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EU Pay Transparency Directive: Everything employers need to know

James Kelly

Author

James Kelly

Last Updated

30 January 2026

Read Time

10 min

The EU Pay Transparency Directive changes how companies across Europe hire, pay, and manage their people. With implementation required by 7 June 2026, employers need to understand what’s coming and what steps to take now.

There’s a lot to get your head around here, and we know HR teams are already stretched thin. That’s why we’ve put together this guide to give you clarity on what’s required and a clear path forward.

The EU Pay Transparency Directive (Directive (EU) 2023/970) is binding legislation designed to strengthen equal pay for equal work between men and women. The EU Council adopted it in April 2023, and all 27 member states must transpose it into national law by 7 June 2026.

The directive addresses a persistent challenge. Despite decades of equal pay legislation, the gender pay gap across the EU remains at around 12-13%. Research has shown that a lack of pay transparency is one of the key obstacles to closing this gap. When pay differences aren’t visible, they’re harder to identify and address.

The directive introduces binding measures across recruitment, pay-setting, employee information rights, and gender pay gap reporting. For employers, this means new obligations but also a chance to build trust with your team through greater openness about how pay decisions are made.

The EU Pay Transparency directive applies to:

  • All public and private sector employers in EU member states
  • Non-EU employers with employees based in EU member states (including subsidiaries, branches, and remote workers)

Reporting obligations are based on company size, but many transparency requirements apply regardless of how many people you employ. Even smaller organisations will need to comply with recruitment transparency rules and respond to employee requests for pay information.

01 | Pay transparency in recruitment

The directive introduces important changes to how employers approach hiring:

Salary disclosure: Employers must provide job applicants with the initial pay or salary range for a position before the interview stage. This can be included in the job posting or shared before conversations begin. The range should reflect what you’ll realistically pay for the role, based on objective criteria.

Salary history ban: Employers cannot ask candidates about their current or previous salary. This is designed to prevent historical pay gaps from carrying forward into new roles.

Gender-neutral job postings: Job titles, vacancy notices, and recruitment processes must be gender-neutral and non-discriminatory.

What this means in practice

Your recruitment team will need updated templates and training on how to have transparent conversations about pay. Rather than asking “What’s your current salary?”, recruiters can focus on explaining how the salary range was determined and what factors influence where a candidate might land within it.

02 | Pay transparency for current employees

Employees will have new rights to understand how their pay compares to colleagues:

Right to information: Workers can request information about their individual pay level and the average pay levels, broken down by gender, for colleagues doing the same work or work of equal value. Employers must respond within a reasonable timeframe.

Accessible pay criteria: Employers must make the criteria used to determine pay, pay levels, and pay progression easily accessible to workers. These criteria must be objective and gender-neutral.

No pay secrecy clauses: Employers cannot prevent workers from disclosing their pay or discussing it with colleagues.

What this means in practice

You’ll need clear documentation of how pay decisions are made, and managers should be equipped to explain the rationale behind individual pay levels. Factors like qualifications, experience, performance metrics, and responsibilities should be clearly defined and consistently applied.

03 | Gender pay gap reporting

Employers above certain size thresholds must report detailed information on gender pay gaps.

Reporting timeline

  • Employers with 250+ workers: Annual reporting, starting June 2027 (using 2026 data)
  • Employers with 150-249 workers: Reporting every three years, starting June 2027
  • Employers with 100-149 workers: Reporting every three years, starting June 2031
  • Employers with fewer than 100 workers: No mandatory reporting requirement (though individual member states may extend this)

What must be reported

  • Mean and median gender pay gap in basic salary
  • Mean and median gender pay gap in variable/complementary components (such as bonuses and allowances)
  • Proportion of male and female workers receiving variable pay components
  • Proportion of male and female workers in each pay quartile
  • Gender pay gap between categories of workers performing equal work or work of equal value

Reports must be submitted to the relevant national authority and made publicly available. This means the information will be accessible to employees, job candidates, and the wider public.

04 | The 5% threshold and joint pay assessments

The directive includes an important accountability mechanism:

The 5% rule: If gender pay gap reporting reveals a difference of 5% or more in any category of workers that cannot be justified by objective, gender-neutral criteria, the employer must take action.

Six-month window: Employers have six months to remedy unjustified gaps.

Joint Pay Assessment: If the gap isn’t resolved within six months, the employer must conduct a Joint Pay Assessment in cooperation with employee representatives. This assessment must:

  • Analyse the pay differences identified
  • Examine the reasons for those differences
  • Identify measures to address them
  • Be made available to workers, their representatives, and the relevant monitoring body

Joint Pay Assessments are serious undertakings that require collaboration with employee representatives and transparency about your findings. Addressing pay gaps proactively, before reporting obligations begin, can help you avoid this process.

The directive requires member states to establish penalties that are “effective, proportionate, and dissuasive.” While specific penalties vary by country, the framework includes:

Financial penalties: Fines that may be based on the employer’s annual turnover or total payroll. Early indications from member states suggest fines ranging from €400 to over €10,000 per violation, depending on the jurisdiction.

Employee compensation: Workers who experience pay discrimination are entitled to compensation, which may include full recovery of back pay, bonuses, and payments in kind. Importantly, this compensation is uncapped.

Shifted burden of proof: In pay discrimination cases, the employer must prove they haven’t violated equal pay rules, rather than the employee having to prove discrimination occurred.

Other consequences: Penalties may include exclusion from public procurement processes and public disclosure of non-compliance.

The fines are only part of the picture. The reputational impact of published pay gaps, and the potential for multiple employee claims, are risks best addressed through proactive compliance.

As of January 2026, member states are at varying stages of transposition. On 18 December 2025, the European Commission reaffirmed that it expects all member states to meet the June 2026 deadline.

Countries with partial implementation already in place:

  • Poland (recruitment transparency provisions effective December 2025)
  • Malta (recruitment transparency provisions effective August 2025)
  • Belgium (public sector provisions in certain regions)

Countries with draft legislation published or in progress: Sweden, Ireland, Slovakia, Finland, Germany, Lithuania, Netherlands

Countries still in early stages: Several member states, including Austria, Bulgaria, Croatia, Denmark, Greece, Hungary, Italy, Latvia, Luxembourg, Portugal, and Slovenia, have not yet reported significant progress.

What this means in for employers

Even if your country hasn’t finalised its legislation, the directive’s requirements give you a clear framework for preparation. Waiting for local laws before taking action could leave you short on time. It’s also worth noting that member states can exceed the directive’s minimum requirements, so some jurisdictions may impose stricter obligations.

Phase 1: Assessment

Audit your current state:

  • Map your workforce by job category, function, and level
  • Calculate your current gender pay gaps at both organisational and role-category level
  • Identify any gaps exceeding 5% and assess whether they can be justified by objective criteria
  • Review your existing pay-setting and progression criteria

Review recruitment processes:

  • Identify where salary history questions appear in applications, interview scripts, or reference checks
  • Assess whether your job postings include salary information
  • Review job titles and descriptions for gender neutrality

Phase 2: Foundation Building (Q1-Q2 2026)

Establish clear pay structures:

  • Define objective, gender-neutral criteria for pay decisions
  • Create documented salary bands for each role category
  • Ensure criteria are accessible and consistently applied

Update recruitment practices:

  • Remove all salary history questions
  • Add realistic salary ranges to job postings
  • Train recruiters and hiring managers on new requirements

Prepare for information requests:

  • Establish processes to respond to employee requests within reasonable timeframes
  • Equip managers to explain how pay decisions are made
  • Prepare clear communications about your pay structure

Phase 3: Reporting readiness (Q2 2026 onwards)

Build reporting infrastructure:

  • Ensure HR and payroll systems can capture required data
  • Run a test report using current data to identify any gaps
  • Establish clear ownership and processes for ongoing reporting

Engage employee representatives:

  • If you have works councils or employee representatives, involve them in your preparations
  • Build collaborative relationships that will support any future Joint Pay Assessments

Phase 4: Remediation

Address identified gaps:

  • Where you’ve found unjustified pay gaps, develop a remediation plan
  • Prioritise closing gaps before your first reporting deadline
  • Document your approach and progress

The EU Pay Transparency Directive is part of a broader global shift toward greater pay transparency. While the compliance work is real, it’s also a chance to strengthen trust with your workforce and show your commitment to fair treatment.

Employers who get ahead of this, building transparent pay practices rather than scrambling to tick boxes, will find it easier to attract and retain talent in a competitive market.

How Boundless can help

Boundless employs people on your behalf across Europe, which means we handle the compliance so you don’t have to. Our in-house legal and HR experts monitor regulatory changes in every market where we operate, and we build those requirements into how we manage your team’s contracts, payroll, and benefits.

When the EU Pay Transparency Directive comes into force, we’ll make sure your employees are managed in line with the new rules, from compliant employment contracts to accurate pay reporting. You focus on your business. We’ll handle the rest.

Have questions about how the EU Pay Transparency Directive affects your business? Get in touch with our team to talk through your situation.

FAQs

Yes. If you have employees working in EU member states, you’re in scope, even if your headquarters are elsewhere. This includes subsidiaries, branches, and remote workers based in the EU. The reporting thresholds are based on your headcount within each member state, so a US company with 150 employees in Germany would need to comply with German reporting requirements.

This is one of the trickier parts of the directive. Work of equal value means roles that are comparable based on objective criteria: skills, effort, responsibility, and working conditions. It’s not just about job titles. Two roles with different titles could be considered equal value if they require similar levels of skill and responsibility. Employers will need to categorise their workforce using gender-neutral criteria, and employees can request pay comparisons with colleagues doing work of equal value to theirs.

Not all pay gaps are problematic. The directive allows for differences that can be explained by objective, gender-neutral factors like experience, qualifications, performance, or market conditions. The key is documentation. If you can demonstrate that a gap exists for legitimate reasons and those reasons are applied consistently, you won’t be required to conduct a Joint Pay Assessment. But “we’ve always done it this way” or “they negotiated better” won’t cut it.

It depends on what you mean by small. If you have fewer than 100 employees, you won’t have mandatory reporting obligations (unless your member state decides to extend the requirements). But the recruitment transparency rules apply to all employers regardless of size. You’ll still need to share salary ranges with candidates, stop asking about salary history, and respond to employee requests for pay information. And if you’re growing, it’s worth building good practices now rather than retrofitting them later.

The making available of information to you on this site by Boundless shall not create a legal, confidential or other relationship between you and Boundless and does not constitute the provision of legal, tax, commercial or other professional advice by Boundless. You acknowledge and agree that any information on this site has not been prepared with your specific circumstances in mind, may not be suitable for use in your business, and does not constitute advice intended for reliance. You assume all risk and liability that may result from any such reliance on the information and you should seek independent advice from a lawyer or tax professional in the relevant jurisdiction(s) before doing so.

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