The most important changes introduced by the Pay Transparency Directive

Austria already has regulations on pay transparency in place. The Equal Treatment Act obliges employers to state the minimum salary under the collective bargaining agreement in job advertisements. In certain cases, an income report on the level of wages and salaries, broken down by men and women, must also be prepared. The Pay Transparency Directive now introduces significant changes for employers. The most important changes are summarized below.

Pay transparency during the application

Applicants must be aware of the starting salary or salary range for the advertised position. The Pay Transparency Directive does not clarify whether the employer must provide this information on its own initiative or whether the applicant must ask about the salary range. It remains undefined whether and how the Austrian legislature will clarify this open question.

During the application process, employers are no longer allowed to ask applicants questions about their current or previous salary. If the potential future employer nevertheless asks such a prohibited question, in Austria an applicant can, in principle, give an untruthful answer without this having any consequences for them under employment law. In addition, job advertisements and professional titles must be gender-neutral and the application process must be conducted in a non-discriminatory manner.

Pay transparency in an ongoing employment relationship

While the obligation to provide information as part of the application process is nothing new for Austrian employers (e.g., the mandatory indication of the minimum salary under the collective bargaining agreement in job advertisements), the Pay Transparency Directive will, for the first time, also provide employees with information rights relating to pay during an ongoing employment relationship. In the future, employers will have to provide their employees with information on the following matters:

• The criteria used to determine the level and development of pay, which must be objective and gender-neutral
• The average level of pay of employees performing the same or equivalent work, broken down by gender

In addition, employers must inform their employees annually of their information rights.

Contractual provisions that prevent employees from disclosing information on pay will be prohibited in the future.

Reporting obligations

Employers with more than 150 employees in Austria were already required to prepare an income report every two years in accordance with Section 11a of the Equal Treatment Act, but they did not have to publish it. The Pay Transparency Directive will tighten the requirements for the income report, as follows:

• In the future, the reporting obligations will also cover employers with 100 employees or more (previously, the limit was 150 employees).
• Companies with 250 or more employees must prepare and publish the income report annually; for companies with 100 to 250 employees, an interval of three years is envisaged. However, as the Pay Transparency Directive stipulates that the provisions that favor employees may be upheld, companies with more than 150 employees will also have to comply with the two-year interval in the future.
• The report must contain detailed information, such as the gender pay gap or the proportion of employees who receive variable pay components.
• The essential difference to the previous legal situation is that employers must take action if there is a pay gap that cannot be explained by objective and gender-neutral criteria. If this pay gap is more than 5% and it is not corrected in six months, employers must carry out a pay assessment in cooperation with the employee representatives. In the pay assessment, the amount of the pay gap and its reasons must be determined for each affected group of employees so that measures can be taken to close the gap.

Simpler enforcement of rights

If the employer violates the pay transparency regulations, employees are entitled to compensation. Employees can claim, among other things, the full payment of missed remuneration and any related bonuses or benefits in kind. A particularly sensitive aspect is that the burden of proof is reversed in favor of the employer. This makes it considerably easier for employees to enforce their rights in legal proceedings.

In addition, the limitation period of three years only begins to run when the employee has or should have become aware of the breach of the principle of equal pay.

Recommendations

Changes to the salary structure usually require a certain preparation time. To be prepared for future reporting and information obligations, we recommend taking the steps below now. This will not only keep you one step ahead of the legislature, but it will also increase your attractiveness as an employer.

• Review your HR processes and define clear guidelines regarding the application procedure (e.g., ensuring a non-discriminatory procedure, a gender-neutral job title and job advertisement, no questions about previous/current salary).
• Analyze your current pay scheme (due diligence). If there is a gender pay gap, identify the reasons for this and take proactive measures to close the gap.
• Define a process to ensure compliance with future information and reporting obligations during the employment relationship, e.g., by identifying objective criteria (qualifications, competencies, job-related responsibilities, working conditions) for determining pay and developing a pay system that meets the requirements of the Pay Transparency Directive.
• Eliminate provisions from existing employment contracts that require the employee to maintain confidentiality concerning the amount of remuneration.

Click here to access the German version.