New EU directive pushes Luxembourg toward salary transparency

What are the salaries in your company? Is there any gender discrimination? Imagine a workplace where these questions are not social faux pas.

For now, true salary transparency has only been possible in the realms of fantasy. Few taboos are as closely guarded as salaries but imagine the relief of working in an office where everyone's pay was known.

Some companies and public administrations do use salary scales that make career progression more transparent. Generally, though, firms cultivate an atmosphere of ambiguity, with salaries, promotions, and benefits negotiated out of earshot.

That may soon change. The new EU Pay Transparency Directive is sending shivers down HR departments spines. Adopted in May 2023, it must be transposed into Luxembourg and other Member States by 7 June 2026. Therefore, the deadline is fast approaching.

Right to request information regarding average pay, broken down by gender

The directive is shaking up the working world by reinforcing "the principle of equal pay for women and men for the same work or work of equal value, through pay transparency."

Contacted by RTL Infos, Luxembourg’s Labour Ministry said the directive "provides, among other things, that employees will have the right to request and obtain written information from their employer about their individual salary level and the average salary levels, broken down by gender, for categories of employees doing the same work as them or work of equal value."

In short, staff will not be able to see the exact salary of a specific colleague. They will, however, be able to access average pay for their role, with a clear breakdown by gender. Where salaries are not fair or there is clear discrimination, employees will have stronger means to report disparities.

At hiring, employers will be required "to apply objective, non-discriminatory and non-sexist criteria when setting pay, pay bands and progression. Applicants will also be entitled to information on the starting salary or salary range," according to the Ministry.

In practical terms, applicants will be able to "receive information from potential employers about the starting salary or starting salary range based on objective, non-sexist criteria corresponding to the position in question." In addition, "potential employers will no longer be allowed to ask job applicants about their current or previous salary",  the Ministry of Labour explains.

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Small, medium-sized and large companies: different obligations

The Directive applies to all employers, whether in the public or private sector, and concerns all employees and job applicants. However, not all companies will be subject to the same obligations:

• companies with between 100 and 249 employees will have to submit a report every three years (from 2027 for companies with between 150 and 249 employees and from 2031 for companies with between 100 and 149 employees). These companies will be required to take corrective action for any gap of more than 5%;
• companies with more than 250 employees will have to send annual reports to the relevant national authority detailing salaries by gender and setting out the criteria used to determine remuneration. In addition, they will also have to correct any gap of more than 5% between salaries.
• Companies with fewer than 100 employees may, if they wish, report on pay without any obligation to correct discrepancies greater than 5%. 

It should be noted that a pay gap of more than 5% may be accepted if it is justified by objective criteria that are "non-sexist and unbiased" (e.g. competence, seniority or performance).

Furthermore, the directive provides for remedies to compensate employees who are victims of pay gaps, penalties for employers who do not comply with the legislation, and legal protection against reprisals for employees.

Another important point is that the directive provides for a reversal of the burden of proof in matters of remuneration.

Previously, employees had to prove that their employer had violated the rules on pay transparency. Once the directive is transposed, the burden of proof will fall on the employer.

When will this change happen?

Why is Luxembourg slow to transpose this directive, unlike France and other countries?  According to the Labour Ministry, "the bill is expected to be tabled at the end of 2025".

The statement continues: "Given that several ministries and administrations had to be consulted during the drafting of the preliminary bill, it has not yet been possible to table the bill. Furthermore, one of the complexities involved in transposing the directive is striking the right balance between, on the one hand, effectively protecting employees' rights and, on the other hand, avoiding creating excessive administrative burdens for businesses."

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There may be some concerns that this greater level of transparency will be accompanied by risks of internal tensions: rivalries between employees, loss of motivation and productivity, resignations, legal disputes, complexity of implementation and compliance with data confidentiality, and so on.

However, the law would put pressure on employers who have no qualms about offering arbitrary salaries or unfairly blocking an employee's career. "Yes, this directive can bring about positive changes in the Luxembourg labour market, including greater salary transparency for job applicants. In terms of challenges, the obligation to assess the value of a job based on criteria such as skills, effort, responsibilities, etc. may prove complex, especially for small and medium-sized enterprises", concludes the Labour Ministry.

Our colleagues at RTL Infos want to hear from you!  Do you think there should be more wage transparency? Are you paid what you are worth? Does your employer discriminate in terms of wages? Send us your (anonymous) thoughts in a quick survey below. You can also contact RTL Infos journalist (romain.vandyck@rtl.com) if you would like to share your thoughts on this subject. Thank you!