An EU directive forcing companies to publish salary details by various categories, including gender, will increase bureaucracy for small businesses, the CEO of a leading Spanish consultancy has warned.
The Remuneration Transparency Directive, approved in May 2023, requires companies to publish salary scales, though not individual salaries, and prohibits asking job candidates about their past salary. The directive aims at combating the EU ‘gender gap’—a highly debated statistic that claims women, on average, earn 10% less than men.
It requires companies with more than 250 employees to publish annual data on their employees’ actual salary measured by job category and gender, including bonuses and other extra benefits. Companies with 100-250 employees have less stringent requirements but must still publish annual reports, and smaller companies are exempt from such annual reports, at least for now. Companies must also provide job candidates with information on the starting salary for the positions they are seeking.
When the report finds a gender pay gap of more than 5% that cannot be justified by specific job and performance parameters, and that is not addressed within six months, the employer is required to sit down with the union to work out a solution.
Critics have warned that the directive will only increase bureaucracy, especially for smaller businesses.
“The European Parliament itself recognizes that [the directive] will result in an increase in the economic, fiscal and administrative burden, especially for micro and small businesses,” says Josep Capell, CEO of the consulting firm Ceinsa.
For this reason, Capell further noted, the directive excludes companies with less than 100 employees from having to make the report, though “this directive establishes minimum parameters” for small businesses as well.
Brussels, Capell points out, “considers prioritizing the fundamental right to equal pay and the eradication of disparities over the bureaucratic implications stemming from its application.”
The expert also warns that there’s a chance the regulation could backfire.
“Wherever there’s a law, there’s a trick around it,” he observes, in very Spanish style.
It is possible companies will respond to the legislation by making it harder to hire women or simply “making up” salaries at the management level, he told El Debate.
The rules apply to both private companies and the public sector. Member states are also required to set up a body to enforce the law. Non-compliant companies can face sanctions.
The goal is to end the gender pay gap by requiring companies to be more transparent about how they pay employees, ending the long-standing custom of maintaining such information as a secret.
The precise causes of and the best ways to address the gender pay gap—including whether it even can or needs to be addressed by government regulation—are intensely debated among social scientists, cultural commentators, economists, and feminists of all varieties.
For his part, Capell doubts that under the current circumstances of the labor market the regulation will harm women by causing companies to avoid hiring them.
“But today we are all eager to hire talent regardless of gender,” he concludes.
