With the entry into force of the EU Pay Transparency Directive (Directive (EU) 2023/970) on June 6, 2023, the European Union is paving the way for greater pay equity between women and men. The goal is to finally give greater enforceability to the principle of “equal pay for equal or equivalent work” through binding requirements for salary and compensation transparency.
Companies should address the new requirements early on – because the directive must be transposed into national law by June 7, 2026, at the latest. Those who are prepared now will not only strengthen their employer brand but also create a fair and attractive work environment.
What is meant by “pay”?
The directive deliberately defines “pay” broadly. It encompasses not only the base or minimum wage but all monetary benefits related to the employment relationship—including:
- Allowances
- Bonuses
- Benefits in kind such as company cars, meal allowances, or supplementary insurance
This broad interpretation is intended to ensure that all forms of compensation can be reviewed for equal treatment.
Who is subject to the Pay Transparency Directive?
The directive applies to all employers and employees, regardless of industry or company size, in both the public and private sectors. It thus represents a significant expansion of existing laws, such as the German Pay Transparency Act (EntgTranspG), which previously applied primarily to larger companies.
Key Points of the Directive: What Companies Can Expect
The Pay Transparency Directive introduces a number of concrete changes that companies should prepare for now:
1. Salary information becomes mandatory in job postings
One of the most visible changes concerns the application process: In the future, employers will be required to provide salary information directly in the job posting or, at the latest, before the job interview.
The goal is to create greater fairness and comparability even before hiring. At the same time, employers are prohibited from requesting information about applicants’ previous salaries—a common practice that often unconsciously reinforces inequalities.
2. Right to Information for Employees
The directive also gives current employees a stronger set of tools: They can request information about the pay of other employees in comparable positions—subject to data protection regulations.
This provision aims to expose hidden discrimination and scrutinize internal pay structures.
3. Mandatory reporting on pay gaps
In particular, companies above a certain size will be required to report regularly on gender-based pay gaps in the future. Even though the exact implementation still depends on national legislation, one thing is already clear:
Companies with more than 250 employees have a particular obligation to systematically and transparently document their pay equity practices.
If discrepancies are identified, appropriate measures must also be taken—a mere report is not sufficient.
Equality as a strategic HR issue
The Pay Transparency Directive makes it clear: Equality is no longer a voluntary CSR goal, but is becoming a mandatory responsibility for corporate management and HR leaders. Organizations would do well to analyze and document existing compensation systems and review them for potential unequal treatment.
Conclusion: Time to act
The Pay Transparency Directive is a milestone on the path to true equality in the workplace. For companies, this means:
- Making salary structures transparent
- Clearly documenting compensation criteria
- Preparing for reporting and disclosure obligations
- Establishing IT-supported tools and processes
The sooner companies take action, the better they will be able to not only meet legal requirements but also send a strong signal of fairness, transparency, and equality.