New Requirements for Employers: Why Wait for the Last Day When You Can Start Preparing Now

Roberta Kulikauskė

The Directive on Transparent Remuneration, officially named "European Parliament and Council Directive (EU) 2023/970 of 2023-05-10 establishing mechanisms for transparency in remuneration and the enforcement of equal pay for equal or equal value work," was adopted in 2023.

Since the directive is not directly applicable and requires the transposition of its provisions into national law, Lithuania must implement it by June 7, 2026. While national regulation is still pending, the Directive on Transparent Remuneration can be used as a guideline, as it establishes minimum requirements that companies can start preparing for in advance.

Employers can start preparing for the new regulation based on the Transparent Remuneration Directive as a guideline, and if there are any uncertainties about the new regulation, HubLegal Law Firm will be happy to answer any questions and assist in achieving the objectives.

Objectives of the New Regulation

The new rules on remuneration transparency aim to help combat wage discrimination and contribute to reducing the gender pay gap.

The lack of wage transparency has been identified as one of the main barriers to reducing the gender pay gap, which in 2020 was on average about 13% in the EU. This means that women earned, on average, 13% less per hour than men (Eurostat data, 2021).

The pay gap has a long-term impact on women's quality of life, their risk of poverty, and the pension gap, which in 2023 was around 30% in the EU (Eurostat data, 2023).

Thus, this directive focuses primarily on wage discrimination based on gender and seeks to eliminate the wage differences between men and women. To achieve this goal, a new tool is introduced: under the new rules, companies with a larger number of employees will have to disclose remuneration information and take action if the gender pay gap exceeds 5%.

Equal Pay for Equal or Equal Value Work

The directive establishes the general principle of equal pay for equal or equal value work. This principle is not new in labor law, as it is already enshrined in the Lithuanian Labor Code. The code mandates that employers pay equal remuneration for equal or equal value work. However, the current regulation seems insufficient to achieve this principle's objectives, which is why the Transparent Remuneration Directive seeks to introduce tools that are more likely to effectively combat gender-based wage discrimination.

New Rules for Hiring Employees

Job seekers will have the right to receive information not only about the initial salary or salary range before the job interview or contract signing but also about the criteria for setting the salary and the job position to which the remuneration applies. This means that, before starting the recruitment process, employers will need to be prepared to provide such information to candidates.

The directive introduces a new prohibition for employers: they will no longer be allowed to ask candidates about their current or previous salary. Due to this new prohibition, employers are advised to review their hiring processes and ensure that such information is not being collected from candidates.

More Employer Responsibilities – More Information for Employees

Employers will be required to provide more information to employees and their representatives about the company's remuneration system, the salary range for their position, the criteria used to determine the remuneration, and how employees are positioned within these ranges.

Under the current provisions of the Lithuanian Labor Code, employers with an average of more than 20 employees must provide, upon request from employee representatives, anonymized data on the average wage by professional groups and gender once a year (excluding management positions).

The new regulation significantly expands this requirement. Employees will have the right to request information about their own salary, average wages by gender, and wages for employees performing equal or equal value work (in their job category or group). Employers will not only have to provide this information but also the criteria used to determine the employee’s salary, salary ranges, and salary increases.

Employers will have to regularly inform employees about their right to access information about remuneration and the criteria used to determine it, outlining the steps they must take to exercise this right or voluntarily provide such information so employees do not need to request it.

It is important to note that the directive changes established practices in companies. Often, the salary paid to an employee is considered confidential information, and employees are prohibited from disclosing it to colleagues or others. However, under the new rules, employers will no longer be able to prohibit employees from disclosing their salary if it is done to enforce the principle of equal pay for equal or equal value work. It is recommended that companies review existing employment and confidentiality contracts and ensure that internal documents align with the new regulations.

New Employer Requirement: Obligation to Report on the Gender Pay Gap

The Transparent Remuneration Directive introduces an obligation for employers with 100 or more employees to report on the gender pay gap in their organization. Since the directive sets only minimum requirements, national legislation may require employers with fewer employees to prepare similar reports. Employers who are not obligated to prepare reports can do so voluntarily.

The accuracy of the report will be confirmed by the company's management in consultation with employee representatives, and the report will be made public. Employers may also publish the report on their website.

If the report shows a pay gap of at least 5% between men and women for equal or equal value work, and the employer cannot justify this difference using objective criteria, the company’s remuneration system will have to be reviewed, and measures will be taken to reduce the gap.

Thresholds for Gender Pay Gap Reporting

Which employers will be required to prepare a report on the gender pay gap:

Employers with 250 or more employees – from June 7, 2027, and thereafter, they must submit an annual report on the previous calendar year.
Employers with 150-249 employees – from June 7, 2027, and thereafter, they must submit a report every 3 years on the previous calendar year.
Employers with 100-149 employees – from June 7, 2031, and thereafter, they must submit a report every 3 years on the previous calendar year.

What to Do if the Gender Pay Gap in the Report is 5% or More

If the pay gap is at least 5%, the company will need to justify the gap using objective, gender-neutral criteria and correct the gap within the specified time frame. If this is not possible, the employer, together with employee representatives, will have to conduct a joint wage assessment to address the gap and prevent future occurrences.

The joint wage assessment will cover:

(a) an analysis of the proportion of female and male employees in each category;

(b) information on the average wage for female and male employees in each category and additional or variable pay components;

(d) the reasons for the wage gap based on objective, gender-neutral criteria, if any, as determined by employee representatives and the employer;

(e) the proportion of female and male employees who, after returning from maternity or paternity leave, childcare leave, or sick leave, benefited from any wage increase if such an increase occurred during the leave period;

(f) measures to address the wage gap if it is not justified by objective, gender-neutral criteria;

(g) an assessment of the effectiveness of the measures outlined in previous wage assessments.

In other words, both justifying a gender pay gap of at least 5% using objective criteria and conducting a joint wage assessment will essentially require a review of the company's remuneration system.

Key Points and Recommendations for Preparing for the New Requirements

Under the Transparent Remuneration Directive, remuneration includes not only the basic salary and all other components of pay but also additional benefits in cash or in kind that the employee receives directly or indirectly from the employer for their work (e.g., health insurance, pension fund contributions, additional vacation days, stock incentives, etc.).

The directive does not prohibit paying different wages for equal or equal value work, provided it is based on neutral and gender-neutral criteria that the employer can justify through the company's remuneration system.

Remuneration must be paid not only for equal work but also for work of equal value. The concept of "equal value" is evaluative in nature. Evaluation criteria are partially explained in the case law of the Court of Justice, which indicates that the value of work should be calculated and compared based on objective criteria, including professional qualifications, educational and training requirements, skills, efforts, responsibilities, and working conditions, defined by time, without considering differences in work models.

Employers can already begin preparing for the new regulations based on the Transparent Remuneration Directive as a guideline, for example: preparing or reviewing equal opportunity policies, job descriptions, recruitment processes, existing standard employment contracts, pay systems, defining objective, gender-neutral criteria, preparing methodologies for determining work of equal value in the company, taking other necessary actions, and ultimately equalizing salaries and other salary components where needed to ensure compliance with the new regulations.