On Jan. 1, 2027, the Gender Pay Transparency Directive Implementation Act will take effect. It requires employers in the Netherlands (and other EU countries) to make equal pay more transparent and eliminate unjustified pay gaps. The rules apply to all employers, but additional reporting requirements apply to organizations with more than 100 employees. The law also gives the works council (OR) an important role through (additional) consent rights.
Although the law will not go into effect for another year, it is necessary to make preparations next year. In this article, we talk about what the law entails and what you need to do as an employer.
Specifically, what will change?
- Transparency in recruitment: It becomes mandatory to mention the (starting) salary or salary scale in vacancies or at the first contact about a vacancy. Asking about previous salaries will be prohibited from then on. In addition, job postings and job titles must be gender-neutral. Remember that if these changes also result in a change in the recruitment policy, the consent of the Works Council must be sought first.
- Insight for employees: Employees may request information on average pay of colleagues with equal (worthy) work, broken down by gender, within the organization. They will also be given, upon request, insight into the gender-neutral and objective criteria on which their pay and advancement opportunities are based. This requires timely evaluation and substantiation of current positions and rewards and the differences between employees who do equal(worthy) work but are rewarded differently. The Works Council must also be involved again through the right of consent.
- Burden of proof on employer when gender discrimination is suspected: In a pay claim for gender discrimination, the employer will soon have to prove that there is no unjustified difference, instead of the employee having to prove that there is. If an employee is proven right, the unequal pay must be fully restored, including salary, bonuses and advancement opportunities.
By giving employees more insight into their pay and making it easier for them to sue over their pay, we expect that this law will increase the likelihood of gender discrimination lawsuits.
Additional obligations for large employers
Additional obligations will soon apply to larger employers. They must report on the remuneration situation within the WOR company.
- Reports:
- 100 – 249 employees: report on wage situation to Labor Inspectorate every three years
- 250+ employees: annually report on wage situation to Labor Inspectorate
With a wage gap of 5% or more, a wage assessment must take place, an action plan must be drawn up, and the wage gap must be resolved. This must involve close cooperation with the Works Council, which, among other things, will have an additional duty to consent regarding the action plan.
A special element of the bill is that the obligations rest on the WOR-employee. Consequently, the division of an organization into WOR-entities affects the reporting obligation, taking the number of employees of the WOR-entity as the starting point.
What should employers do now?
Although the law won’t take effect for another year, the advice is to start preparing now in the manner below:
- For larger employers: Check WOR structure: Check whether one or more enterprises exist within the meaning of the WOR. This is because the reporting obligation depends on the number of employees per WOR enterprise.
- Analyze compensation policies: Make a survey of all salaries and salary components within the organization and record the remuneration criteria used.
- Chart differences: Check for non-objectifiable differences in rewards of employees doing equal(er) work.
- Adjust policies as needed and resolve differences in a timely manner: Provide objective, gender-neutral criteria and transparent recruitment processes. Substantiate pay differences with objective and gender-neutral elements. Resolving and addressing pay differences in a timely manner will prevent turmoil and discontent within the organization at the time of enactment.
- For larger employers: Involve Works Council early: Consent rights apply to policy changes and action plans.
The action items mentioned above require time and commitment from HR. So don’t wait too long and start on time, then there will be room to complete all the steps in a timely and careful manner. For employers and works councils in need of guidance in this process, we are happy to consider appropriate and future-proof pay and hiring policies and options in resolving pay disparities.
Need help? Contact Wessel van der Lans – specialists in labor and employee participation law.
