How to bridge the gap in gender pay in the Netherlands to avoid surprises

The gender pay gap has led to significant developments in legislation, prompting the European Union to adopted a directive and member states either drafting or amending their own legislation. The legislation will make the gap transparent and shift the burden of proof from the employee to the employer.

As a result, employers are likely to face an increase in claims relating to unequal treatment and breaches of good employment practice. Although the legislation has not yet come into force, it is recommended that employers address these issues in order to anticipate future legislation. In practice, it has proven difficult to investigate, address and implement measures to "close the gap".

EU Pay Transparency Directive

In the EU, the gender pay gap remains a pressing concern, with women earning (on average) 13% less than their male counterparts. The EU has adopted the Pay Transparative Directive which aims to create more transparency throughout the employment process. It requires increased transparency for pay practices within organisations and includes several far-reaching obligations for employers. The main elements are:

• Pre-employment pay transparency (for example, to applicants).
• Transparency of pay setting and pay progression policy (based on objective criteria).

• Right to information; for example, on individual pay levels and the average pay levels, which are broken down by gender for categories of workers performing the same (or equivalent valued) work.

  Reporting obligations (even, to an extent, retrospectively) on the (median) gender pay gap, including variable components.

• A shift in the burden of proof and an obligation on the employer to disclose evidence.

Member States must implement the directive by 7 June 2026. For certain obligations, Member States have the possibility to derogate.

Proposed legislation in the Netherlands

The gender pay gap in the Netherlands was 14.2% in 2020, which is worse than the EU average. In order to combat the gap, a bill has been pending in the Netherlands since 7 March 2019: the Gender Pay Equality Act, which introduces a number of instruments to combat the gender pay inequality. These include:

• A certification requirement for large employers with 250 or more employees, including an increased burden of proof applicable for those employers who are not certified.
• An annual disclosure requirement to the works council and in the board report for employers with 50 or more employees.
• A right for employees to inspect (anonymous) pay information of colleagues doing (substantially) the same work for employers with 50 or more employees.

The Dutch Labour Inspectorate is responsible for monitoring these obligations. Violations can result in a fine of up to €103,000 (2024 figure), with the possibility of an increase in the event of repeated violations. It is possible that the act will be amended to align with the Pay Transparency Directive, but it could also be adopted and implemented before the obligations of the directive take effect.

Pre-emptive measures for Dutch and EU employers?

In the Netherlands, along with other EU countries, it is difficult to unilaterally change employment conditions. In general the consent of the employee is required and only in limited circumstances an employer can unilaterally change employment conditions. As employees will generally not give their consent to a salary reduction to bridge the gap and a hard salary freeze may also raise eyebrows, it is important to pre-empt implementation of both the directive and the act.

Pre-emptive measures that employers should have or consider putting in place include:

• Conduct audits to identify any gender pay gaps
• Already have commenced with addressing gender pay gaps by freezing salaries or differentiating in annual salary increases (possibly over multiple years).
• Implement transparent pay policies and ensure that employees are informed about pay scales and pay progression.
• Establish reporting mechanisms to accurately track and report gender pay gaps.
• Work with the works council (or employee representative body) to implement and evaluate transparent pay structures.

Osborne Clarke comment

1. While the Pay Transparency Directive and the Gender Pay Equality Act represent a significant step towards gender pay equality, their successful implementation requires efforts from employers to ensure a culture of transparency and accountability in the workplace.
2. Legal penalties can easily be overshadowed by risks to reputation, workforce retention and competitiveness in a tight labour market.

The employment team(s) at Osborne Clarke and the international ESG team can help clients analyse their current practices and proactively develop sustainable and equitable workplace practices and policies.