The purpose of the EU Pay Transparency Directive, approved in 2023, is to increase pay openness, transparency and equality between women and men. The Directive must be incorporated into national legislation by June 2026, and it is therefore not yet in force in Finland. At this stage, there is no exact information on the types of legislative amendments that will be introduced on account of the Directive. However, the Directive has already been taken into account in the Government Programme, which states that pay openness will be promoted in accordance with the minimum level provided in the Directive.
The Directive applies to all employers regardless of size, and the obligations imposed by it are employer-specific or company-specific. In the Directive, employee refers to all persons with a valid contractual or public-service employment relationship with the employer in question.
In Finland, the Act on Equality between Women and Men already obligates employers to promote gender equality in a goal-oriented and systematic manner, including in the terms of employment and with regard to pay in particular. Moreover, the Act provides that employers with at least 30 employees must draw up an equality plan, which must contain a pay survey of all personnel that presents a classification of the jobs performed by women and men and a breakdown of the pay for these jobs and the pay gaps. The Act also prohibits discrimination and includes the employer’s obligation to explain the procedure they follow.
Although we are still waiting for the relevant national legislation, it is already apparent based on the Directive how its implementation will affect businesses’ operations in the next few years. The Directive seeks equal pay as well as pay openness and transparency.
Pay openness in recruitment
In the future, jobseekers must be informed about the initial pay or its range and, where applicable, the relevant provisions of the collective agreement for the purpose of negotiating pay. This information may be provided in the job vacancy notice, prior to the job interview or in another way, but it must be provided without the jobseeker having to separately ask for it. The employer is not entitled to ask the jobseeker about their prior pay.
Moreover, job vacancy notices and job titles must be gender-neutral, and the recruitment process must be carried out in a non-discriminatory manner, as is already required by current legislation.
Pay transparency
Employees have the right, upon their request, to obtain information in writing on the average pay level, broken down by sex, of the employees performing the same work as them or work of equal value to theirs. Employers must inform the employees of this right annually and provide the information within two months of the request. Employers may not prevent their employees from voluntarily disclosing their pay by including a condition prohibiting it in the employment contract, for example.
Businesses must provide their employees with information on the pay system they use and the basis for the calculation of pay, pay levels and pay increases, which must be objective and gender-neutral.
If pay discrimination does occur, employees may be entitled to compensation, and a fine may be imposed on the business. The burden of proof shifts to the employer, which must prove that it has not acted contrary to the Directive with regard to equal pay and pay openness.
Pay reporting
After the implementation of the Directive, businesses with at least 100 employees must report on pay gaps more broadly than in the pay survey included in the equality plan, with the pay gaps broken down by basic wage or salary and complementary pay components. If the reporting demonstrates a pay gap of more than 5% between women and men without the pay gap being justifiable based on objective or gender-neutral factors and the pay gap is not rectified within six months, the employer must conduct a pay assessment, as specified in the Directive, together with their employees’ representatives.
Moreover, businesses with at least 100 employees must draw up a public report for the national supervisory authority on the pay gaps between women and men (in percentages) after the transition period. The purpose of making this information public is to make it possible to compare the information on pay gaps between employers, industries and areas.
How should businesses prepare for the Pay Transparency Directive?
As the relevant national legislation does not yet exist, it cannot be said for certain what will be expected of businesses and employers in the future. At this stage, businesses should already assess the degree to which their current operating models and reporting capabilities meet the upcoming changes to be introduced by the Directive.
For example, the list below may be used to aid preparation:
- Ensure compliance with the current legislation with regard to equality.
- Make sure that the business has drawn up an equality plan and a related pay survey and that these are up to date (businesses with at least 30 employees).
- Examine the business’s recruitment process and identify any needs for changes required by the Directive, such as the job titles being gender-neutral. Consider at which stage of the recruitment process the jobseeker will be informed of the initial pay or its range.
- Find out how job demands and the equality of different jobs are assessed and which jobs in the business are the same and of equal value. If there is no system in place for assessing job demands or if no job classification is in use, prepare to adopt or build such a model. Several collective agreements include a model on job classification and the assessment of job demands.
- Ensure that the business’s pay policy is gender-neutral and that the pay criteria are transparent.
- Find out whether there are any unjustified gender pay gaps. If no objective justification exists for the pay gaps, prepare a plan on rectifying the pay gaps in reasonable time.
- Check whether the systems used by your business allow pay information to be reported in accordance with the Directive (requests from employees, pay survey in the equality plan, pay reporting by businesses with at least 100 employees).
