The EU Pay Transparency Directive is just around the corner (relatively speaking). Each EU member state (country) has until June 7, 2026 to implement the Directive by incorporating it into its own laws. If your company operates and has employees in the EU—even if you’re headquartered in the US—you need to understand exactly how this Directive affects you today. This blog walks you through the Directive’s core requirements, how they affect employers across the EU, and the steps you should take now to prepare.
What is the EU Pay Transparency Directive?
The EU Pay Transparency Directive is a measure enacted by the European Union to reduce pay discrimination and eliminate pay disparities between men and women. The Directive officially entered into force on June 7, 2023. It requires companies operating in the EU—including non-EU-owned companies—to implement specific pay transparency measures, as well as procedures for reporting, assessing, and remediating gender pay gaps.
EU member states must create their own national laws based on the Directive’s requirements by June 7, 2026. However, some of the requirements (such as pay gap reporting) will come into effect at different times (depending on company size). To add to the complexity, some countries have already enacted similar regulations, some of which are even stricter than those required by the Directive.
If you’re an employer in the EU, take time now to familiarize yourself with the requirements and make sure that you have a solid understanding of how well you are (or aren’t) prepared to comply with them so that you can take immediate steps to address any gaps.
Is the EU Pay Transparency Directive a law?
The EU Pay Transparency Directive is not technically a law—that’s a distinction that is very important for employers to understand. The EU describes it as a legislative act with specific goals all member states must achieve. Thus, the Directive itself is not directly enforceable by the EU. Rather, it is the laws that each country creates to comply with the Directive that your company will need to be in compliance with.
And, because each country can decide how to turn the Directive’s goals into its own laws, employers operating in multiple EU countries will face a complex network of different laws, some of which will be even stricter or broader than the Directive itself.
What are the EU Pay Transparency Directive’s key requirements?
At minimum, all EU member states must ensure that employers meet these key requirements (remember, this is the minimum baseline—each country can choose to make these requirements more strict):
1. Pay transparency measures for job applicants
- Employers must share pay levels or salary ranges in job postings or before the interview with the job applicant.
- Employers can’t ask applicants about their salary history (current or previous salaries).
2. Employees have the right to access pay information
- Employees have the right to request information about their pay level and average pay levels of other employees performing the same (or equal-value) work.
- Employees must receive clear explanations about the criteria that companies use to determine pay, promotions and other forms of career progression.
3. Companies must report on their existing gender pay gaps
Pay gap reporting depends on company size (headcount). The timing also varies by company size:
- Companies with 250+ employees: must publish gender pay gap information annually starting in 2027.
- Companies with 150-249 employees: must report gender pay gap information every 3 years starting in 2027.
- Companies with 100-149 employees: must report gender pay gap information every 3 years starting in 2031.
4. Companies face mandatory pay audits if they show significant pay gaps
- If your company reports a gender pay gap of 5% or higher and if you can’t provide objective (gender neutral) justifications for the gap or resolve it within six months, you must conduct a joint pay audit with the employee and their worker representative.
- Employees are also entitled to compensation (back pay, bonuses, etc.) if your company is found to have a gender pay gap in the audit findings (learn more about penalties in the next section).
What are the penalties for companies that don’t comply with the EU Pay Transparency Directive?
Penalties for non-compliance will vary widely across EU countries, because each country gets to decide how to enforce the Directive. Penalties could include fines, restrictions on doing business, or even other legal consequences, depending on how each country has designed its laws.
Importantly, the Directive shifts the burden of proof onto the employer in pay discrimination cases. This means that it is now the employers who must prove compliance if accused of discrimination. Further, if an employee is found to have experienced pay discrimination, they are now entitled to full back pay, bonuses, and other related compensation.
Don’t underestimate the complexity of staying in compliance with varying Pay Transparency laws across multiple countries
The most challenging aspect of complying with the Directive is its inherent flexibility. Many employers underestimate the complexity of navigating varying requirements country-by-country. For example:
- Spain already requires companies with 50+ employees to report gender pay gaps, making it stricter than the Directive.
- Germany currently mandates reporting only for companies with 500+ employees, but will need to make this stricter (will need to drop to 100+) in order to align with the Directive’s 100-employee threshold.
- Ireland’s threshold of 150 employees in 2024 is lowered to 50 in 2025—that’s well ahead of the Directive’s 2026 deadline.
- Meanwhile, countries like the Czech Republic currently have no private-sector reporting laws. Because they must introduce them by 2026, expect these countries to have the most dramatic changes in laws.
Given these variations, multinational employers will need to develop country-specific compliance strategies for each country in which they operate.
Which actions should you take now to prepare your company for the EU Pay Transparency Directive?
Here are practical steps your company should take immediately to prepare:
- Conduct internal pay audits to establish your baseline gender pay gap data, establish reasons for existing pay gaps, and consider any necessary remediation actions.
- Review and update job descriptions and classification structures to ensure gender-neutral and transparent pay criteria.
- Set up or upgrade systems to track gender-disaggregated pay data efficiently.
- Review pay and recruitment policies and procedures.
- Closely monitor legal developments in countries where your company operates, and adjust your approach as national laws are finalized.
How can your company leverage the EU Pay Transparency Directive?
Proactive compliance with the Directive can strengthen your brand, mitigate your compliance risks, improve employee morale by promoting equity, and satisfy the expectations of investors and customers.
Why getting expert help is essential for compliance
Because this key EU Pay Transparency Directive’s implementation will vary significantly across countries—and since some EU countries already have measures in place—you’ll need guidance to navigate these complexities successfully, even as prospective laws continue to shift and evolve as they approach their final form. Working with a trusted expert who is actively monitoring each EU member state’s evolving regulations is key. At HSP, we’re tracking country-specific pay transparency requirements closely to help you navigate every jurisdiction effectively. If you need support in understanding how the EU Pay Transparency Directive affects your operations in Europe, and the steps you need to take to prepare, reach out to our experts today.
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