Pay Transparency Bill: Current Status, Overview, and Practical Guidelines

The deadline is approaching: the European Pay Transparency Directive must be implemented in the Netherlands by June 7, 2026. However, it appears that the Netherlands will not meet this deadline. Currently, implementation of the bill is anticipated as of January 1, 2027. The European Commission has indicated that they do not agree with this timeline.

Although legislative changes may not yet have entered into force, employers must start preparing now. This is due in part to future obligations and the possibility of directive-consistent interpreting in accordance with existing on existing equal treatment standards. In this blog, we outline the most important obligations and information and offer practical guidance.

Who does this apply to?

The new legislation has a very broad scope and applies to all employees. The type of employment contract is irrelevant.

All employers are subject to the new transparency requirements; the size of the company is not decisive. However, the larger the company, the more additional requirements apply. These requirements are increasing, particularly in the areas of reporting and evaluation.

Job Evaluation and Classification

All employers must have a clear and verifiable system for job evaluation and classification. This typically consists of:

1. a job classification system;
2. objective job evaluation;
3. salary scales or salary ranges;
4. a transparent compensation policy.

The system must be designed to be completely objective and gender-neutral. The law specifies four criteria that must be taken into account in all cases:

• skills;
• effort;
• responsibility;
• working conditions.

These criteria must be supplemented with other relevant criteria, provided that they are objective and gender neutral. The role of soft skills should not be underestimated.

Transparency and duty to inform

The transparency and duty to inform does not apply only to employees, but begins as early as the recruitment process. During this process, information must be provided on the starting salary or salary range for the position in question, as well as the relevant provisions of the compensation policy. Naturally, these must be based on objective and gender-neutral criteria.

In addition, employers are prohibited from asking job applicants about their current or previous salary.

Under the new bill, employees will be entitled to enhanced access to information. Employers must provide easy access to the criteria used in determining pay and pay levels. Employers with 50 or more employees have an additional obligation to provide information on pay developments.

Employees may also request information about individual wages and the average salary of colleagues in comparable positions, broken down by gender. Employers must respond to such requests within two months. Furthermore, employers are required to inform employees annually of the existence of this right.

Reporting Requirement

Employers with 100 or more employees are subject to an additional requirement: they must prepare a pay report on pay disparities within the organisation. The reports must include, among other things, information on average pay, supplementary or variable pay components, and pay disparities within categories of employees. These are just a few examples of topics that must be included.

The size of the organization determines the frequency of payroll reporting and the date of the first report:

Evaluation requirement

If the reports indicate that:

• there is a wage gap of 5% or more;
• this cannot be justified on the basis of objective and gender-neutral criteria; and
• if this cannot be remedied within 6 months of the date the information was provided,

then the employer must conduct a comprehensive wage evaluation for the relevant category of employees regarding the average pay level. Based on this evaluation, measures must be taken to eliminate the unjustified pay differences.

Consequences

Failure to comply with these obligations can result in various consequences. A violation may result in a warning, an administrative fine, or an order subject to a penalty.

In addition, an employee may claim compensation, including backpay and bonuses.

Role of the Works Council (OR)

The Works Council has an important role to play. The Works Council must be involved in the development and amendment of the compensation system and the job evaluation and classification system, as well as in the determination of the criteria used.

This role will be enshrined in the future provision regarding the Works Council’s right of consent. In addition, the Works Council plays a role in the fulfillment of reporting and evaluation obligations, particularly when a joint pay evaluation must be conducted in response to identified pay disparities.

Practical Tips

Although the law has not yet formally taken effect, sitting idly by is not an option. Practical first steps include:

• analyze the current job evaluation and classification system and identify risks;
• involve the Works Council in a timely manner;
• increasing transparency of salaries and compensation criteria;
• adjust recruitment processes and job postings.

Do you have any questions about the new bill and/or need assistance? Please feel free to contact us.