Sweden becomes the first EU country to release draft local legislation for the EU Pay Transparency Directive, reinforcing that employers must act now to prepare for greater transparency and close gender pay gaps.
Employer Action Code: Monitor
The Swedish government has published its first proposal to transpose the European Union (EU) Pay Transparency Directive, the first EU member state to do so. The EU directive aims to ensure equal pay for equal work or work of equal value between men and women by giving employees extensive new rights to information about their own pay and the pay of male and female peers (see 2023 Global News Brief: European Union: Agreement on Pay Transparency Directive). Member states have until June 2026 to transpose the requirements into local law. Employers need to be prepared by this date.
The Swedish proposal builds on its existing equal pay legislation and reporting. The proposal is currently out for referral to various Swedish organizations and governmental bodies, which must provide feedback on the proposed changes and underlying report by October 4, 2024.
Key details
Sweden's existing legislation — primarily the Discrimination Act (Diskrimineringslagen) — is mainly in line with the directive's requirements, requiring all employers to conduct annual reviews of equal jobs and jobs of equal value (lönekartläggning), to ensure that no employees are being discriminated against in their salary/wages based on gender. Under the existing legislation, companies with 10 or more employees must document the salary review in writing, including specific measures to address any identified pay gap issues, while companies with 25 or more employees must also produce annual equality plans. The Equality Ombudsman has the right to request the plan, including the annual salary review.
Sweden's proposals to transpose the EU directive are actually a series of amendments to the current legislation. The proposed amendments include both requirements that aren't currently in the Swedish legislation (e.g., gender pay gap reporting) and changes or additions to the existing requirements, including:
- Pay transparency before employment: Employers must provide information to job applicants about the initial salary or range for the position and any relevant collective bargaining agreement provisions on salary. This information does not need to be included in the job postings but should be provided in reasonable time to allow for an informed negotiation on pay. Employers cannot ask prior salary history. This is in line with the directive.
- Transparency for employees on pay setting: Employers must inform employees about the "norms and practices"for wages, to help employees understand the annual equal pay salary reviews being conducted. This is an adaptation of the "criteria for setting pay" provision in the directive.
- Pay transparency for employees on average pay: Employees must have rights to information on their individual pay level and average pay levels for workers performing equal work, broken down by gender. Employers must provide the information within two months of the employee's request. This is in line with the directive, with the pay information corresponding to the information in existing annual equal pay salary reviews.
- Reporting of gender pay gaps: Employers with 100 or more employeesmust report gender pay gaps during the calendar year for the overall workforce to the Equality Ombudsman, who will publish this information. Employers must also report to the Ombudsman pay gaps by groupings of employees performing equal work, explaining differences of at least 5% with objective reasons or actions to be taken. These gaps will not be published by the Ombudsman. This is in line with the directive.
- Pay progression and leave: The annual equal pay salary analysis must also include a comparison between women's and men's pay progression in connection with parental leave and pay progression for employees who perform equal work or work of equal value and haven't taken a corresponding leave. This goes beyond directive provisions.
Employer implications
In terms of overall pay gaps in Sweden, in 2022 women's hourly earnings were 7% below those of men (compared to an EU average of 11%, according to OECD data). The directive will have a lasting impact on pay equity and transparency in Europe; employers in Sweden and other member states should start preparing for the pay transparency requirements to ensure that their pay and benefits are ready for this level of transparency and that they are delivering equal pay. Please refer to WTW's whitepaper: EU Pay Transparency Directive – Transposing into national law to find out more on WTW's specific guidance and expert recommendations for transposing this important directive into national law.
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