The EU Pay Transparency Directive: What Employers Need to Know in 2026

Roger Blikkberget
Jul 10
10 min read

The European Union is introducing a major change in how employers recruit, structure salaries and demonstrate equal pay.

Directive (EU) 2023/970—commonly known as the EU Pay Transparency Directive—strengthens the principle of equal pay for women and men performing equal work or work of equal value. It introduces new transparency rights for job applicants and employees, formal gender pay-gap reporting obligations for larger employers, and stronger enforcement mechanisms.

EU Member States were required to transpose the Directive into national law by 7 June 2026. However, the precise legal requirements, procedures and penalties may differ between countries because each Member State implements the Directive through its own national legislation.

For employers, this is not simply a reporting exercise. It represents a fundamental shift in recruitment, compensation governance, human resources data and legal risk.

Why Was the Directive Introduced?

Equal pay for equal work has been a principle of European law for decades. Nevertheless, pay differences between women and men remain significant.

According to the European Commission, the unadjusted gender pay gap in the EU was approximately 12% in 2023. This means that women earned, on average, 12% less per hour than men. The figure does not necessarily prove discrimination in every individual case, but it reflects structural differences in occupations, seniority, working patterns, career progression and remuneration.

One of the challenges has been the lack of access to salary information. Employees may suspect that they are being paid differently but have historically found it difficult to obtain the information necessary to assess or prove unequal treatment.

The Directive seeks to address this by:

Increasing transparency before and during employment.
Requiring objective and gender-neutral pay structures.
Giving employees access to relevant pay information.
Requiring certain employers to report gender pay-gap data.
Strengthening employees’ ability to claim compensation.
Introducing effective penalties for non-compliant employers.

Salary Transparency During Recruitment

One of the most visible changes concerns the recruitment process.

Job applicants must be informed of the initial salary or salary range for the position. This information must be based on objective and gender-neutral criteria.

The information may be included in the job advertisement, provided before the interview or otherwise communicated early enough to allow an informed and transparent salary negotiation.

Employers will also be prohibited from asking candidates about their salary history.

This is intended to prevent previous pay inequalities from following candidates from one employer to another. Instead of basing an offer on what a candidate earned in a previous position, employers must determine remuneration according to the value, requirements and responsibilities of the new role.

The Directive also requires vacancy notices and job titles to be gender-neutral, while recruitment processes must be conducted in a non-discriminatory manner.

What this means in practice

Employers should review:

Job advertisements.
Recruitment scripts and interview questions.
Salary-range approval procedures.
Offer-letter templates.
Recruitment agency instructions.
Internal rules for salary negotiations.

Managers and recruiters must also understand that asking a candidate, “What do you currently earn?” may no longer be lawful under applicable national legislation.

Employees’ Right to Pay Information

Employees will have the right to request information about:

Their individual pay level.
The average pay levels, broken down by sex, for employees performing the same work or work of equal value.
The criteria used to determine pay.
The criteria used to determine pay levels and career progression.

Employers must provide this information within a reasonable period, subject to the specific rules introduced under national legislation.

Employees must also be informed annually of their right to request pay information and how they can exercise that right.

Contractual clauses preventing employees from discussing their salaries cannot be used to obstruct the enforcement of equal-pay rights. Employees must be able to disclose their pay when this is necessary to establish whether the principle of equal pay is being respected.

Equal Work and Work of Equal Value

The Directive does not apply only when two employees have identical job titles.

It also covers work of equal value.

Employers must be able to compare roles using objective and gender-neutral criteria. These criteria may include:

Skills.
Effort.
Responsibility.
Working conditions.
Educational or professional requirements.
Other factors relevant to the position.

This is particularly important when comparing different categories of work. A business should not assume that roles cannot be compared merely because they belong to different departments or have different titles.

For example, organisations may need to evaluate whether roles in administration, operations, customer service, technical departments or management involve comparable levels of responsibility, complexity and organisational value.

Employers therefore need a defensible job-evaluation methodology—not merely a list of salaries.

Gender Pay-Gap Reporting Obligations

The Directive introduces reporting obligations based on employer size.

Employers with 250 or more employees

These employers are expected to report gender pay-gap information annually, with the first reporting deadline generally applying from 7 June 2027.

Employers with between 150 and 249 employees

These employers are expected to report every three years, beginning from 7 June 2027.

Employers with between 100 and 149 employees

These employers are expected to report every three years, beginning from 7 June 2031.

Employers with fewer than 100 employees

The Directive does not impose the same mandatory EU-level reporting schedule on these employers. However, Member States may introduce reporting obligations for smaller organisations under national law.

Smaller employers are also affected by other provisions of the Directive, including recruitment transparency, employee information rights and equal-pay enforcement.

What Must Be Reported?

Depending on national implementation, reportable information is expected to include data such as:

The overall gender pay gap.
The gender pay gap in variable or supplementary remuneration.
Median gender pay differences.
The proportion of women and men receiving variable remuneration.
The proportion of women and men within different pay quartiles.
Gender pay gaps within categories of employees performing equal work or work of equal value.

This requires more than extracting base-salary data from payroll.

Employers may need to examine:

Bonuses.
Commissions.
Allowances.
Benefits in cash or in kind.
Overtime payments.
Performance-related remuneration.
Long-term incentives.
Other employment-related compensation.

The Directive treats pay broadly. Organisations must therefore ensure that payroll, HR and financial systems contain consistent, complete and analysable remuneration data.

The 5% Pay-Gap Threshold

One of the most important provisions concerns an unexplained gender pay gap of at least 5% within a category of workers.

A joint pay assessment may be required when:

The reporting process reveals a gender pay gap of at least 5% in a category of workers.
The employer cannot justify the difference using objective, gender-neutral factors.
The employer has not remedied the unjustified difference within six months.

The assessment must normally be conducted in cooperation with employee representatives.

The 5% threshold should not be interpreted as permission to maintain pay differences below 5%. Any unjustified difference in pay may still constitute unequal treatment. The threshold specifically relates to the circumstances that can trigger a formal joint pay assessment.

Stronger Enforcement and Employer Liability

The Directive significantly strengthens enforcement.

Employees who suffer loss because of pay discrimination must have access to full compensation. Depending on national law and the circumstances, compensation may include:

Recovery of unpaid salary.
Bonuses or benefits that should have been received.
Interest.
Compensation for other losses or harm.

The Directive does not establish a general EU-wide upper limit on compensation.

Member States must also introduce effective, proportionate and dissuasive penalties, which may include fines. The exact level and calculation of penalties will be determined through national legislation.

Burden of proof

The Directive may shift the burden of proof towards the employer.

Where an employee establishes facts suggesting that pay discrimination may have occurred, the employer may be required to demonstrate that no discrimination took place.

Where an employer has failed to comply with applicable transparency obligations, the employer’s evidential position may become even more difficult.

For businesses, the practical implication is clear: salary decisions must be documented and supported by objective criteria.

A statement that a salary was “individually negotiated” may not, by itself, provide a sufficient defence if the employer cannot explain why comparable employees receive different remuneration.

Confidentiality and Data Protection

Pay transparency must be implemented alongside the EU General Data Protection Regulation and national privacy rules.

Employees may be entitled to aggregated information about average pay levels within relevant categories. However, organisations must avoid unnecessarily disclosing identifiable salary information relating to individual colleagues.

This can be challenging in small teams or highly specialised positions where aggregated data may indirectly reveal an individual’s remuneration.

Employers should therefore develop procedures covering:

Who can request salary information.
Who is authorised to respond.
How employee categories are defined.
How personal data is aggregated or anonymised.
How requests and responses are documented.
How employee representatives are involved.
How long supporting information is retained.

Pay transparency does not eliminate confidentiality obligations. It changes how confidentiality must be balanced against employees’ legal rights.

Why Employers Should Act Now

Waiting for a reporting deadline is risky.

An organisation may discover that its HR systems cannot reliably identify comparable roles, reconstruct historical pay decisions or explain differences in bonuses and salary progression.

Businesses should begin by conducting a structured pay-transparency readiness review.

1. Map the workforce

Identify:

Legal entities.
Establishments and jurisdictions.
Employee numbers.
Contract types.
Job families.
Grades and seniority levels.
Applicable collective agreements.

For international groups, workforce reporting may need to be assessed separately in each Member State.

2. Review job architecture

Employers should determine whether positions are consistently classified according to objective criteria.

Job titles alone are not enough. Organisations need a methodology for assessing skills, effort, responsibility and working conditions.

3. Conduct a privileged pay-gap analysis

A preliminary analysis can identify:

Unexplained salary differences.
Inconsistent starting salaries.
Gender differences in bonuses.
Unequal access to promotions.
Salary compression.
Departments requiring deeper investigation.

Because the analysis may reveal potential legal exposure, businesses should consider conducting sensitive reviews with qualified employment-law counsel.

4. Document objective pay criteria

Legitimate salary differences may result from factors such as:

Relevant experience.
Performance.
Seniority.
Qualifications.
Responsibility.
Scarce technical expertise.
Geographic location.
Shift patterns.
Market conditions.

However, these factors must be applied consistently and supported by evidence. An objective criterion cannot simply be created after a dispute arises.

5. Standardise recruitment

Introduce approved salary ranges and define who may authorise exceptions.

Recruiters and hiring managers should receive clear instructions on salary-history questions, salary disclosures and gender-neutral recruitment.

6. Review bonuses and discretionary remuneration

Discretionary systems often create the greatest risk because decision-making may be inconsistent or poorly documented.

Bonus criteria should be measurable, transparent and capable of independent review.

7. Establish employee-request procedures

Businesses need a controlled process for receiving, evaluating and responding to employee requests for pay information.

The process should involve HR, payroll, data protection and legal teams where appropriate.

8. Prepare internal and external communication

Pay transparency can generate concern even where differences are legally justified.

Employers should be prepared to explain:

How remuneration is determined.
How roles are evaluated.
What the reported figures mean.
Why an overall gender pay gap does not automatically prove discrimination.
What corrective action will be taken when unjustified differences are found.

TRANSPARENCY

The Strategic Opportunity

The Directive creates compliance obligations, but it also offers a strategic opportunity.

A transparent and credible compensation system can help organisations:

Strengthen employee trust.
Improve employer branding.
Attract qualified candidates.
Reduce inconsistent salary decisions.
Improve retention.
Support diversity and inclusion.
Identify structural weaknesses in career progression.
Reduce legal and reputational risk.

Companies that treat pay transparency as a governance and talent-management issue—not merely a statutory reporting requirement—may gain a competitive advantage.

Clear salary structures can also improve budgeting and workforce planning. When roles, grades and progression criteria are properly defined, management gains better visibility over labour costs and organisational design.

Special Considerations for International Companies

International groups face additional complexity.

A multinational business may use global salary bands, but the legal entity employing the worker remains subject to the national law applicable in the relevant jurisdiction.

Implementation may therefore vary in relation to:

Reporting bodies.
Filing formats.
Employee-count calculations.
Deadlines.
Consultation obligations.
Access to information.
Definitions of employee categories.
Administrative fines.
Court procedures.
Collective agreements.

International employers should establish a group-wide compliance framework while allowing for country-specific implementation.

The Directive establishes minimum requirements. Individual Member States may introduce rules that are more favourable to employees or more demanding for employers.

Pay Transparency Is Becoming a Board-Level Issue

Responsibility for compliance cannot remain solely with HR.

The Directive affects:

Corporate governance.
Financial reporting.
Data management.
Recruitment.
Employment law.
Employee relations.
Reputation.
ESG and sustainability reporting.
Merger and acquisition due diligence.

Boards and senior management should understand whether the organisation can answer five fundamental questions:

Can we explain how every role is valued?
Can we identify employees performing equal work or work of equal value?
Can we justify material differences in remuneration?
Can our systems generate reliable gender pay-gap data?
Can we respond correctly to an employee information request?

Where the answer to any of these questions is no, remediation should begin immediately.

Conclusion

The EU Pay Transparency Directive changes the employment landscape by making salary structures more visible and strengthening the enforcement of equal-pay rights.

Employers must move from informal and discretionary remuneration practices towards systems that are structured, documented, objective and defensible.

The most important preparation is not the final report. It is the work that comes before it:

Building a reliable job architecture.
Defining objective pay and progression criteria.
Reviewing recruitment practices.
Analysing salary data.
Correcting unjustified differences.
Training managers.
Establishing governance and documentation.

Businesses that begin early will be in a stronger position to manage compliance, employee expectations and reputational risk.

How Viladomat Group Can Support Your Organisation

Viladomat Group supports businesses entering, operating and expanding within European markets.

Together with appropriate legal, HR and remuneration specialists, we can assist organisations with:

Pay-transparency readiness assessments.
Workforce and compensation-data mapping.
Review of recruitment and employer-branding practices.
Development of internal communication strategies.
Coordination of cross-border implementation projects.
Preparation of management action plans.
Identification of operational and reputational risks.
Alignment of HR, compliance and corporate communication.

National implementation differs between jurisdictions. Organisations should obtain advice from qualified employment-law and tax professionals in every country where they employ personnel.

Contact Viladomat Group to discuss how your organisation can prepare for the new European pay-transparency environment.

This article is provided for general informational purposes and does not constitute legal, tax or employment advice.

Special Considerations for Norway.

The EU Pay Transparency Directive does not yet apply directly in Norway. Although the Directive is considered relevant to the European Economic Area, it has not yet been incorporated into the EEA Agreement or fully implemented in Norwegian legislation.

The EU transposition deadline of 7 June 2026 applied to EU Member States, but not to Norway. Norwegian authorities are working on the national implementation process in cooperation with the social partners and other relevant stakeholders. At present, no final Norwegian implementation date has been confirmed.

Norwegian employers are nevertheless already subject to significant equal-pay and equality obligations. Under the Norwegian Equality and Anti-Discrimination Act, women and men within the same organisation must receive equal pay for the same work or work of equal value. Employers must also work actively and systematically to promote equality, document their efforts and, in certain circumstances, conduct pay reviews and provide employees with access to relevant pay information.

Businesses operating in Norway should therefore distinguish between existing Norwegian legal obligations and the additional requirements expected to arise when the EU Directive is incorporated into the EEA Agreement and implemented nationally. Employers should monitor official Norwegian guidance and prepare their job architecture, salary criteria, recruitment processes and remuneration data in advance.

Roger Blikkberget, CEO Viladomat Group