Since the 1970s, human rights movements and organisations have taken a clear stance and implemented measures to combat wage discrimination. As a result, improvements were noticeable for a long time; however, this process has slowed over the past decade, and since then the average gender pay gap within the European Union has no longer decreased significantly. For this reason, the European Parliament and the Council have set out concrete measures. One of the key instruments is pay transparency, as well as the practical implementation of the principle of “equal pay for equal work.
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Equal pay for equal work: the principle in practice
In defining this, companies can rely not only on the Pay Transparency Directive but also on the case law of the Court of Justice of the European Union, which provides useful methodological guidance for the objective comparison of the value of different job roles. However, the Hungarian implementing regulation is still pending.
Can Different Job Roles Represent the Same Value?
While it is relatively straightforward to require equal pay and working conditions for identical positions, the comparison of different roles raises more complex issues. How, for example, can the value of work performed by sales assistants and warehouse workers be assessed and compared?
However, every job role must be evaluated in an objective and gender-neutral manner. Criteria may include required prior education, professional knowledge, skills, duration of training, the physical or mental effort involved in performing the tasks, the degree of responsibility, as well as working conditions and soft skills (e.g. friendliness, patience, etc.). These and similar criteria must be weighted and scored, and the total scores of the respective job roles must then be compared.
Based on this methodology and in cooperation with employee representatives, employee categories can be established within which remuneration is equal. These categories do not correspond to job roles or positions: entirely different tasks may fall within the same category if they are deemed to be of equal value. This categorisation process must not be arbitrary or based on subjective considerations.
Of course, pay differences may continue to exist in the future, provided that they are justified by objective, gender-neutral criteria—such as measurable differences in performance.
How Can the Pay Transparency Directive Be Applied During Recruitment?
Pay transparency obligations do not apply only to large companies. Regardless of company size, job applicants are entitled to receive information about the starting salary for the position or its salary range. Although this does not have to be included in the job advertisement itself, applicants must be informed in a way that enables them to negotiate their salary on an informed and transparent basis.
Pay Transparency During Employment
Employers are required to make accessible the objective and gender-neutral criteria used to determine pay levels and pay increases. This means that, irrespective of company size, all employees have the right to request information about their own pay as well as the average pay levels within their category, broken down by gender. At the same time, any restriction on communication regarding pay is prohibited.
Reporting Obligations and Joint Pay Assessments: Companies with More Than 100 Employees
Companies employing more than 100 employees are required to regularly report on gender pay gaps. If, in any category, the difference exceeds 5% without objective justification and the employer does not correct it within six months, a joint pay assessment must be carried out in cooperation with employee representatives.
What Are the Legal Consequences of Breaching the Pay Transparency Directive?
The specific sanctions will be set out in Hungarian legislation and are therefore not yet known, but they must be effective and dissuasive. Employees are entitled to full compensation retroactively for up to three years. The burden of proof lies with the employer.
Please feel free to contact the LeitnerLaw and the LeitnerLeitner World of Work practice group with any questions regarding pay transparency.
We develop an employee competency map that systematises the required skills and capabilities, identifies potential within the organisation, and forms the foundation of the entire job structure. Building on this foundation, you can confidently establish a transparent, legally compliant and defensible remuneration system.
Although the national implementing rules are not yet known, companies should already begin reviewing their organisational and remuneration structures and defining job categories and pay levels. An objective and gender-neutral pay structure can only be defended if it is consciously and carefully designed. Given that many companies will be subject to reporting obligations in the near future, preparations should not be delayed.
Further details on deadlines and company-size-specific obligations can be found in our article.
This article summarises the Pay Transparency Directive: Directive (EU) 2023/970 of the European Parliament and of the Council.
