Pay Transparency

The Pay Transparency Directive

An EU directive requires pay transparency to be implemented across EU member states. It is up to each EU member state to determine how these rules are implemented and when national legislation takes effect.

But what does this mean for businesses?

This page gives you an overview of what to expect and what you need to have in place.

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Why do we need

pay transparency?

The Pay Transparency Directive was adopted on 24 April 2023. Its purpose is to prevent pay discrimination and close the gender pay gap. The Pay Transparency Directive is intended to address a European problem: women earn, on average, around 13% less per hour than men in the EU.

Comply with pay transparency through HR controlling

Objective pay criteria

Gender-neutral pay decisions

Employee categories

Clear pay structures

Work of equal value

Gender pay gap analysis

Access to pay information

Transparent salary ranges

Pay reporting

Woman in an office setting with a focus on pay transparency, clear pay criteria and equal pay for equal work.

What is pay transparency?

Pay transparency should make it easier to understand why employees are paid what they are. It therefore requires clear principles for setting pay and gives employees access to relevant information about pay levels. The aim of pay transparency is to identify differences between women’s and men’s pay for the same work or work of equal value. For businesses, this includes

Defining job categories

Establishing a clear pay structure

Pay must be justified using gender-neutral criteria linked to the responsibilities of the work

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Job applicants must be given an initial salary or a salary range before a discussion about pay takes place. Employees must be able to know how their pay is determined and request pay information for comparable work, broken down by gender. Employers must not ask about previous pay or prevent employees from discussing their own pay.
Businesses with at least 100 employees must produce pay reports. The frequency of reporting depends on the size of the business. If a pay report shows a gap of at least 5% between women and men within an employee category, the business must examine whether the gap can be justified using objective, gender-neutral criteria. If it cannot, and the gap is not addressed within six months of reporting, the business must carry out a joint pay assessment with employee representatives.

Individual EU member states may choose to require businesses with fewer than 100 employees to report, but this is not part of the directive’s minimum requirements.
Under the Pay Transparency Directive, businesses of this size must report on gender pay gaps for the first time by 7 June 2031. Reporting must then take place every three years. The figures must, among other things, show pay gaps between employees performing the same work or work of equal value.
Businesses of this size must submit their first report on pay gaps by 7 June 2027. The business must then report every three years.
The largest businesses must report on pay gaps every year from 2027. The first pay report must be submitted by 7 June 2027 and cover the previous calendar year.

Colleagues reviewing data and charts at a meeting about pay transparency and pay differences.

Understand all the rules of the EU’s Pay Transparency Directive

All employers in the EU must establish employee categories for those performing the same work or work of equal value. Pay for these employee categories must be based on a defined set of objective, gender-neutral criteria.

This requires a clearer overview of roles, pay criteria and pay data. With Timegrip’s HR controlling solution, you can bring together relevant information and work with analyses and reports that make it easier to examine pay gaps. The precise requirements depend, among other things, on the size of the business and how legislation is adopted in the relevant EU member state.

Read our guide to pay transparency

Female employee in an office with colleagues in the background at a company working towards pay transparency and equal pay.

Prepare for pay transparency

It is a good idea to start preparing your business for pay transparency now. Begin by looking at how you currently set pay:

Is it clear which skills, tasks and responsibilities influence pay?

Then review your roles and consider which employees perform the same work or work of equal value. Establish employee categories on this basis.

Also check whether your pay data is held together and up to date, so you can identify differences between women and men. If you find differences, you can start looking more closely at what explains them.

At the same time, you can prepare managers and HR teams for questions about pay and review how you communicate salary ranges during recruitment.

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Questions and answers about pay transparency

Pay transparency means making it easier to understand how pay is set and to examine pay gaps. The EU’s Pay Transparency Directive aims to strengthen the right to equal pay for women and men performing the same work or work of equal value.
The directive’s requirements concerning pay information during recruitment and employees’ right to pay information apply regardless of business size. The requirement for regular pay reporting generally applies to businesses with at least 100 employees. Individual EU member states may choose to introduce additional requirements in their national legislation.
No, the directive does not require the salary to appear in the job advert itself. However, the employer must provide the applicant with the initial salary or a salary range at a point that allows for an informed pay negotiation, for example in the job advert or before the interview. The employer must not ask about the applicant’s previous pay.
Under the directive, businesses with at least 250 employees must report annually from 2027. Businesses with 150–249 employees must report every three years from 2027, while businesses with 100–149 employees must report every three years from 2031.
A gap of at least 5% within an employee category does not automatically trigger a requirement for a joint pay assessment. If the business cannot justify the gap using objective, gender-neutral criteria and does not address it within six months of reporting, it must carry out a joint pay assessment with employee representatives.
If an employee brings a pay discrimination claim and the employer has not complied with the directive’s pay transparency requirements, the employer must prove that no discrimination has taken place. However, this rule does not apply if the employer can prove that the breach was clearly unintentional and minor.
Each EU member state is responsible for implementing the directive through national legislation. The final national rules and the dates on which they take effect depend on the legislative process in each member state.

Get an overview of your pay data and create greater transparency

When you have a clear overview of employee categories, pay levels and the criteria behind pay decisions, it becomes easier to answer employees’ questions and examine any pay gaps. With Timegrip’s HR controlling solution, you can bring your data together and establish a better basis for analysis and reporting.

Compare pay across relevant employee categories.

Identify pay gaps between women and men.

Use pay data as the basis for clear, objective pay decisions.

Prepare the information and reports that the forthcoming rules may require.

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