The EU Pay Transparency Directive (Directive 2023/970) introduces significant obligations aimed at increasing transparency to strengthen the principle of equal pay for equal work or work of equal value between men and women. Member States must transpose the Directive into national law by 7 June 2026.
Therefore, employers should start reviewing and adjusting their pay practices and structures now to ensure timely compliance with these new transparency obligations.
1. Key employer obligations
A) Information obligations
All employees will have the right to request (written) information about their own pay level as well as the average pay levels (broken down by gender) for colleagues performing the same work or work of equal value. Importantly, pay secrecy clauses preventing employees from discussing their remuneration will be strictly prohibited.
Furthermore, all employers will be required to use objective and gender-neutral criteria when determining salary, pay levels and career progression, and will have to provide their employees with easy access to this information. However, Member States may exempt employers with fewer than 50 employees from the information obligation related to pay progression.
B) Reporting obligation for larger companies
Employers with at least 100 employees will be required to report on several key indicators, including the gender pay gap between workers by categories of workers, broken down by ordinary basic wage or salary and complementary or variable components.
Reports must be shared with the competent supervisory body, the employees and employee representatives. The reporting frequency depends on the company’s headcount:
- Companies with 250 or more employees must report annually from June 2027.
- Companies with 150 to 249 employees must report every three years from June 2027.
- Companies with 100 to 149 employees must report every three years from June 2031.
Member States have the possibility to establish lower thresholds.
C) Joint pay assessment
If a gender pay gap of 5% or more is identified in any category that cannot be justified by objective, gender-neutral criteria and is not remedied within six months following the reporting, employers will be required to conduct a joint pay assessment (with employee representatives). This assessment must include a root cause analysis and proposed corrective measures. This obligation applies to employers with more than 100 employees, although Member States may extend this obligation to smaller companies. The assessment must be made available to employees, their representatives, and the competent authority.
2. Sanctions and legal remedies
The Pay Transparency Directive provides for strong enforcement mechanisms and extensive employee rights, including:
- Full compensation for victims of pay discrimination, including uncapped back pay and bonuses, and protection against less favourable treatment;
- A reversal of the burden of proof where a presumption of discrimination exists or where transparency obligations have not been met;
- The possibility for Member States to impose fines comparable to GDPR penalties.
3. Next steps for employers ?
Employers should begin preparing for these new obligations by analysing their internal pay structures and HR policies from a gender perspective, ensuring that remuneration criteria are objective and gender-neutral, and setting up systems for reporting and employee information requests.
Through their strategic collaboration, Simont Braun and PIHR provide tailored and comprehensive compliance support to help employers comply with all new pay transparency requirements.
