Insights
Pay Transparency: Three Court Cases, One Lesson
In light of the EU Pay Transparency Directive (2023/970)
With the Directive 2023/970 (“Directive”) on pay transparency, the European Union has sent a strong signal: pay discrimination must not only be identified but demonstrably addressed. This Directive, which must be transposed into national law by June 2026 at the latest, obliges employers to implement crystal-clear pay structures and accountability. Three recent rulings by the Netherlands Institute for Human Rights (College van de Rechten van de Mens) are highlighted below in the context of the Directive.
- Ministry of Defence case: “Last earned salary” no longer a valid excuse
A female security officer at the Defence Security and Safety Organisation discovered after two years that her male colleague, who joined the organisation at the same time as her, earned significantly more. The reason? According to the employer, he had more work experience and a higher previous salary.
The Netherlands Institute for Human Rights ruled that these arguments were not objective or justified. Neither employee had relevant experience in security and using the last salary promotes gender inequality since women historically tend to earn less.
Legal significance: According to the Directive, employers may only use objective, gender-neutral criteria for pay. Using salary history is explicitly mentioned as risky and undesirable. This case shows that the Directive is already influencing Dutch case law.
- Spaarne Gasthuis: unequal salary grading justified by objective policy
A woman who was internally promoted as an application specialist was classified in FWG 55, step 4, while her male colleague – hired externally – was remunerated according to step 7. The woman took her case to the Netherlands Institute for Human Rights, claiming unequal pay for equal work.
The Institute ruled that the hospital followed the collective labour agreement (CAO) and applied the grading correctly, based on internal promotion rules. The pay difference stemmed from the distinction between internal promotion and external hiring, not from gender.
Legal significance: The Directive requires that pay differences be transparent and objectively explainable. In this case, the hospital succeeded in doing so based on the CAO regulations. In fact, this is exactly what the Directive envisions: equal standards, regardless of gender, provided they are properly documented.
- International Pharmaceutical company: long-term pay difference but no equal work
A female employee at an international pharmaceutical company discovered that her male colleague had earned more for years, received a higher bonus and had a company car. Both had held the same job title since 2019.
However, the Institute ruled that his work was more demanding: he dealt with more complex processes, bore higher risk of serious consequences from mistakes and had more responsibility. An independent expert confirmed that the jobs were not equivalent.
Legal significance: The Directive requires employers to prove equal pay for equal work or for work of equal value. This case highlights the importance of careful job evaluation and documentation. The same job title does not necessarily mean that it concerns equal work.
What changes with EU Directive 2023/970?
From 2026, employees will have a set of new rights under the Directive:
- Right to pay transparency: Employees may request pay data of colleagues in comparable roles.
- Reversal of burden of proof: Employers must demonstrate that pay differences are objectively justified.
- Ban on asking about salary history: This prevents historic pay discrimination from being carried forward.
- Mandatory pay reporting: Employers with more than 100 employees must publish transparent reports on pay equality.
Practice will show to what extent employees feel sufficiently free to exercise these rights.
What does this mean for employers?
Employers without a clear view of their pay policies risk legal challenges. The Directive makes both individual and collective claims easier. Key action points for employers:
- Review pay grading systems for objectivity and gender neutrality
- Carefully document all pay-related decisions
- Provide employees with insight into job evaluations and career paths
- Conduct a pay audit before 2026
Conclusion
These three cases handled by the Netherlands Institute for Human Rights show that without transparency and objective criteria, unequal pay is a persistent risk. Employers who work with clear and consistently applied grading and job evaluation systems are on stronger legal ground even if pay differences exist.
It is crucial that jobs are grouped based on equivalent value, not on the basis of assumptions or old structures. The Directive underlines that equal pay is no longer just an aspiration but an enforceable standard. Employers who review their pay policies and job evaluation systems now will not only secure legal certainty but also strengthen trust and credibility within their organisation.
We will post a follow up article about the additional rights works council will gain because of the implementation of the Directive.
