The EU pay transparency directive (EU) 2023/970 obliges EU member states to introduce pay structures that exclude gender pay discrimination.
Under the ESG reporting obligation, pay transparency will be a key issue, which companies with 150 employees or more will have to report on from 2027.
Directive (EU) 2023/970 on eliminating the gender wage gap
The EU Directive (EU) 2023/970 obliges EU member states to introduce pay structures that exclude gender pay discrimination. Objective, gender-neutral criteria such as skills, effort, responsibility and working conditions should be used to assess performance.
The decision is a response to the fact that women in the EU earn on average 13% less than men. The gender pay gap has typically remained stable over the past decade.
The aim of EU Directive 2023/970 is to establish minimum standards to ensure gender equality, in particular in the field of the principle of equal pay for equal work and the fight against pay discrimination. The new rules promote wage transparency and allow the right to equal pay to be enforced more effectively.
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What entities are subject to the wage transparency directive?
Directive (EU) 2023/970 applies to both public and private sector employers and to all employees who have an employment contract or employment relationship as defined by the law, collective agreements and/or practice in force in each member state.
Wage transparency directive – what will change?
Measures pertaining to recruitment
Under the new rules, job advertisements and interviews must be gender-neutral. Employers should inform applicants of the starting salary or salary range for the position before the interview and, where applicable, of the relevant provisions of the collective agreement that the employer has in place for the position. They are not allowed to ask applicants about their current or previous remuneration.
Employee rights
Employees have the right to request information on their own pay and average pay levels, broken down by gender, for categories of workers who do the same job or work of equal value. After 2027, employees will no longer be prevented from voluntarily disclosing their pay in order to enforce the principle of equal pay;
Companies where contracts or company directives require the confidential treatment of pay-related information have time to prepare and apply the EU directive by 2027.
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Employers' obligation to inform employees
Employers must make information easily accessible to their employees on the criteria they use to determine their employees' pay, pay levels and pay increases; these criteria must be objective and gender-neutral.
Employers must provide information on:
- the gender pay gap,
- the proportion of male and female employees who receive additional or variable components as part of their remuneration (this requirement will be phased in from 7 June 2027 for employers with more than 100 employees, depending on the size of the company).
Where the pay report reveals a gender pay gap of 5% or more, which cannot be justified by objective and gender-neutral factors and which has not been remedied within six months, employers must cooperate with workers' representatives to identify and eliminate discriminatory pay gaps.
Employers’ reporting obligation
- For companies with 100 or more employees, the directive introduces new reporting obligations. The report should show the gender pay gap in different breakdowns.
- For companies with 150 or more employees, this report must be disclosed for the first time by 7 June 2027, and thereafter – depending on the size of the company – every year (250 or more employees) or every three years (150-249 employees).
- Companies employing between 100 and 149 employees must prepare the first report by 7 June 2031, and every three years thereafter.
Protection of employees' rights
The directive guarantees that workers are not disadvantaged because they wish to assert their right to equal pay.
It also gives all employees the right to go to court if they feel their rights have been violated. If proceedings are brought against an employer, the employer is to prove that no such discrimination took place. The limitation period for equal pay claims should not be less than three years.
Wage transparency – key deadlines
Member states have until 7 June 2026 to transpose the directive into national law.
The application of the new rules and compliance with the principle of equal pay will be monitored by the national equality bodies, which will ensure effective implementation of the pay transparency measures. The penalties (which should include fines) must be effective, proportionate and dissuasive.
Member states shall provide Eurostat with the national data necessary for the calculation of the gender pay gap on an annual basis, starting from 31 January 2028;
They shall inform the European Commission by 7 June 2031 on the implementation of the legislation – this will form the basis of the report that the Commission will submit to the European Parliament and the Council of the European Union by 7 June 2033.
