Lithuania Aligns Labour Code with EU Pay Transparency Directive (2023/970)

Lithuania becomes one of the first countries to amend parts of the Labor Code, to align it with the forthcoming EU Pay Transparency Directive; (EU) 2023/970. These proposed changes impose significant new obligations on employers aimed at promoting salary transparency and enforcing the principle of equal pay for equal work or work of equal value. Below we outline the key obligations for employers, from hiring practices to pay systems and reporting, and connect each to the corresponding requirements of Directive (EU) 2023/970 for legal substantiation.

The amendments are expected to be approved in parliament during the fall session.

Pre-Employment Pay Transparency Obligations

Salary Ranges in Job Listings: Employers will be required to disclose the initial salary or salary range for a position in the job advertisement. This has already been in place since 2019, and is nothing new to Lithuanian employers. This ensures candidates have upfront information on pay, facilitating informed and fair negotiations. It mirrors Article 5(1)(a) of Directive 2023/970, which grants job applicants the right to know the pay level or range for the prospective role.

No Asking About Pay History: Employers will be prohibited from inquiring about a candidate’s current or past salary during the hiring process. This ban aligns with Article 5(2) of the directive, which explicitly forbids employers from asking applicants about their pay history. Eliminating salary history questions helps prevent perpetuating past pay discrimination.

Disclosure of Collective Agreements: If a position is covered by a collective bargaining agreement, the employer must inform the applicant of the relevant provisions of that agreement. This duty reflects Article 5(1)(b) of the EU directive, which requires employers to disclose any applicable collective agreement terms for the job. Giving the candidate this information upfront ensures they understand any collectively negotiated pay scales or conditions tied to the role.

Gender-Neutral Pay Structures and Job Classification

The new law will require all employers to establish a structured pay system based on objective, gender-neutral job evaluation criteria. Every role must be classified and compensated based on clear factors that are the same for men and women. Specifically, the Labour Code amendments define four standard criteria that must be used to assess the value of work: skills, effort, responsibility, and working conditions. These criteria come directly from Directive (EU) 2023/970, Article 4(4), which requires that pay structures enable comparison of jobs using such gender-neutral factors. By law, these factors cannot be related to the employee’s sex, and they ensure that traditionally undervalued “soft skills” (often associated with female-dominated roles) are not overlooked.

• Formal Remuneration Systems for All Employers: Previously, the Labour Code required companies with 20 or more employees to have an established remuneration system that ensures equal pay for the same or equivalent work. The new amendments remove this threshold, extending the obligation to every employer, regardless of size.
• Gender-Neutral Job Evaluation Criteria: All pay systems must be founded on objective, gender-neutral job evaluation criteria. The law specifies four key criteria derived from Directive (EU) 2023/970 to assess the value of work: skills, effort, responsibility, and working conditions. Roles that are equivalent based on these factors must be classified and compensated equally, ensuring that pay is based on the nature of the work, not the gender of the person performing it.
• Pay Increase Procedures for Larger Employers: For companies with 50 or more employees, the remuneration system must also include a formal salary increase procedure. This means establishing and documenting the criteria and process for how pay raises are decided (e.g., merit increases, adjustments for tenure). This aligns with Article 6 of the directive, which emphasizes transparency in pay progression, though Lithuania applies this specifically to larger employers.

Employers should also involve employee representatives in developing or updating these pay systems where such representatives exist, as encouraged by the directive. The goal is to promote transparency and employee trust in how compensation is determined. By clearly defining how jobs are evaluated and priced, companies can more readily identify and correct unjustified pay gaps between male and female employees performing equivalent work.

Employee Right to Pay Information and Timely Explanations

The amendments grant employees robust rights to access pay information, empowering them to identify potential discrimination.

• Right to Request Comparative Pay Data: Any employee will be entitled to request, in writing, information on their own pay level and the average pay levels of other employees performing the same work or work of equal value, broken down by gender. This directly reflects Article 7(1) of the EU directive.
• Employer's Duty to Respond and Clarify: The employer must respond to these information requests within a reasonable time. The directive sets an upper limit of two months for responding to employees’ pay transparency requests (Article 7(4)), and the Lithuanian law is expected to adopt a similar deadline to ensure timely compliance. This means that once an employee submits a pay information request, the company should gather the relevant salary data and deliver a written report to the employee (or to the employee’s representative or equality body if the employee prefers, as allowed by Article 7(2)) without undue delay and no later than two months from the request. If the employee finds the information unclear or incomplete, they have the right to ask for additional clarification, and the employer must provide a substantiated reply within the same two-month period. For instance, if an employee notices a gender pay gap in the provided figures, they could ask the employer to explain the reasons for that gap. The employer would need to clarify which objective factors (such as differences in qualifications, experience, performance, etc.) justify the discrepancy, or else acknowledge and address an unjustified gap.
• Annual Notification of Rights: The amendments also oblige employers to proactively inform employees of their pay transparency rights on a regular basis. In practice, employers must notify all employees at least annually that they have the right to request pay information and explain the procedure for exercising this right. This stems from Article 7(3) of the directive, which requires employers to inform workers on an annual basis of their entitlement to pay information and the steps to take to obtain it. HR departments should incorporate this notification into their yearly communications or policy updates (for example, via an email reminder, staff handbook, or internal portal) so that all staff are aware of how to ask for comparative pay data.
• Protection Against Retaliation and Pay Secrecy: The amendments reinforce strict protections against retaliation for any worker who requests pay information or discusses their salary. In line with the directive, contractual clauses that prevent workers from disclosing their own pay will be prohibited, invalidating pay secrecy policies that hinder the enforcement of equal pay. While employees can share their own pay, they are expected to use information received about others' pay solely for the purpose of exercising their right to equal pay, respecting data protection principles.

Gender Pay Gap Reporting

Another cornerstone of the amendments is enhanced gender pay gap transparency. Building on Lithuania’s existing practice of collecting pay data, the new rules give employee representatives the right to receive detailed information on gender pay gaps within the company. Specifically, worker representatives will be entitled to request an overview of the pay gap between female and male workers by job category on a yearly basis. This initiative aligns with Article 9(1) of Directive 2023/970, which requires employers to report various indicators of the gender pay gap in their organization.

• The 5% Action Threshold: If the data reveals a gender pay gap of 5% or more in the average pay for any category of employees performing equal or comparable work, and the employer cannot justify this gap with objective, gender-neutral factors, action is required.
• Six-Month Remediation Period: When an unjustified gap of 5% or more is identified, the employer must work with employee representatives to analyze the reasons and will have six months to lower the gaps. This could involve salary adjustments or other corrective measures to ensure the principle of equal pay is restored in practice. This mechanism, drawn directly from Article 10 of the directive, moves beyond simple reporting and requires employers to actively resolve gaps.

What does this mean for employers? Upon finding a significant gap (≥5%) between women’s and men’s pay in a given role or pay grade, the employer should first analyze whether there are objective reasons (such as differences in experience, education, performance, or other neutral factors) that fully explain the gap. These justifications must be documented. If no adequate explanation exists, the employer must formulate and implement a plan to close the gap within six months, for example, by adjusting salaries. Employers are expected to do this in cooperation with worker representatives or, where applicable, with labor inspectors or equality bodies to ensure transparency and fairness. The six-month correction timeframe is designed to initiate immediate action.

Conclusion

The proposed Labor Code amendments mark a big step in the process of transposing the EU Pay Transparency Directive. From hiring practices to internal pay structures, employee rights, and reporting duties, the new rules demand a high level of transparency. Employers in Lithuania should use this as an opportunity to get started, as the process towards implementing these amendments is often a bigger project that initially imagined. It is vital for companies to understand if there are systemic issues, and if there are gaps, what the budget to close them will be for the next budget cycle. Remember, many companies are closing the budgets around October-November, so make sure to surface the need for corrections as a part of that.

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