Thursday, July 25, 2024

Sweden Releases Its Proposed Amendments of EU Pay Transparency Directive | JD Supra

Must read

In response to the EU Pay Transparency Directive, which requires employers operating in European Union member states to report on pay data, Trusaic will be evaluating the state of each country in the EU’s current gender pay gaps and the path toward compliance.

The impetus for the EU Pay Transparency Directive was to address the 12.7% gender pay gap in the European Union. Sweden’s gender pay gap is among the lowest in Europe, at 9.9%.

Currently, Swedish employers with more than 10 or more employees must produce annual pay surveys on their gender pay gaps. Employers with 25 or more employees are subject to more stringent requirements, including requirements to work on “active measures.”

Sweden is the first country to release a draft of its proposed amendments to comply with the EU Directive that it plans to transpose into law. Based on the initial proposal, which was released May 29, employers with operations in Sweden will need to begin updating their HR policy and practices to prepare for the more in-depth requirements of the upcoming EU Directive.

Quick Action Items for Swedish Employers

Employers in Sweden with 25 or more employees are required to annually reporting on their gender pay gaps. Further, they must provide an analysis of causes for gender pay gaps and provide measures that will be taken to rectify pay differences associated with gender.

Thus, most Swedish employers should be adept at the thorough reporting and remediation mechanisms that will be required under the EU Directive. However, employers will still need to account for several key additional requirements moving forward. These include:

  • Providing sufficient salary range information to job candidates. Sweden has no current legal requirements to provide salary ranges on job postings.
  • Not asking job candidates about their salary history.
  • Yearly pay gap reporting and acting when it exceeds 5%.
  • Accounting for intersectional discrimination in pay practices and considering needs of workers with disabilities.

As we’ve previously noted, the EU Directive deliberately uses the wider term of “worker” versus “employee” to account for contractors. Portugal law currently only applies to employees. Thus, employers will need to adjust to include contract workers in their reporting.

Employers with operations in Sweden should proactively evaluate their current pay practices and overall compensation philosophy. Employers can lean on pay equity software solutions to expedite this process and determine root causes of potential pay disparities.

In effect, by 2026, all large employers (250+ employees) must report gender pay gaps. By 2031, all smaller employers (100 or more employees) will have to comply.

Swedish Employers’ Current Requirements

Employers with 10 or more employees are required to carry out an annual pay survey and analyze:

  • Provisions and practices regarding pay and other terms of employment.
  • Differences in pay between women and men performing work regarded as equal or of equal value.

In addition, organizations must evaluate whether pay differences are due to gender. Analysis must refer to differences between:

  • Men and women performing work that is regarded as equal.
  • Pay differences between groups of employees who perform work that is (or is considered to be) female dominated and another group of employees that are performing work that is regarded as equivalent to such work (but which is not or is not normally considered to be dominated by women).
  • Predominantly female jobs compared to lower-valued jobs that are not predominantly female but receive higher compensation.

Employers with 25 or more employees are subject to additional requirements, including four ongoing “active measures” under the Act (investigate, analyze, take measures, and monitor).

The following information must be documented:

  • Report on the pay survey, and an analysis of its causes.
  • The measures to be taken to rectify pay differences associated with gender.
  • A cost estimate and a plan of when measures will be implemented (which must be within three years).
  • A report on the progress of the previous year’s measures.
  • An account of how the requirement to cooperate with employees has been fulfilled.

Work on Active Measures: Additional Considerations

Work on active measures is to encompass five key areas including:

  • Working conditions
  • pay and terms of employment;
  • recruitment and promotion;
  • education and training;
  • reconciliation of employment and parenthood

The Act also includes a general requirement to investigate discrimination in relation to opportunities and recruitment.

In addition, if a job applicant is not employed or selected for an interview, or if an employee is not promoted or selected for education or training for promotion, the employer must provide, upon request, information relating to the “education, professional experience and other qualifications that the person had who was selected for the employment interview or who obtained the job or the place in education or training.”

Complying with Sweden’s Proposed EU Directive Legislation

The EU Pay Transparency Directive was approved in 2023, establishing a clear framework for EU member states to apply the principle of equal pay for equal work or work of equal value.

EU member states have three years from June 7, 2023 to transpose the directive into law. Likely implementation dates are 2026, however, some countries may enact legislation earlier. All 27 member states are required to adopt the directive.

Sweden’s proposed legislation expands on the directive’s minimum requirements, applying its law to employers with 10 or more employees. Some key provisions of the proposed legislation include:

  • Requirement to develop a salary chart: Employers with 10 or more employees must prepare a salary chart during a year which accounts for groups of male and female employees that are performing work that can be considered equal or equivalent. The salary chart would also contain an analysis of wage differences that are directly or indirectly related to gender, and account and timeline of salary adjustments to remedy such differences
  • Requirement to develop and submit payroll report, which includes:
    • wage differences between women and men;
    • wage differences between women and men with regard to salary supplements or variable allowances;
    • median wage differences between women and men;
    • median wage differences between women and men with respect to wage supplements or variable compensation;
    • the proportion of women and men who receive salary supplements or variable allowances; and
    • the proportion of women and men in each salary quartile.
  • Pay transparency requirements: On the request of an employee the employer must provide written information about the employee’s salary compared to the average salary, broken down by gender, for that respective employee group. This information must be provided no later than 2 months from the request
  • Salary range requirement: Employer must provide applicant current salary or starting salary range. Employers must also provide applicable collective agreement provisions
  • Salary history ban: Employers cannot ask applicant about salary from a different employer.

Initial Steps for Swedish Employers

While Sweden’s proposed legislation is mostly in line with the EU Directive requirements, there are subtle nuances — notably, the significant applicability expansion to small employers.

Organizations with operations in Sweden now have the framework of what is required. Some initial steps to prepare for compliance include:

  • Pay explainability. Prepare to explain how you differentiate and define performance in setting base salaries. Pay transparency legislation means workers must be given access to criteria used to define salary and pay raises.
  • Analyze pay gaps. Identify the causes where pay disparities exceed 5%. If there is no objective justification, we recommend addressing any anomalies to remove those unexplained gaps.
  • Intersectional pay equity audit. Intersectionality is essential to close the gender pay gap. It recognizes that individuals can experience discrimination and inequality based on the intersection of multiple identities, such as race, gender, disabilities, age, and more. Intersectional discrimination is defined in the EU Transparency Directive.

Latest article