Client Alerts
Closing the gap: A new era for pay transparency in the EU
1. Tackling the gender pay gap
The gender pay gap – the persistent divide in earnings between women and men – remains a global challenge. It is rooted in the lack of transparency in pay systems, vague legal definitions of “equal work” and legal barriers that hinder employees from taking action. The EU Pay Transparency Directive (“Directive”), adopted in June 2023, introduces clear obligations for employers from the recruitment stage onwards, with local authorities also playing a role.
2. Key deadline
EU member states must implement the Directive by 7 June 2026. To comply with employers’ obligations, data collection and thorough analysis of pay information must begin well in advance. Identifying any gender pay gaps at an early stage is crucial, as this requires employers to review and potentially adjust their pay structures. Since reporting begins in June 2027, based on 2026 data, forward-thinking employers should allocate budget in 2025 to proactively close gaps and ensure compliance.
3. Work of equal value
To fully understand the impact of the Directive, it is essential to examine its key definitions. “Pay” refers not only to base salary, but also includes bonuses, overtime, benefits, allowances and more. The scope of “employees” is broad, encompassing fixed-term, agency, platform and atypical workers, as well as trainees and apprentices. Even job applicants fall under certain transparency provisions. A cornerstone of the Directive is the requirement to evaluate “work of equal value” using clear, gender-neutral criteria like skills, effort, responsibility and working conditions. This means employers must establish transparent systems to accurately assess and compare job roles and employee contributions.
4. Core obligations
| The obligation of the employer | Application |
| Recruitment: Providing information to job applicants about initial pay | All employers, without exception |
| Salary structures: Implementing transparent salary frameworks with objective, neutral criteria | All employers, without exception (Local derogation possible for employers with fewer than 50 employees) |
| Information obligation: Upon employee request, providing written information on pay levels within 2 months | All employers, without exception |
| Joint pay assessment: Conducting a joint pay assessment with employee representative bodies if the gender pay gap exceeds 5% | All employers, without exception |
| Reporting obligation: Reporting on the gender pay gap | Applies to employers with 100 or more employees |
5. Preparation In Time
Meeting the Directive’s new obligations requires treating compliance as a strategic priority. This involves collaboration across HR, legal, payroll and data analytics teams. The Directive goes beyond simple compliance – it drives structural improvements in fair workplace pay structure.
Plan ahead and partner with Wolf Theiss for expert support in reviewing pay criteria, conducting audits and updating recruitment and remuneration policies – ensuring you stay ahead of evolving EU transparency standards.
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