Employers can still rectify pay gaps in time and prevent unrest

Employees in an organisation must receive equal pay for equal work. ‘That is already stipulated by law,’ says PwC partner Nicolien Borggreve, who advises clients on the legal aspects of the workforce. ‘What is new with the EU Pay Transparency Directive is that employers are required to be transparent, with the idea that this will reduce the pay differences between men and women. To give an idea of these differences: the average pay gap in the EU between men and women is currently thirteen percent.’

The directive, which will come into effect in the Netherlands for companies with 150 or more employees from 1 January 2027, requires employers to provide recurring, detailed reporting on wage differences. Furthermore, from that date, employees can request the average salary of colleagues in the same role – the employer is expected to provide this information within two months.

Borggreve: 'It will therefore become easier for employees to obtain information about their salary position without having to initiate legal proceedings. But if the employee subsequently disagrees with the employer, and the employer is not willing on their own to close the pay gap, legal action will still be necessary to contest a wage difference.' The draft Dutch bill has not yet been finalised, Borggreve explains, but: 'the changes will only be refinements and clarifications. Employers will have to work on this in any case.'

What impact will the possibility of requesting information have on employers? Lisette de Zwart, PwC adviser with a background in labour law: 'The more uncertainty there is in a company about equal pay, or the greater the expected pay gap, the greater the chance that many requests will be made from 2027 onwards, with all the administrative pressure that entails. That is why we advise companies to address this in a timely manner.' De Zwart points out that those who get insight into pay differences now still have a year to reduce pay disparities, 'and to increase employees' trust on this matter. For achieving both goals, a year is not particularly long. Those who start now will know in time whether the company is in control or what still needs to be done.'

What steps should employers take to comply with the law and possibly reduce pay disparities in advance? The first step is to gain insight into the pay structure, says Borggreve: 'Start by systematically collecting data on work and remuneration. Some companies already have a structured pay system with an equal pay policy, while in other companies the data must come from the payroll administration. On both routes, we can help with data collection and the legal analysis to delineate categories of work. What are equivalent roles and what remuneration is appropriate for them? What grounds of fairness justify differences? Based on these kinds of questions, we implement an objective pay structure and make the gender pay gap transparent.'tussen mannen en vrouwen inzichtelijk.’

On basis of the analysed pay gap, measures can be taken to reduce it. Borggreve: 'This concerns hiring policies in which everyone is aware of the pay range within which new employees can be hired. What principles of fairness, such as experience and skills, apply when deciding on individual adjustments within that range? Furthermore, we can assist companies with the analysis to correct the imbalance in the pay structure, for example through salary increases, freezing excessively high current salaries, or other solutions. As regards such corrective measures, legislation currently provides little clarity.'

A second step to comply smoothly with legislation is to set up the HR processes accordingly. In terms of technology, PwC has the in-house expertise to ensure that the correct data enters the systems, that recurring legal reporting is easy to produce, and that information requested by individual employees can be easily generated. De Zwart: 'And for the human side of HR processes, we involve all stakeholders who play a role, such as recruitment and line managers who hire people. Some of them will need to change their behaviour to achieve equal pay, and they will have tasks in the recurring reporting process.' According to De Zwart, the works council is also involved: 'The role of the works council is not yet fully defined by legislation. But the works council will in any case be involved in changes to recruitment policies and in plans to close the pay gap.'

The law sets out fines that are imposed and published if a company fails to comply. There may be compensation claims from employees, and the company could suffer reputational damage if the law is not followed. De Zwart: 'But I find it more interesting to talk about what this law can bring to employers. Providing insight into pay differences, formulating arguments for those differences and closing the pay gap as much as possible – that will be appreciated as good employment practice by many employees.'

Borggreve and De Zwart have been working for some time with a number of medium-sized and large companies to anticipate the legislation. They see significant differences in practice. De Zwart: 'There are companies with a gender-neutral pay structure and an equal pay policy where a pay gap still emerges because the safeguards are insufficient. We see companies that have set up very little in this area and can now build from scratch. And we speak to employers covered by a collective labour agreement (CAO) who think it does not apply to them – but even there, there is a risk of unequal pay within scales.'

'Whatever the starting point,' Borggreve concludes, 'all these companies will eventually have to provide insight into pay differences. The law is a trigger to start working on it. Whether that requires a simple system adjustment or an extensive project including cultural change: this will become the new normal. And we are happy to help respond to this efficiently.’

In the PwC webcast State of Tax, Legal & People, Nicolien Borggreve and Lisette de Zwart further discuss the EU Pay Transparency Directive: what are the legal requirements, what data do you need and what does this mean for HR processes? For more information, you can contact Nicolien Borggreve and Lisette de Zwart without obligation.