EU pay transparency: 5% gap may trigger joint pay assessment

Under the EU Pay Transparency Directive, a 5% gender pay gap within a category of workers may trigger a joint pay assessment, according to The HR Director. The threshold is not automatic; it applies only when the difference is at least 5%, cannot be justified by objective, gender-neutral criteria, and is not remedied within six months of submitting the pay report.

The 5% figure is part of Article 10 of the Directive. For employers subject to Article 9 reporting, the difference must be at least 5% within a category of workers. It must also be a difference that cannot be justified by objective, gender-neutral criteria. Additionally, the employer has six months from submitting the pay report to remedy the unjustified difference.

Category of workers matters

The 5% threshold is not an overall gender pay gap. It applies within a category of workers. Employers need to understand how workers are grouped, whether similar roles are treated consistently, whether job levels are clear, and whether all relevant pay components are captured. If underlying categories or job structures are unclear, it becomes harder to understand why a pay difference exists and whether it can be objectively justified.

Justification requires evidence

Finding a difference of at least 5% is the first condition. The next part of the Article 10 test is whether the difference can be justified by objective, gender-neutral criteria. The Directive’s wider equal-pay framework points to factors such as skills, effort, responsibility and working conditions when considering work of equal value. Employers must show why a pay difference exists and support that explanation with hard evidence. Documentation plays a crucial role, as explanations sitting in someone’s memory are not sufficient.

Six-month remedy window

If a difference of at least 5% cannot be justified, a joint pay assessment is not automatically triggered on the reporting date. The employer has six months from the submission of the pay report to remedy the unjustified difference. During this period, employers may need to check the data, understand why the difference exists, review relevant pay decisions, involve workers’ representatives, decide on corrective action, and document what has been done. Six months can pass quickly when several people and processes are involved, so employers need to track the reporting submission date and have a process for addressing identified differences.

What a joint pay assessment involves

A joint pay assessment looks more closely at where unexplained differences are coming from and what needs to be done about them. It examines the representation and average pay levels of women and men within each category of workers, the differences identified, and the reasons behind them. It also covers measures to address differences that cannot be justified by objective, gender-neutral criteria. The assessment is carried out in cooperation with workers’ representatives and is intended to identify, remedy and prevent unjustified differences in pay.

Practical implications for HR teams

HR teams should not wait for a 5% difference to appear before looking at these issues. Much of the groundwork can be done before the reporting deadline. Employers should review whether categories of workers are clearly defined, whether job families and levels are used consistently, and whether salary, bonus and other variable pay components are properly mapped. They should also examine how pay decisions are made and recorded, including whether pay-setting and progression criteria are clear and whether exceptions are documented. Reviewing category-level results before formal reporting can give HR time to investigate significant differences before the report is submitted. The aim is to know whether there is a defensible explanation, whether evidence supports it, and where it does not, what action needs to be taken. Rules vary by jurisdiction, so employers should seek local legal advice.

Sources: The HR Director