Germany: Update on Equal Pay and Pay Transparency: What companies need to consider

On 23 October 2025, the German Federal Labour Court clarified the requirements for proving gender-based pay discrimination (8 AZR 300/24), significantly lowering the hurdles for affected employees and having far-reaching consequences for employers.

According to the press release, a female employee sued her employer for retrospective financial equality with certain male colleagues regarding several pay components. She based her claims, among other things, on information from the company's internal dashboard. The employer disputed the comparability of the activities, attributing the pay difference to performance deficiencies on the part of the claimant. According to the employer, this was why she was also remunerated below the median pay of the female comparison group.

What are the key statements of the German Federal Labour Court?

Individual comparison is sufficient: Employees now only need to demonstrate and prove that a single colleague of the opposite gender is earning more for doing the same or an equivalent job. This alone establishes a sufficient presumption of gender-based discrimination. There is no need for a "predominant probability" of gender-based disadvantage.

Median pay levels alone are not decisive: In this case, the fact that the female colleague used as a comparator received a salary above the median pay level of the male comparison group, was held to be irrelevant. The size of the comparison group and the level of median pay for both gender groups are not significant factors in establishing the presumption of a gender-based discrimination.

The burden of proof lies with the employer: Once the presumption of gender-based discrimination is established, the employer must prove that the pay difference is not gender-based. If they are unable to do so, companies are obliged to pay the remuneration they paid to the colleague used as a comparator.

Status quo: The German Pay Transparency Act and the upcoming implementation of the EU Pay Transparency Directive

The decision, which has so far only been published as a press release, suggests a significant strengthening of employees' position in pay discrimination lawsuits. According to the decision, comparison with a single colleague of the opposite gender is sufficient to establish the presumption of gender-based discrimination, with statistical considerations regarding comparator groups and median pay levels becoming secondary. This means that a greater number of information requests can certainly be expected in future.

We would therefore like to take this opportunity to provide a brief overview of the current legal situation in Germany and the likely short-term changes resulting from the implementation of the EU Pay Transparency Directive.

The Pay Transparency Act (EntgTranspG): Scope and basic principles

The German Pay Transparency Act has been in force since July 2017. It applies in addition to the existing provisions of the General Equal Treatment Act and already establishes various obligations for employers. These obligations are based on the principle of equal pay for equal or equivalent work. The aim is to promote pay equality between women and men. The law is essentially based on three pillars: the individual right to information (sec. 10 ff. EntgTranspG), operational review procedures (sec.17 ff. EntgTranspG) and reporting obligations (sec. 21 f. EntgTranspG).

Employees working in business operations with more than 200 employees have an individual right to information relating to various pay aspects, including their own pay level and the average pay levels broken down by gender, for employees of the opposite gender performing the same or equivalent work (comparative activity). The employer's obligation to provide information about comparative pay relates to the median of the comparison group, which must currently comprise at least six people of the opposite gender. Employees can request this information at least every two years.

Employers with more than 500 employees are encouraged, but not obliged, to regularly carry out operational review procedures consisting of an inventory, analysis and results report, in order to review their pay regulations and structures for compliance with the equal pay requirement and adjust them if necessary. However, genuine reporting obligations for measures to establish pay equality currently only exist for employers with more than 500 employees who are required to prepare management reports.

Tightening of the existing catalogue of obligations through the EU Pay Transparency Directive (Directive (EU) 2023/970)

The upcoming implementation of the Directive into German law by June 2026 at the latest will result in a significant tightening of the catalogue of obligations outlined above. This will be achieved through lowered thresholds, increased reporting obligations, extended transparency requirements in the recruitment process, and concrete obligations to act when pay gaps are identified. The following key points from the EU Directive are particularly noteworthy:

• Extended transparency obligations before and during recruitment (Art. 5 EU Directive): Employers must provide applicants with information about the initial pay or its range already in job vacancy notices.
• Right to information for all employees (Art. 7 EU Directive): According to the EU Directive, all employees should generally have a right to information, regardless of company size. This includes the right to receive information about their individual pay level and the average pay levels, broken down by gender, for categories of employees performing the same or equivalent work. Unlike previous German legislation, there is no minimum size requirement for the comparator group. Employers are also required to inform all employees annually of this right.
• Stricter reporting obligations (Art. 9 EU Directive): The reporting obligations will be significantly expanded. Employers with at least 100 employees will have to report on the gender pay gap in their company. This significantly lowers the threshold compared to the current requirement of 500 employees under German law. The reports must contain detailed information about the gender pay gap, broken down by categories of workers and additional or variable components. Companies with 100 to 249 employees must report every three years, whilst larger companies must report annually.
• Joint pay assessment in case of pay gap (Art. 10 EU Directive): If reporting reveals a gender pay gap of at least five per cent that cannot be justified by objective, gender-neutral criteria and this pay gap is not corrected within six months, employers must carry out a joint pay assessment in cooperation with workers representatives. This obligation to actively eliminate unjustified pay differences goes significantly beyond the previous voluntary review procedures under German law.
• Shift of burden of proof (Art. 18 EU Directive): The Directive expressly provides for a shift in the burden of proof. If employees provide evidence suggesting that direct or indirect discrimination relating to pay has occurred, the employer must prove that no such discrimination has taken place.
• Compensation and penalties (Art. 16, 23 EU Directive): In addition to claims for compensation, effective, proportionate and dissuasive penalties for violations of pay equality must also be established by national law. 

Status of implementation of the Pay Transparency Directive in Germany

Germany established an eleven-member independent expert commission that was responsible for making proposals for the effective and low-bureaucracy implementation of the Directive, considering support for small and medium-sized enterprises.

On 7 November 2025, the commission submitted its 88-page final report to the Federal Ministry of Education, Family Affairs, Senior Citizens, Women and Youth, which clearly highlights the tension between the intended changes being as unbureaucratic as possible on the one hand and ensuring compliance with EU law on the other.

The commission addressed a number of guiding questions in detail, including the concept of pay, which must be precisely defined to ensure the beneficial implementation of reporting obligations. Overall, the commission recommends using actual pay rather than target pay as a basis. Additionally, whilst the sum of all pay components in the reporting period should generally serve as the basis, exceptions should be made for pay components not offset by work performance during the reporting period, such as severance payments. The introduction of a de minimis threshold for low-value benefits in kind is also discussed.

Relief for small companies (i.e. those with fewer than 50 employees) is supported. They should be exempted from the obligation to provide information on the criteria for pay progression.

The criteria by which categories of employees performing equal or equivalent work (comparator group formation) are determined should be adapted from the EU Directive. Essentially, it would therefore depend on the skills required for the respective activity, the associated effort, the responsibility and the working conditions.

The commission has also extensively discussed a possible privileging of companies bound by collective agreements, as well as the role of workers representatives in remedial procedure and pay assessment.

As expected, a number of questions relating to the right to information were also addressed. In particular, the information provided should offer a clear explanation of how the comparator groups were formed and relate to the gross annual pay and the corresponding gross hourly pay paid in the previous year. The possibility of setting a time limit on the right to information was also discussed, with the majority favouring a minimum waiting period of one year between information requests. The new right to information should first be asserted in 2027.

Outlook and conclusion

Although the commission's results are not legally binding, the final report provides initial indications on how implementation could be designed and where problems may arise in the future. The ministry will now consider the proposals and prepare a draft with the aim of initiating the legislative process at the start of 2026.

Case law and legislation clearly indicate that employers must take action. Early and structured preparation for the upcoming changes is essential. Thus, the coming months should be used for a comprehensive analysis of the current situation, existing data and the development of viable implementation concepts relating to the key points of the Directive. If not already done, pay transparency must be firmly anchored in HR and compliance structures.