Netherlands: Implementation of the EU Pay Transparency Directive

Scope

Employers covered

The Directive applies to both public and private sector employers

The definition of “employer” in the Dutch legislative proposal is as follows: “Each organizational entity operating as an independent unit in society, where work is performed under an employment contract or a public law appointment”. This definition is similar to ‘enterprise’ within the meaning of the Works Councils Act and includes both private and public sector entities. The decisive factor would be the “organizational entity” from which employees perform their work. This can be the employing legal entity, but this might not always be the case.

Types of workers covered

The Directive applies to all workers who have an employment contract or employment relationship as defined by law, collective agreements and/or practice in force in each Member State with consideration to the case-law of the Court of Justice.

The definition of “employee” in the Dutch legislative proposal is as follows: “The person who has an employment contract or a public law appointment with the employer.” The Dutch legislative proposal does not specifically reference “workers”. The definition of employee also encompasses part-time employees, employees with fixed term employment contracts and agency workers. However, it excludes contractors unless contractors can ultimately be classified as employees. Ultimately, the number of FTE’s is relevant for determining the threshold of employed employees rather than the actual headcount of employees, which follows from the ”Recommendation 2003/361/EG concerning small, medium-sized and micro-enterprises”.

Information requirements

On hiring

Provision of information to applicants

Employers must provide information to job applicants about:

• the initial salary or its range;
• (where applicable) the relevant salary provisions in the collective bargaining agreement applied by the employer.

Such information must be provided in reasonable time to allow for an informed and transparent salary negotiation.

Prohibition of certain questions

Employers may not ask applicants about their pay history during their current or previous employment relationships.

During employment

General pay determination criteria

Employers must make easily accessible the objective, gender-neutral criteria used to determine pay, pay levels and pay progression.

This rule does currently not exist under Dutch law. Following the Transparent and Predictable Working Conditions Act, employers are obliged to inform employees about their salary, the individual salary components and the method and frequency of salary payment(s). The legislative proposal in addition introduces the obligation for all employers to establish salary structures which are based on objective criteria, enabling the categorization of work and positions accordingly. These objective criteria should encompass at least the following four factors: skills, efforts, responsibilities and working conditions. In addition to objective criteria, the salary structures should also be designed to incorporate gender-neutral criteria.

The legislative proposal also introduces the obligation for employers to provide their employees with access to the criteria used to determine salary, salary levels and wage progression. The legislative proposal makes use of the option to exempt employers with fewer than 50 employees from the obligation to provide their employees with transparency with regards to the criteria used for wage progression.

Individual pay levels

At the request of a worker (directly or through a worker representative or equality body), employers must provide information on their individual pay level and the average pay levels, broken down by sex for categories of workers performing the same work or work of equal value. The employer must also inform workers annually about their right to request this information.

This rule does currently not exist under Dutch law. The legislative proposal introduces a right to information following which all employees can request written information about their individual wage level and the average wage levels of employees performing equal (or equivalent) work, broken down by gender. This right can be exercised either directly by the employee or through an employee representative body, if any. Employers will be required to inform all employees at least once per year of their right to request this information. This is intended to raise awareness and ensure that employees are empowered to act if they suspect unequal pay.

No secrecy clauses

Workers shall not be prevented from disclosing their pay for the purpose of the enforcement of the principle of equal pay and clauses in contracts prohibiting disclosure of pay information are prohibited.

This rule does currently not exist under Dutch law and new legislation is therefore required to transpose the requirement into national law.

The legislative proposal states that employees shall not be prevented from disclosing information about their salary for the purpose of enforcing the principle of equal pay. Any clause in the employment contract that prohibits employees from disclosing their pay is null and void.

Reporting requirements

Employer size threshold, start and frequency

Employers with 100 or more workers must prepare and publish gender pay gap reports. The start and frequency of that obligation will depend on worker numbers.

This rule does currently not exist under Dutch law and new legislation is therefore required to transpose the requirement into national law.

The legislative proposal requires employers with 100 or more employees to prepare and submit gender pay gap reports. The frequency of the reporting depends on the size of the workforce.

Content of reporting

Reports must include:

• the gender pay gap (including in complementary or variable components);
• the mean gender pay gap (including in complementary or variable components);
• the median gender pay gap (including in complementary or variable components);
• the proportion of female/male workers receiving complementary or variable components;
• the proportion of female/male workers in each pay quartile;
• the gender pay gap by category of workers broken down by base pay and complementary or variable pay.

The accuracy of the report must be confirmed by management after consulting with workers’ representatives.

The report should include the elements as set by the Directive. The accuracy of the report should be confirmed by the employer’s management. Furthermore, the employer should ‘consult’ with employee representatives (e.g. the Works Council) before finalizing the report. These requirements will be further detailed in article 31d of the Works Councils Act.

Provision / publication of report

Companies must provide the pay gap information to the national authorities designated for that purpose and may also publish it themselves on their website or otherwise make it publicly available.

Remedial action requirement

Employers must take steps to remedy unjustified pay gaps within a reasonable period of time in close cooperation with workers’ representatives, the labour inspectorate and/or the equality body.

Obligation to carry out joint pay assessment with workers’ representatives

This obligation arises where:

• there is a 5% or higher pay gap in any category of workers;
• that gap is not justified by objective, gender-neutral criteria;
• the employer has failed to remedy within 6 months of report

The joint pay assessment must include certain prescribed information and must be made available to workers and their representatives and on the request for the Labour Inspectorate and equality body.

This rule does currently not exist under Dutch law. However, employers employing at least 100 employees are required to discuss the pay ratio developments compared to the previous year at least once a year during the consultation meeting with the Works Council (if any).

According to the legislative proposal, employers will be required to take remedial action when unjustified gender pay gaps are identified. This means that in case the gap is 5% or more within a category of employees performing equal or equivalent work, and the gap cannot be justified by objective, gender-neutral criteria and the employer fails to remedy the gap within 6 months after submission of the report to the concerning authority, the employer is required to take further action. In that event, employers are required to carry out a joint pay assessment in close cooperation with the employee representative body (e.g. the Works Council) and, upon request, the Labour Inspectorate and/or the equality body.

Following the legislative proposal, this means that the Works Council will be granted a right to consent under article 27(1)(c) of the Works Councils Act (i.e. when introducing, changing of withdrawing “pay or job-grading systems”). The joint pay assessment will fall under this scope.

Other provisions

Who can take action?

Workers may take action, as well as their representatives, associations, organisations and equality bodies.

Currently, employees and/or their legal representative(s) can submit claims regarding unequal treatment in terms of pay and start court proceedings at the Netherlands Institute for Human Rights (in Dutch: “College voor de Rechten van de Mens”) and subsequently start a civil court procedure. The decisions of the Netherlands Institute for Human Rights are not binding for the court. However, courts tend to take this decision into consideration.

According to the legislative proposal, employees themselves, employee representatives, Trade Unions, equality bodies and/or legal representatives can take action in support of the right to equal pay.

Compensation

Workers must be able to claim full compensation or reparation for loss and damage in a dissuasive and proportionate manner. No upper limit may be fixed.

Other remedies or penalties

Other penalties for an infringement of rights or obligations related to the principle of equal pay should include:

• an order to stop the infringement;
• an order to take measures.

Employees can demand the cessation of an infringement of the right to equal pay and that measures should be taken to apply the principle of equal pay. Courts may impose a penalty payment (in Dutch: “dwangsom”) to enforce compliance. These rights are already embedded in the Dutch law and therefore do not require additional implementation.

Enforcement of the proposed legislation is expected to be carried out by the Dutch Labour Inspectorate. Further procedural details will be set out in lower regulations. Non-compliance may result in administrative sanctions (including fines of up to EUR 10,300 per violation per individual employee (2024 threshold)), corrective measures and public disclosure.

Burden of proof

Non-compliance with obligations leads to a shift of the burden of proof, unless the infringement is manifestly unintentional or minor.

Proof of equal work for equal value – equal pay claims

When assessing whether female and male workers are carrying out the same work or work of equal value, the assessment of whether workers are in a comparable situation shall not be limited to situations in which female and male workers work for the same employer, but shall be extended to a single source establishing the pay conditions. A comparator does not need to be employed at the same time as the worker concerned. Hypothetical comparators are permitted.

Article 7 of the Equal Treatment (Men and Women) Act currently states that the salary of an employee performing work of equal or nearly equal value within the same company shall be used as the basis for the comparison of employees’ salaries.

The legislative proposal expends article 7 of the Act to the extent that the assessment of whether employees are in a comparable situation is not restricted to employees working for the same employer. Comparisons may be made across different employers if the relevant pay conditions/structures are traceable to a single source, such as a CLA that applies to multiple employers. The legislative proposal allows comparisons between employees who are not employed at the same time. If there is no real comparator available, the employee should be allowed to use a hypothetical comparator to demonstrate that they would have been treated differently based on gender.

Access to evidence equal pay claims

Authorities’ or courts’ must have the power to order disclosure of evidence relevant for equal pay claims

Limitation periods equal pay claims

Minimum 3 years from awareness, or reasonable possible awareness, of infringement.

Penalties

Penalties must be effective, proportionate and dissuasive applicable to infringements of the rights and obligations relating to the principle of equal pay, including fines and specific penalties for repeated infringements.

Public contracts

Measures must to ensure that, in the performance of public contracts or concessions, economic operators comply with their obligations relating to the principle of equal pay. Public procurement may be used to enforce the equal pay principle.

This rule already follows from the Public Procurement Act. According to the legislative proposal, no further implementation is required.