Pay Transparency Directive: A New Era for Fair Compensation in the EU
With the EU’s Pay Transparency Directive (Directive (EU) 2023/970) entering into force on June 6, 2023, the European Union is taking a firm step toward equal pay for equal work. The directive aims to combat gender-based pay disparities by requiring employers to be more transparent about how they determine and distribute compensation.
By June 7, 2026, all member states must implement this directive into national law. Companies that prepare now will not only ensure compliance but also boost their employer brand and build trust with current and future employees.
What Does “Pay” Include?
The directive defines “pay” in a broad sense. It includes:
- Base salary or minimum wage
- Allowances
- Bonuses
- Non-cash benefits, such as company cars, meal vouchers, or health coverage
This broad scope ensures that all aspects of remuneration can be assessed for fairness and equality.
Who Is Affected?
The directive applies to all employers and employees, across public and private sectors. This marks a significant expansion from current legislation like Germany’s Entgelttransparenzgesetz, which was limited in scope and primarily targeted larger employers.
Key Requirements for Employers
The directive introduces a number of binding obligations:
1. Salary Disclosure in Job Ads
One of the most visible changes is that employers must include salary ranges in job postings or provide them before the first interview.
It will also become illegal to ask applicants about their previous salary, a common practice that often perpetuates existing inequalities.
2. Employee Right to Pay Information
Current employees will be able to request information on pay levels for roles of equal value. This enhanced right is designed to bring hidden pay discrimination to light and ensure internal structures are equitable.
3. Mandatory Pay Gap Reporting
Large companies – generally those with over 250 employees – will be required to report regularly on gender pay disparities. Where gaps are identified, employers will need to implement corrective measures.
Reporting alone is not enough—action must follow.
Equality as a Strategic HR Priority
The directive reinforces that pay equity is no longer optional—it is a strategic issue that must be embedded in HR and leadership responsibilities.
Employers should begin by reviewing pay systems, documenting compensation criteria, and eliminating bias. Tools like rexx systems’ HR software can help streamline the reporting and transparency process.
Conclusion: Act Now
The Pay Transparency Directive is a landmark policy that advances gender equality in the workplace. Employers are encouraged to:
- Make compensation structures transparent
- Define pay criteria clearly
- Prepare for reporting and disclosure obligations
- Implement digital tools and processes
Taking proactive steps today means meeting tomorrow’s standards—and showing employees that fairness and transparency are more than just buzzwords.
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