The New European Directive regulating the equal pay principle between women and men and pay transparency

The European Parliament has adopted strict rules which will introduce transparency to pay discrimination. On 17 May 2023, Directive (EU) 2023/970 of the European Parliament on strengthening the application of the equal pay principle for equal work or work of equal value for women and men through pay transparency and enforcement mechanisms was published in the Official Journal of the EU. As far as Bulgaria is concerned, the principle of equal pay for equal work is not new and unknown. It is regulated under Bulgarian law in Art. 243 of the Labor Code and there is already established case-law on its application. Relevant texts are also contained in the Bulgarian Anti-Discrimination Act. The Directive provides for the introduction of sanctions – fines, which should be determined on the basis of national law, taking into account any applicable and aggravating or mitigating circumstances. Member States can provide for different types of measures that have a financial impact, such as the withdrawal of public benefits or the possibility of receiving state aid, restrictions of the right to participate in public procurement. The amount of the fines would possibly be based on the employer's gross annual turnover or the total amount of its payroll. Member States should introduce specific sanctions in case of repeated violations of the rights and obligations related to the principle of equal pay. EU countries will have to implement the rules in their national legislations by 7 June 2026.

The Directive sets out requirements on:

• Strengthening the implementation of the equal pay principle for equal work for women and men
• Determination and transparency of remuneration
• Data collection and reporting on pay gaps
• Prohibiting discrimination

And applies to:

• All public and private sector employers, as well as administration
• All workers and employees employed by them
• Employment applicants

Member States shall provide consistent and coordinated monitoring of and support for applying the equal pay principle and enforcing all available remedies. To that end, each Member State shall designate a body for monitoring and supporting the implementation of national measures implementing this Directive (the monitoring body) and shall make the necessary arrangements for its proper functioning. The monitoring body may be part of an existing body or structure at national level.

Employers will have to revise their internal pay rules and ensure their gender neutrality policy. To do this, they will need to:

• Review the remuneration of the workers and employees employed by them
• Take action to eliminate the pay gap between men and women
• Where establishing unsubstantiated differences of more than 5% in the average level of remuneration between women and men, it  will be necessary, in cooperation with the workers and employees, to carry out a joint assessment of the remuneration policies and principles with a view to adjusting it.

Joint pay assessments should lead to ending gender-based pay discrimination in a reasonable time frame through adopting corrective measures. In addition to this, medium-sized and large enterprises will also need to take action to provide the necessary human resources and administrative capacity to implement periodic reporting requirements in compliance with Art. 9 of the Directive.

Employers will need to make the criteria that are used to determine workers' pay, pay levels and pay progression easily accessible to their workers. Member States may exempt employers with fewer than 50 workers from the obligation to provide information on pay progression. Another innovation will be the right of workers to request information about individual and average pay levels at their workplace. Employers should inform all workers annually of their right to receive that information and of the steps they should take to exercise that right. The information shall be provided within a reasonable period of time but, in any case, within a maximum of two months as of the date on which the request was made. The information employers will have to provide about their work organization is as follows:

• 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 female and male in each of four groups of workers into which they are divided according to their pay levels, 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.

Pay structures shall be such as to enable the assessment of whether workers are in a comparable situation in terms of the value of work on the basis of objective, gender-neutral criteria. Those criteria shall not be based directly or indirectly on workers’ gender. They shall include skills, effort, responsibility and working conditions and, if appropriate, any other factors which are relevant to the specific job or position. "Work of equal value" means work that is determined to be of equal value consistent with non-discriminatory and objective gender-neutral criteria. In case of violations, the relevant persons will be subject to sanctions by the competent authorities. Compensation from the companies can also be sought by affected employees who are victims of discrimination.

Job applicants also receive additional protection under the new directive. They have the right to receive information by their future employer of the starting pay or its range, calculated on the basis of objective, gender-neutral criteria to be determined for the relevant position. This information shall be provided in such a way as to ensure well-informed and transparent pay negotiations between employer and job applicant, such as in a published job vacancy, prior to a job interview or otherwise. The employer shall not be entitled to ask job applicants questions about pay during their current or previous employment relationship. It must be ensured that job vacancies and job titles are gender-neutral and recruitment processes are carried out in a non-discriminatory manner so as not to undermine the right to equal pay. Employers shall provide that same information to persons with disabilities in a format, which is accessible and takes into account their specific needs. It remains an interesting question to what extent the transposition of the new regulation into Bulgarian law will also affect other already existing legal acts, such as Regulation №4 on the types of professions or activities for which, due to their nature or the conditions under which they are exercised, gender is an essential and defining professional requirement.

In any case, it seems highly recommendable for employers to start reviewing their internal remuneration policies in order to be prepared for the future changes and be able to react in a timely and efficient manner.