Pocket Guide: The EU Pay Transparency Directive

The EU Pay Transparency Directive was passed in spring of 2023 and required EU member states to transpose its measures into local law by June 7th, 2026 (see our transposition tracker for details of local legislation.) This wide-reaching law aims to reduce gender-based pay disparities by requiring more transparency from employers, and it’s changing the way that organizations measure, correct, and report on gender pay gaps.

We have many more in-depth resources about the Directive, including our full eGuide. This article covers the basics about the Directive, its requirements, and who it affects.

What is the EU Pay Transparency Directive?

The EU Pay Transparency Directive is an ambitious piece of legislation designed to make sure that workers of all genders receive equal pay for work of equal value. To this end, it charges employers (those with 100 or more employees) with implementing transparent compensation practices and closing gender pay gaps.

The Directive covers two main areas: pay transparency and pay equity.

What are the key requirements of the EU Pay Transparency Directive?

Key pay transparency requirements

The pay transparency requirements relate to the way employers and employees communicate about pay and the information that employers are obligated to provide, either up front or on request.

• Employers must inform applicants of the starting pay or pay range, either in the job posting or before the interview. 
• Employers are not allowed to ask candidates about their pay history.
• On request, employers must provide employees with information about pay ranges for categories of workers doing the same work or work of equal value.
• Employers’ decisions about employees’ career progression and pay levels need to be based on specific, gender-neutral criteria that employees are allowed to review.
• Employees are allowed to talk about their pay.
• If an employee asks for it, the employer must give them a comparison between their pay and the pay of other comparable employees. Specifically, this includes the employee’s pay and the average pay level (broken down by gender) for the category of workers doing the same work or work of equal value.

How do you define “categories of workers doing the same work or work of equal value”?

The principle of equal pay for equal work is fairly simple – it means that employees doing the same work should be paid equally, regardless of gender or any other demographic factors. But what if two workers (say, a customer service rep and a maintenance worker) don’t have the same job, but contribute the same value to the company? Those workers should be paid equally too, and that would be equal pay for work of equal value.

To protect against pay discrimination, these categories of workers must be defined using objective and non-arbitrary (bona fide) criteria. The criteria should be based on skills, effort, responsibility, working conditions, and any other elements unique to the job.

While local laws may give more specific guidance about how to define worker categories and clarify pay structures, all categorization systems all follow the same basic principles and can be addressed by using the European Institute for Gender Equality (EIGE) toolkit or with custom documentation. See also our article on defining worker categories.

Key pay equity and gender pay gap reporting requirements

The Directive’s pay equity requirements are linked to how employers measure and report their pay gaps. Here is the big pay reporting requirement:

There are also some other requirements related to pay equity:

• Employees have the right to see their employers’ pay gap information.
• After accounting for objective, gender-neutral factors, the gender pay gap should be below 5%.
• In the event of a pay dispute, employers bear the burden of proof. In other words, the employer must be able to show why the employee’s pay is what it is.

What happens if the pay gap is 5% or more?

If the pay gap (after accounting for objective factors) is at or over 5% in any category of workers, an employer has two choices.

• They can correct the pay gap within six months after publishing their measurements.

or

• They can perform a pay assessment, then create a gender action plan based on it. The plan should outline how the company is going to remedy the situation in a reasonable period, in collaboration with worker representatives. Further reports may be required. Assessments performed in this way are called joint pay assessments.

What if an EU member state already has its own pay transparency and pay equity reporting requirements?

Member states with pre-existing pay transparency or pay equity laws have amended or are in the process of amending existing laws so they align with the core requirements of the Directive. Some countries are expanding their existing reporting infrastructure, while others are creating new systems.

While the legislation is still being finalized in some countries, even after the deadline, we note that the Directive prohibits the new laws from being less employee-friendly than the previous laws, and most local laws implemented under the Directive are staying close to its core requirements.

How are employers affected by local governments missing the June 2026 deadline for transposing the Directive into local law?

Many EU member states did not meet the transposition deadline of June 7th, 2026, with legislation in the draft stages or with implementation dates announced for 2027. However, as the EU still grants rights to employees, member states may face legal proceedings for delaying. Furthermore, all reported data will need to be retrospective.

Employers that delay their compliance with the Directive may suffer reputational damage. Meanwhile, if there are any pay gaps of 5% or more, fixing them over the course of two years rather than one helps to reduce budget shock. Our advice to employers—even those where local markets are behind in transposition—is to take a proactive approach and prepare for the Directive as soon as possible.

Who needs to comply with the Directive?

The law applies to all EU companies with 100 or more employees. This includes part-time employees and contract workers. Member states may make reporting on pay mandatory for organizations with fewer than 100 workers.

Recommended further reading

To provide more information, we’ve created an eGuide on the EU Pay Transparency Directive. Download your copy to understand the key components of the Directive and how they apply to your organization.

As you continue preparing for the Directive, we would highly recommend reading the Directive itself. To learn about existing laws in the EU and around the world, visit our resources page.