Finland's Implementation of the EU Pay Transparency Directive

The Finnish government has released its 102 page proposal to implement the EU Pay Transparency Directive, which aims to ensure equal pay for men and women by increasing transparency around salary structures and addressing unjustified pay disparities. Finland's proposed legislation largely aligns with the minimum requirements of the Directive but introduces specific nuances tailored to the Finnish context, potentially affecting companies differently depending on their size.

Core principles and universal application

Finland's proposal closely follows the Directive's core principles, such as mandatory disclosure of salary ranges during recruitment, the prohibition of salary history inquiries, and the annual right of employees to request information on salary distribution by gender for similar roles. These measures will apply universally across all employers, regardless of size, reflecting a robust commitment to gender equality.

Strategic nuances and thresholds

However, Finland has strategically utilized discretion allowed by the EU Directive in a few critical areas. For instance, while all companies must disclose their pay-setting criteria transparently to employees, only companies with 50 or more employees will be required to outline pay-progression criteria explicitly. This threshold provides a degree of administrative relief for smaller businesses, acknowledging the resource challenges they might face.

Gender pay-gap reporting requirements

One significant aspect of Finland's implementation is the reporting of detailed gender pay-gap metrics, which will become mandatory for companies employing 100 or more workers. This data will include metrics such as median pay gaps, gender distributions within pay quartiles, and differences in variable pay components. Companies with 150 to 249 employees must first submit these reports by 2027, and those with 100 to 149 employees by 2031, mirroring the Directive’s phased approach.

Administrative simplification efforts

To ease administrative burdens, the Finnish government will leverage existing systems, notably Tulorekisteri, Finland's income register, to simplify data collection. This pragmatic decision should help minimize the administrative overhead companies face in adapting to the new regulatory landscape.

Penalties and enforcement

A critical feature of Finland’s implementation is the introduction of a substantial administrative omission fee, ranging from €5,000 to €80,000, for companies failing to comply with reporting obligations or joint pay assessments triggered by unjustified pay gaps. This penalty, scaled according to company turnover and severity of non-compliance, underscores Finland’s firm stance on enforcement.

Practical implications for Finnish companies

Finnish companies now face several practical implications. Businesses, particularly those with more than 50 employees, must swiftly modernize and document their pay-setting and evaluation processes to ensure alignment with gender-neutral criteria. Recruitment processes must also adapt promptly to comply with new transparency requirements, notably the public disclosure of salary ranges and elimination of salary-history inquiries.

Additionally, enterprises with over 100 employees should prepare for rigorous external scrutiny of their pay practices. Proactively assessing pay structures, identifying potential gender pay gaps, and establishing plans to address any discrepancies will be crucial to avoiding reputational risks and hefty fines.

Conclusion

Overall, Finland’s proposal is a measured yet clear response to the EU’s directive, carefully balancing the Directive's demands with national flexibility to mitigate potential challenges for businesses. As Finland moves toward the planned enactment date of May 18, 2026, companies should use the intervening period strategically to ensure compliance, minimize risk, and embrace the transparency ethos central to the new regulatory landscape.