 may also wish to conduct a pay equity audit alongside that reporting process, to ensure that preparation for the introduction of the Pay Transparency Directive can commence ahead of the final salary review process. This can be a useful exercise that allows remedial action and other proactive measures to be taken where appropriate. This may in certain circumstances include adjustments in compensation or – particularly where there are legitimate reasons for gaps in pay - alternative best practice approaches to addressing gender inequality such as policy / practice modifications, the introduction of training / hiring guidelines, and implementing cross-sectoral initiatives.
Next Steps
As illustrated above, it is imperative that employers to prepare for this Directive in good time to ensure their organisation has addressed any GPG that may exist.
Contact Us
Matheson's Employment, Pensions and Benefits Group is available to guide you through the complexities of navigating the new trends and legal developments in this area.
For more information please contact Employment, Pensions and Benefits partner, Alice Duffy, or your usual contact at Matheson.