EU Pay Transparency Directive: Complete guide to Employers

Why This law matters

Europe’s gender pay gap remains stubbornly wide. On average, women still earn roughly 13 percent less than men across the EU. Pay discrimination often stays hidden because employers rarely disclose how they set pay or give employees the ability to compare compensation. To address this structural problem, the EU adopted the Pay Transparency Directive (Directive (EU) 2023/970) in April 2023. The law entered into force on 7 June 2023, and Member States have three years—from June 2023 to June 2026—to transpose its provisions into national law. This means employers across the bloc must be ready to comply by June 2026. Some countries already have pay‑gap reporting laws in place; others will have to introduce entirely new regimes. This guide explains what the directive requires and how European businesses can prepare.

1. Pay Transparency before employment

The directive requires open pay information in recruitment. Employers must disclose the initial pay level or pay range for a position either in the job advertisement or before the interview stage. They are also prohibited from asking applicants about their salary history, a practice that perpetuates historical pay inequalities. Job titles and vacancy notices must be gender‑neutral, and recruitment processes must be non‑discriminatory. Key obligations:

• Salary range disclosure: Provide the starting salary or pay band in the advertisement or prior to interviews so candidates can negotiate on an informed basis.
• Salary‑history ban: Do not ask candidates about their previous pay.
• Gender‑neutral job descriptions and recruitment processes: Avoid wording that suggests roles are gendered or implies certain genders are preferred. Failing to follow these rules could trigger claims of discriminatory recruitment and expose organisations to fines when national transposition laws take effect.

2. Transparency during employment

Once workers are hired, employers must provide greater visibility into how pay is determined. Employees will have easy access to the criteria used to determine pay, pay levels and pay progression, and those criteria must be objective and gender‑neutral. Workers can request information on their own pay level and on the average pay levels for workers doing the same job or work of equal value, broken down by sex. Employers must respond to these requests within a reasonable period (usually within two months) and must remind employees annually of their right to request this information. Other key points:

• No pay‑secrecy clauses: Employers cannot prohibit employees from discussing their pay with colleagues. Member States must ban contractual clauses that prevent workers from disclosing their pay.
• Small employer exemption: Member States may exempt employers with fewer than 50 workers from some information‑access requirements. However, those employers still need to ensure pay structures are objective and gender‑neutral.

3. Gender pay-gap reporting and metrics

The heart of the directive is mandatory gender pay‑gap reporting. Companies must publish gender pay‑gap information (covering basic salary and any other form of compensation) to a designated body and, in some countries, may need to publish it externally. Reporting obligations depend on the employer’s size:

Organization Size	1st Reporting	Frequency of reporting
≥ 250 employees	7 June 2027	Annually
150–249 employees	7 June 2027	Every three years
100–149 employees	5 June 2031	Every three years
< 100 employees	Not mandated by the directive	May be covered by national law

What must be reported? Applicable employers must calculate and report a comprehensive set of metrics, including:

• Mean and median gender pay gaps, expressed as a percentage of the male pay level.
• Mean and median gender pay gaps in complementary or variable components, such as bonuses.
• Proportion of men and women receiving variable pay.
• Proportion of men and women in each quartile pay band.
• Pay gaps between categories of workers performing the same work or work of equal value, broken down by base salary and by complementary or variable components.

Workers’ representatives, equality bodies and labour inspectorates have the right to request explanations of the data and the methodology used.

4. Joint Pay Assessment (JPA)

Publishing gender pay‑gap metrics is only the first step. If the report reveals a gender pay gap of 5 % or more in any category of workers that cannot be justified by objective, gender‑neutral criteria, and the employer fails to close the gap within six months, the company must conduct a Joint Pay Assessment. A JPA is essentially a pay‑equity audit carried out in cooperation with workers’ representatives and must:

• Examine the reasons for pay differences.
• Identify and agree remedial measures.
• Be made available to workers, their representatives and relevant authorities.

JPAs are labour‑intensive and expose employers to scrutiny. Performing an internal pay‑equity analysis before 2026 can help organisations address issues early and avoid mandatory JPAs once the directive is in force.

5. Enforcement and Sanctions

The directive gives teeth to equal‑pay rights by strengthening enforcement mechanisms:

• Right to compensation: Workers who suffer pay discrimination are entitled to uncapped compensation, including full recovery of back pay and related bonuses or payments in kind.
• Shift of burden of proof: In an equal‑pay claim the employer must prove there was no discrimination once the worker presents facts that suggest unequal pay.
• Orders to stop infringement: Courts or competent authorities can order employers to stop discriminatory practices and implement measures to ensure equal pay.
• Penalties and fines: Member States must impose effective, proportionate and dissuasive penalties, including fines, for breaches of equal‑pay obligations. Employers may also be exposed to additional penalties under national law.

Employers face significant financial and reputational risk if they ignore these rules. Compensation is uncapped and national penalties must guarantee a real deterrent effect.

6. Role of worker’s representatives and intersectional discrimination

Workers’ representatives play a central role. They are entitled to request detailed explanations for pay differences and to participate in Joint Pay Assessments. They may also act on behalf of workers in legal or administrative proceedings. Countries without existing systems for workers’ representatives must establish them before transposition. The directive explicitly recognises intersectional discrimination – situations where multiple disadvantages (such as gender and ethnicity or disability) compound discrimination. Employers should be aware that claims may arise from combinations of characteristics rather than gender alone.

7. Implementation timetable and national progress

• Adoption and entry into force: The Council adopted the final text on 24 April 2023 and the directive entered into force on 7 June 2023.
• Transposition deadline: Member States must transpose the directive into national law by 7 June 2026. Some states will need to introduce entirely new pay‑transparency legislation; others will enhance existing laws.
• First reporting deadlines: Employers with 150 or more workers must publish their first gender pay‑gap report by 7 June 2027, while employers with 100–149 workers have until 5 June 2031. Progress varies widely across Member States. For example, France already requires gender pay‑gap calculation and disclosure, while Lithuania has draft legislation that would ban salary‑history questions and require monthly pay‑gap reporting. In Estonia and Latvia, draft transposition laws are still awaited. Regardless of national progress, all employers should start preparing now.

8. How European employers can prepare

The directive isn’t optional, and ignoring it will be costly. Here are practical steps to get ready:

1. Make it a C‑suite priority: This is not just an HR issue. Leadership must commit resources and set the tone for transparency and fairness.
2. Build a cross‑functional team: Include HR, legal, finance, data analysts and, where available, workers’ representatives. Engage legal counsel early to understand national requirements.
3. Map your workforce and data: Identify job families and categories of workers, gather pay data (salary, bonuses, allowances, benefits) and make sure the data are accurate and comparable.
4. Conduct an internal pay equity audit: Analyse your 2024 pay data to identify gender pay gaps and evaluate whether differences can be justified by objective factors. Remedy unjustified gaps immediately; waiting until 2026 will trigger mandatory JPAs.
5. Review recruitment practices: Ensure job descriptions, vacancy notices and selection processes are gender‑neutral. Remove salary‑history questions from applications and train recruiters on lawful, non‑discriminatory hiring.
6. Develop clear pay‑setting criteria: Document objective, gender‑neutral factors used to determine base salary and bonuses and communicate them to employees.
7. Establish procedures for handling pay information requests: Create templates and workflows to respond to employee requests within the statutory time frame and remind employees annually of their rights.
8. Prepare public communications: Decide how and where to publish your gender pay‑gap report, and draft messaging to explain any gaps and your plan to address them.
9. Monitor national legislation: Each Member State may set additional obligations, lower employee‑thresholds or stricter penalties. Stay up to date and adjust your compliance plan accordingly.

Frequently Asked Questions

What is the EU Pay Transparency Directive?

It is an EU‑wide law (Directive (EU) 2023/970) adopted in April 2023 to strengthen the right to equal pay for equal work. It introduces binding rules on pay transparency before hiring, during employment, mandatory gender pay‑gap reporting, joint pay assessments and stronger enforcement mechanisms.

Which employers must comply?

All employers operating in EU Member States must ensure their pay structures are objective and gender‑neutral. Reporting obligations apply to employers with 100 or more workers, but Member States can impose stricter rules or extend reporting to smaller employers.

When will the directive take effect?

The directive entered into force on 7 June 2023. Member States have until 7 June 2026 to transpose it into national law, and the first pay‑gap reports for employers with 150 or more workers are due by 7 June 2027.

Do small employers (< 100 workers) have any obligations?

Yes. Although the directive’s reporting obligations start at 100 workers, all employers must ensure pay‑setting criteria are objective and gender‑neutral and must provide pay information to employees upon request Member States can also require reporting by smaller employers.

What pay information must be disclosed to job applicants?

Employers must disclose the initial pay level or salary range for the position, either in the job posting or before the job interview, and must not ask applicants about salary history

What pay information must be provided to employees?

Employees can request their individual pay and the average pay levels of workers doing the same job or work of equal value, broken down by sex. Employers must also make available the objective, gender‑neutral criteria used to determine pay, pay levels and pay progression

When is a Joint Pay Assessment required?

If a gender pay gap of 5 % or more exists within any category of workers and cannot be justified with objective gender‑neutral criteria, and the gap is not closed within six months, the employer must conduct a Joint Pay Assessment with workers’ representatives.

Are there penalties for non‑compliance?

Yes. Workers can recover uncapped compensation, including back pay and bonuses Employers bear the burden of proving they did not discriminate and face sanctions and fines determined by Member States.

How should multinational employers handle different national laws?

The directive sets minimum standards; Member States can introduce stricter rules (e.g., lower employee thresholds or harsher penalties). Multinational employers should monitor local legislation and harmonise pay‑equity policies across jurisdictions, balancing EU‑level obligations with country‑specific requirements. Engaging local counsel in each jurisdiction is advisable.

What about intersectional discrimination?

The directive recognises intersectional discrimination for the first time, meaning that pay discrimination claims can arise from combinations of gender and other protected characteristics like ethnicity or disability. Employers should analyze pay gaps across multiple dimensions, not just gender.

Conclusion: start preparing now

The EU Pay Transparency Directive marks the most significant overhaul of pay‑equity law in decades. It will force employers to shine a light on pay practices, address unjustified gaps and adopt objective, gender‑neutral pay structures. The costs of doing nothing are high: uncapped compensation claims, public pay‑gap reports and fines that damage reputation and bottom lines. European employers should act now, audit their pay data and recruitment processes, and build compliance plans well before the June 2026 transposition deadline. The era of hiding pay disparities is ending—get ahead of it before the law catches up.

All of this can be overwhelming, let us help. Reach out for a free 30 min consultation on Pay Transparency – and how the right tech can get you compliant quicker.