EU Pay Transparency Directive
The Directive introduces significant new compliance obligations to combat this gap and strengthen the principle of equal pay through new pay transparency measures and comprehensive enforcement mechanisms.
With the implementation deadline drawing closer, now is the time to proactively monitor the Directive’s implementation across the EU and take steps to navigate the Directive’s far-reaching obligations. Organisations that act now will find themselves at the forefront of a more transparent employment landscape and in a better position to minimise any potential legal and reputational risks.
Key Information Snapshot
- Who does the Directive apply to? All EU employers irrespective of the size of the workforce. There are exemptions from certain rules for smaller employers.
- When is it in force? All member states must implement the Directive by 7 June 2026 when the general obligations on employers come into force. There are staged implementation dates for the pay gap reporting obligations depending on headcount, starting on 7 June 2027 for larger employers.
| Status | |
|---|---|
| Legislation passed / Directive implemented | |
| Implementation in progress | |
| No steps taken to implement Directive | |
Key Obligations under the Directive
1. Increased pay transparency
- Job applicants must be informed of (initial) pay or pay ranges, or the criteria for pay progression.
- Criteria for determining pay, pay levels and pay progression as well as job vacancy notices and recruitment processes must be gender neutral.
- Employers cannot ask applicants about their pay history.
2. Employee right to information
- Existing employees have the right to request written information on their pay level and the average pay level for categories of workers performing the same work or work of equal value.
- Requests can also be processed through workers' representative bodies or equality bodies, and the information must be provided within two months.
- Employers must remind workers annually of their right to such pay information, ensuring ongoing awareness of these entitlements.
3. Mandatory pay gap reporting
- Gender pay gap reporting will be mandatory for larger organisations, building upon existing national frameworks whilst harmonising requirements across member states.
- Reporting dates are staggered by employer size (e.g. companies with 250 or more employees to report annually from June 2027 on the basis of data gathered in 2026).
- Companies will have to report on the average wages of male versus female workers per relevant category, considering both fixed and variable pay.
4. Action on pay gaps
- Where an unjustified pay gap of at least 5 % is identified, remedial action will be required.
- Failing to do so will trigger a mandatory joint payment assessment involving workers’ representatives.
5. Stronger enforcement
Potentially the most significant aspect of the Directive is its enforcement mechanisms:
- Workers must receive full, real and effective compensation for damages, including backpay, bonuses, benefits, compensation for lost opportunities, non-material damage, and interest on arrears.
- Specific obligations on member states to impose penalties for breach of equal pay rights and obligations, and to introduce new procedural rules on matters such as limitation periods for bringing claims, facilitated access to evidence for employees, protection from litigation costs for unsuccessful claimants, shifting the burden of proof for employers who failed to implement transparency obligations and strengthening the role of equality bodies.
The Road to Compliance
There is no time to waste. Companies must take proactive steps to prepare for the Directive, such as reassessing existing job classification systems to ensure they are gender neutral and verifying which functions are of equal value, in light of (at least) the following criteria: skills, effort, responsibility and working conditions.
Companies will also need to fundamentally rethink their approach to recruitment and compensation and provide information that allows workers to engage in informed and transparent pay negotiations.
Our International Employment team can support you with internal strategic preparations, auditing current pay practices, identifying any pay differentials, reviewing recruitment practices and building transparency into pay structures, as well as making necessary changes to pay reporting requirements.
Contact our team to discuss how we can help your business prepare.
Horizon Scanning
In our latest edition of Horizon Scanning, we look at the global trends influencing the HR and employment law agenda, including DEI initiatives and pay transparency requirements to innovative wellbeing strategies that attract top talent. We also examine critical challenges facing multinational employers including global restructuring, managing a multi-generational workforce, and responding effectively to workplace activism.
