AGEFI Luxembourg - mai 2025

By Sabrina BODSON, Counsel & Lisa RENARD, Junior Associate Employment en Employment, Baker & McKenzie Luxembourg D irective (EU) 2023/970 of 10 May 2023 has been adoptedby the EuropeanParliament and theCouncil “to strengthen the applica- tion of the principle of equal pay forwork of equal value between men andwomen through pay transparency and enforce- mentmechanisms” (the “Directive”). Itwill be applicable to all employers (private andpublic), irre- spective of their headcount, aswell as to allworkers under an employment rela- tionship, irrespective of theirworking patterns (part-time or full-time). Considering theDirective’s title, preamble, andprovi- sions, the objective is not to establish a princi- ple of equal pay for equalworkbeyond the gender context. TheDirectiveshallbeimplementedintoLuxembourg lawby7June2026.Whilenobilloflawhasbeensub- mitted yet, initial reactions frommarket players sug- gested there was ample time to prepare. However, there is now a growing recognition of the transfor- mative impact of the Directive and the extensive preparatorywork required to be ready by then. This Directiveentailsmorethanjustacomplianceexercise; itpromisestosignificantlychangeremunerationprac- tices, empowering workers from the first day of its implementationinLuxembourglawtowardsachiev- ing equal pay. Until now, unequal pay claims have beenminimalandrarelysuccessful,butthisDirective provides the tools needed formeaningful change. Samework orwork of equal value The Directive mandates that employers must estab- lish pay structures that eliminate gender-based pay disparities among workers performing the same workorworkofequalvalue.Differencesoftreatment that are justified by objective, gender-neutral criteria will remain permissible. This will be achieved through a job categorisation exercise classifying all identical or same value positions into the same cate- gory. While in some sectors a categorisation has alreadybeendoneinthecollectivebargainingagree- ment, the exercise still needs to be performed for workers not covered by such agreements. In Luxembourg, the gender pay gap is most pro- nouncedatthehighestlevelsofremuneration,where workersarenotwithinthescopeoftheseagreements. In line with EU case-law, the value of workmust be assessed and compared based on objective criteria, which according to the Directive, must be agreed withworkers’ representatives. These criteria include skills,effort(physicalandmental),responsibilityand workingconditions.Therelevanceofthese criteria may vary, and they should be weighted accordinglyforeachposition.Additionalcriteriamay be consideredona case-by-case basis, provided they are objective and gender-neutral. This job classification will enable workers to com- pare their pay to that of others in the same category. As the foundation for the information shared with individualworkersunder the transparency require- ments set by the Directive, this job categorisation exercise is critical. The gender pay gap reporting required by the Directive will be partially based on this categorisation. Transparency requirements The Directive brings transparency requirements beforerecruitmentandduringtheemploymentrela- tionship. Before recruitment Candidates will have to receive information about the initial pay or its range and where applicable, about the relevant provisions of the collective agree- ment appliedby the employer in relation to theposi- tion. The aforementioned information shall be pro- vided, for example, in “a published job vacancy notice, prior to the job interview, or otherwise prior to the conclusion of any employment contract”. Employersarealsoprohibitedfromaskingaboutthe pay history of a candidate, a practice considered to perpetuate inequality. The Directive also reminds of the obligation for job offers and job denominations tobegender-neutral andrecruitment processes tobe non-discriminatory. During the employment relationship Transparency is required at several levels. At the collective level, employers shall proactively make easilyaccessible toallworkers the criteriaused to determine (i) pay, including fixed and variable components, (ii) pay levels and (iii) pay progression (with a possible exemption regard- ing this last itemwhere the head- count is below50workers). Asofaheadcountof100work- ers, employers shall further communicate to all workers andtotheworkers’represen- tatives the gender paygapby categories of workers, broken down by base salary as well as complementary or variable compo- nents. Upon request and subject to avail- ability, employers shall also provide the aforementioned data for the four pre- ceding years. At the individual level, employers must, uponaworker’srequest,providethefollowingwith- in twomonths: - Information on theworker’s individual pay level -Informationontheaveragepaylevels,brokendown bysex,forcategoriesofworkersperformingthesame work orwork of equal value. In essence, workers should be aware of their remu- neration level and be able to compare it to others in the same or equal value roles. Workers will also have the right to ask for clarifica- tionsiftheinitialinformationprovidedis“inaccurate orincomplete”andtoreceiveasubstantiatedanswer. Another significant change is the prohibitionof pay secrecy clauses. Communications on pay are encouraged as long as they aimto exercise the right to equal pay. At the public level, for companies with at least 100 workers, employers will be required to regularly communicate informationonpay toanationalmon- itoring body tasked with compiling and publishing remuneration data publicly. This information must include the gender pay gap (i) across the entire com- pany, (ii) by category of workers, (iii) median pay, forbothfixedandvariable salaries aswell as thepro- portion of female andmale workers in each quartile pay band. The “accuracy” of the information must be confirmed by themanagement after consultation of theworkers’ representatives. The schedule and frequency of these disclosures depend on the company’s headcount. Employers with at least 150workersmust submit their first dis- closures by 7 June 2027, based on 2026 data. Companieswith100to149workersmustmaketheir first disclosures by 7 June 2031, based on 2030 data. Joint pay assessment Employers with a headcount of at least 100 workers and (i)agenderpaygapofatleast5%(ii)notjustified by gender-neutral and objective criteria and (iii) not remediedwithin aperiodof 6months, shall conduct a joint pay assessment in cooperation with their workers’ representatives. Informationwill have tobe shared in relation toeach categoryofworkers,suchastheproportionoffemale andmaleworkers, the average pay levels for female andmaleworkers, variable components, any differ- ences in average pay levels and the reasons for these differences, the proportion of female/male workers who received a pay rise following their return from leavelinkedtoparenthood,andmeasurestoremedy paydifferencesthatarenotjustifiedbyobjective,gen- der-neutral criteria. Such assessment will have to be made available to workers, their representatives, andproactively com- municatedtothemonitoringbody(anduponrequest the labour inspectorate and equality body assigned with thatmission). Enforcementmechanisms With workers being provided with the information they need to assess whether they are the victims of gender-basedpay inequality, employerswhodonot remedy unjustified, gender-based differences are at riskoffacingpayinequalityclaimsincourt.Ifawork- erpresentsfactsthatsuggestdiscrimination,thebur- den of proof will shift to the employer. Likewise, if the employer is in breach of the obligations of trans- parencystipulatedbytheDirective(exceptforminor or unintentional breaches).Workers shall be entitled to recover back pay including bonuses, “lost oppor- tunities” and compensation for the prejudice suf- fered.TheDirectivealsoencouragesdissuasivepenal- tiestobesetbyMemberStates,notingthesuggestion made by the Directive that these are based on the gross annual turnover or total payroll. Actionplan Inviewof the transparencyobligations andenforce- ment mechanisms under the Directive, as well as the rights given toworkers’ representatives on such a sensitive and key topic as pay, employers are strongly encouraged to gather information on, audit, define potential remedies, andworkon com- municationplans regardingpaypractices. It is often the case that decision-making on pay has not been documented and the reasons for variable remuner- ation grants and discrepancies are not precisely known or aligned, particularly with performance evaluations. As differences in treatment can be justified by objec- tive,gender-neutralcriteria,itisnowtimeforemploy- ers toensure that either there isnogender-basedpay gaporthatanyexistinggapsareobjectivelyandneu- trally justified. For that purpose, employers should start establishing relevant andappropriate job classi- fications tailored to the specificities of their business, andtakeactiontoaddressanygender-basedpaygap before the Directive takes full effect. Depending on the scenario, the Directive gives an employer up to twoorsixmonthstosatisfyitsobligations.Inpractice, consideringthetasksandchallengesitmaypose,this is extremely short. The key takeaway point can be summarized in threewords: get ready now. Preparing for the Pay Transparency Directive: now is the time! I nclusive Finance Network Luxembourg (InFiNe) a accueilli S.A.R. la Grande- Duchesse de Luxembourg à la Maison de laMicrofinance le 30 avril, une occasion qui a permis de souligner le statut duGrand- Duché en tant que pôle majeur du secteur de la finance inclusive à l’international. Cette journée a été l’occasion de présen- ter le caractère innovant des activités de neuf organisations luxembourgeoises dans le domaine de la finance inclusive et de la microfinance : Appui au Développement Autonome (ADA) et son spin-off Financing Innovation Tool (FIT), Alliance for Financial Inclusion (AFI), European Microfinance Platform (e-MFP), Inclusive Finance Network Luxembourg (InFiNe), Investment for Development (IforD), Microinsurance Network (MiN), Microlux SIS, et Social Performance Task Force (SPTF Europe). S.A.R. laGrande-Duchesse a été accueil- lie à la Maison de la Microfinance par TomPfeiffer, président duConseil d’ad- ministration d’InFiNe, en compagnie de Patrick Losch, président d’Appui au DéveloppementAutonome (ADA). Dans son discours d’accueil, Tom Pfeiffer a déclaré : « Altesse Royale, votre présence ici aujourd’hui n’est pas seulement une source d’inspiration, mais aussi une vali- dation de nos efforts collectifs. Nous savons que derrière votre soutien se cache une pro- fonde conviction quant aux droits de chacun à la dignité et à l’accès aux opportunités éco- nomiques. Cette convictionnous pousse tous à aller de l’avant dans notre mission, qui consiste à faire en sorte que les services finan- ciers de base deviennent réellement accessi- bles à tous, en particulier aux populations les plus vulnérables ». S.A.R. la Grande-Duchesse, fervente porte-parole de lamicrofinance et enga- gée de longue date dans la lutte contre les inégalités dans le monde, a assisté à une présentationde chacune de ces neuf organisations luxembourgeoises expli- quant leurs activités et leurs objectifs principaux. Nichée au cœur de la ville de Luxembourg, la Maison de la Microfinance est un véritable carrefour de l’écosystème de la finance inclusive du pays, accueillant un ensemble hété- rogène d’institutions actives à l’échelle internationale. Chacunede ces organisa- tions joue un rôle essentiel dans la lutte contre l’exclusion financière, tant au Luxembourgquedans les pays endéve- loppement et les économies émergentes. Du microcrédit à l’investissement à impact, en passant par la micro-assu- rance et l’innovation réglementaire, leurs efforts combinés démontrent la force et la synergie d’un écosystème unique. Ensemble, ces institutions illustrent le potentiel de la collaboration pour faire progresser la finance inclusive, renfor- çant ainsi la positionduLuxembourg en tant que chef de file dans la construction d’unavenir financier plus équitabledans lemonde. Une position que S.A.R. la Grande- Duchesse de Luxembourg encourage et défenddepuis plus de trois décennies : « Il y a des années, mon rêve était que le Luxembourg devienne une plateforme euro- péenne, voire mondiale, et un exemple à sui- vre dans le domaine de la microfinance. En voyant ce que nous avons accompli ensemble, ce que vous avez accompli, je dois dire que je suis particulièrement fière de ce que le Luxembourg est aujourd’hui parvenu à concrétiser ». InFiNe a été fondée en 2014 pour stimu- ler l’inclusion financière en tant que levier pour la réduction de la pauvreté et l’autonomisationdespopulations à fai- bles revenus. InFiNe rassemble 44mem- bres, des acteurs clés des secteurs public, privé et de la société civile, constituant ainsi une plateforme unique pour aider à mobiliser l’expertise financière collec- tive du Luxembourg et déployer effica- cement des initiatives de finance inclu- sive à l’échellemondiale. « Il est essentiel de mentionner qu’un réseau représente la capacité d’unir des membres issus demilieux différents autour d’un objec- tif commun. Le Luxembourg est largement reconnu dans le monde comme un acteur clé de l’inclusion financière » , a rappelé Philippe Guichandut, directeur intéri- maire d’InFiNe. S.A.R. la Grande-Duchesse à la Maison de la Microfinance «Le Luxembourg est un acteur clé de l’inclusion financière » ©MaisonduGrand-Duc/SophieMargue Mai 2025 33 AGEFI Luxembourg Droit / Emploi