Wage transparency policy places high demands on employers

Background and core objectives of the directive

The EU Fee Transparency Directive from June 2023 should have been implemented into Austrian law by June 7, 2026. Although this has not yet happened in Austria and no assessment draft is available yet, the Directive itself contains some requirements that companies, as employers, should address sooner rather than later (e.g., reviewing internal salary structures for compliance with guidelines, introducing gender-neutral job evaluation systems, and establishing necessary documentation processes). A central aspect of the Directive is that increased transparency and more effective enforcement mechanisms are intended to help achieve the principle of equal pay for equal or equivalent work, thereby eliminating gender-based pay disparities. Importantly, the directive provides for a reversal of the burden of proof and requires employers to prove that there is no immediate or indirect wage discrimination. Employees have a legally enforceable right to compensation or damages in the event of wage inequality. Moreover, the company’s image can also be significantly damaged.

Individual rights of employees to information

Increased transparency is already evident in the fact that employees – regardless of the size of the company – have the right to written information about their individual salary level and the average salary levels of other employees who perform the same or equivalent work. In this case, the average salary for each gender must be separately disclosed. The employer is required to respond to such a request for information within a reasonable period of time, or in any case within 2 months – the employees are proactively informed about this individual right to information annually.

Regular reporting obligations based on company size

In addition, employers with more than 100 employees – although Austria could also extend this obligation to employers with fewer employees – are required to submit a report to the competent national authority (it is still unclear which authority this will be in Austria) at regular intervals about the gender pay gap in the previous calendar year. Specifically, companies with 100 to 149 employees will be subject to this obligation every three years from 2031 onwards, companies with 150 to 249 employees every three years from 2027 onwards, and companies with 250 or more employees annually from 2027 onwards.

Common wage assessment in case of salary cuts

If such a pay report % identifies a gender-specific wage gap (typically seen in the past as women being disadvantaged), which is not justified by objective, gender-neutral criteria (whether here the length of service can be cited is a matter of debate), or is not corrected within six months, the employer is obliged to conduct a pay assessment jointly with the employee representative body (often the works council) ("joint pay assessment") and to take measures to eliminate the differences. Such a joint pay assessment aims to identify, correct, and prevent unjustified pay differences between men and women in the future. Specifically, according to the directive, the personnel structure, the distribution of remuneration, the differences in remuneration and their justification, as well as the development of remuneration, are analyzed. The analysis results must be made available to the employees and their representatives, to the authority, and, upon request, also to the labor inspectorate and the equal treatment office. Additionally, certain reporting elements must be published externally on the company website or in a separate report. The remuneration definition is broadly defined and includes recurring and one-time benefits, monetary benefits such as non-monetary benefits, fixed as well as variable benefits, benefits agreed upon in collective agreements, etc.

Objective criteria for equal or equivalent work

Beyond reporting obligations, the pay transparency directive also requires companies (even more so than before) to define categories of employees who perform the same or equivalent work, relying on objective evaluation criteria. The directive lists four minimum mandatory evaluation criteria – competencies, workloads, responsibilities, and working conditions – as well as, if applicable, additional factors relevant to the specific workplace or position. Employers must prioritize the position rather than the person in such evaluations and must provide employees with easily accessible information about these criteria, on the basis of which pay, salary levels, and salary development are determined.

New requirements for the application process

Finally, employers must provide clear and transparent information about the starting salary and the salary range (if applicable, the corresponding collective agreement) in the application process, with this information having to be based on objective and gender-neutral criteria. Accordingly, employers must also not ask questions about current or previous salary to comply with the directive, in order to prevent the continuation of unintended wage discrimination.

Image: © Adobe Stock - Sikov