Employers will face tougher obligation to ensure equal pay: two year to prepare

6/13/2024

Povilas Blusius, Figure Baltic Advisory leading consultant

In just over two years, by June 2026, the Directive's provisions will take effect, mandating that employers adhere more closely to the principle of equal pay for equal work. Despite the Directive's significant implications for the labor market, awareness among businesses and the public remains low. This lack of communication about its benefits and challenges represents a significant strategic error, potentially undermining the goal of ensuring the Directive's success.

Let's briefly review the main provisions of the Directive that will be incorporated into Lithuanian national law and enforced by employers:

• Salary ranges. Employers are required to disclose salary ranges in job postings or inform candidates of this information before interviews.
• Recruitment. Employers are prohibited from inquiring about candidate pay history.
• Pay Communication. Employees have the right to request information on average wage by gender and worker category for the same or similar work.
• Reporting. Employers with 150 or more employees must regularly report on the gender pay gap.
• Audits. Employers must conduct assessments with employee representatives if the gender pay gap exceeds 5% in any category and cannot be justified by objective factors, to identify causes and develop action plans.
• Burden of Proof. In discrimination cases, employers must prove compliance with equal pay regulation.
• Sanctions and Penalties. The State can impose fines and bar companies from public procurement for breaching the Directive.
• Compensation. Mechanisms are layed out to compensate and provide redress for workers who have faced discrimination. This includes full compensation for wage disparities and related bonuses, as well as compensation for lost opportunities, prejudice, and any other damages incurred.
• Employee Protection. Provisions to protect workers from retaliation for asserting their right to equal pay.

Intentions are admirable, but there is no lack of criticism

At first glance, the Directive appears necessary and appropriate. The requirement for salary ranges in job advertisements is already common in Lithuania and widely seen as beneficial. Compensation for proven discrimination is also reasonable and fair. Other elements, such as clear job descriptions and communication, are well-established corporate practices that benefit both employees and businesses. So, what is there to criticize?

Reality is always more complex. Labeling a document as promoting 'transparency' or 'equality' does not automatically make it effective. The Directive should be judged not by its title but by the suitability of its measures, as it will create national laws, new mechanisms, and restrict companies' choices. There seems to be a lack of insight into the issues at hand and important justifications are not provided, for example, in setting a specific 5% limit of the acceptable gender pay gap.

Moreover, there are gaps in broader principles. The focus on statistical gender pay gap raises questions about why disparities between age groups or nationalities are not similarly addressed, especially since pay differences between age groups can be significant. Is it assumed that pay differences between genders are inherently worse than other types of disparities?

Another aspect, which is just as problematic is the used notion of “equal work” or “same value job”. Who can accurately determine which different jobs in everyday tasks and skills are of the same value? Value is perceptive, each organization may have an individual point of view about what is most valuable for them. Yes, job evaluation methodologies exist, but they are only attempts to roughly understand what complexity jobs have, while being full of inaccuracies and compromises. With this in mind, how accurate or relevant will this analysis and reporting be if it is built on an inaccurate foundation? Maybe the directive should focus on the notion of “same position”? That way we can achieve more accurate results with less complexity.

Employers have little time but a lot to prepare

Although the provisions might change before 2026, companies won't have the final version of the Directive in advance. If the provisions remain largely unchanged, it will take more than a year, or more than one remuneration review cycle, to prepare adequately.

To be ready in time, companies should start focusing on key areas such as jobs, pay gaps, salary ranges, and communication. Employers should review and organize job descriptions and ensure they are aligned with the Directive’s focus on pay differentials for employees performing the same or similar work.

If not already in place, employers need to establish salary ranges for each position. If ranges exist but are not communicated, preparation for their communication is necessary. Finally, it is recommended that all employers conduct a baseline gender pay analysis, ideally through a job-by-job examination.