EU member states have until 7 June 2026 to implement the EU Pay Transparency Directive (the Directive) into their domestic law. This LawFlash summarises the Directive’s key requirements, considers the current implementation status of the Directive and sets out key preparatory steps global employers with EU operations should be taking now.
Sweden, Belgium, Poland, and Ireland have so far led the way and other countries are expected to publish draft proposals during 2025. As the deadline nears, many organisations operating in the EU have already commenced their compliance efforts, particularly with respect to trial-run gender pay reporting procedures. These test analyses can provide an important opportunity to remediate any pay disparities before the requirements come into force, mitigating the risk of being subject to onerous joint pay assessments under the Directive.
KEY ELEMENTS OF THE DIRECTIVE
The following table sets out a summary of the Directive’s key measures:
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Measure
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Details
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Equal Work and Work of Equal Value
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- Member states will be required to take the necessary measures to ensure that employers have pay structures ensuring equal pay for equal work or work of equal value.
- Analytical tools or methodologies will be made available to employers and will be accessible to support and guide the assessment and comparison of the value of work.
- These tools or methodologies will be designed to allow employers to easily establish and use gender-neutral job evaluation and classification systems that exclude any pay discrimination on the grounds of sex.
- Pay structures should be such as to enable the assessment of whether workers are in a comparable situation in regard to the value of work on the basis of objective, gender-neutral criteria agreed with workers’ representatives where such representatives exist. These criteria should not be based directly or indirectly on workers’ sex.
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Job Applicants
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- Job applicants will have the right to receive information about initial pay or the job’s pay range, which shall be based on objective, gender-neutral criteria attributable to the relevant position.
- Employers will need to ensure that such information is provided in a manner that will ensure an informed and transparent negotiation on pay, such as in a published job vacancy notice.
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Pay Levels and Career Progression
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- Employers should make easily accessible to their workers the criteria that are used to determine workers’ pay, pay levels, and pay progression.
- The criteria will need to be objective and gender neutral.
- Member states may exempt employers with fewer than 50 workers from the obligation related to the pay progression.
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Rights to Information
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- Workers will have the right to request and receive written information on their individual pay level and on the average pay levels, broken down by sex, for categories of workers performing the same work as them or work of equal value to theirs. If the information received is inaccurate or incomplete, workers should have the right to request reasonable additional details and clarification and to receive a substantiated response.
- Employers will need to inform all workers annually of their right to receive such information and of the steps the workers are to undertake to exercise that right.
- Employers will need to provide the information on request within a reasonable period of time and in any event within two months from the date the request is made.
- This right will apply to workers at all employers, irrespective of their size.
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Pay Secrecy Clauses
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- Contractual terms that restrict workers from disclosing their pay, or from seeking information about the same or other categories of workers’ pay, will be prohibited.
- However, employers may require workers who have obtained such pay information, other than their own pay or pay level, not to use that information for any purpose other than to exercise their own right to equal pay.
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Gender Pay Reporting
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What information needs to be reported?
- Mean and median pay gaps
- Mean and median gaps calculated from “complementary and variable” components of pay (e.g., bonuses)
- The proportion of men and women receiving complementary or variable components of pay
- The proportion of men and women within each quartile pay band
- The gender pay gap between workers by categories of workers broken down by ordinary basic wage or salary and complementary or variable components
Accuracy and publication of report
- Management must confirm the accuracy of the information following consultation with workers’ representatives. Workers’ representatives will need to have access to the methodologies applied by the employer.
- The report will need to be made publicly available (e.g., via publication on the organisation’s website) as well as communicated to the applicable national monitoring body. If requested, the results will also need to be provided to the applicable labour inspectorate and the equality body, and this shall apply to the results from the previous four years.
In-scope employers
The timing and frequency of publication depends on the employer’s size:
- Employers with 250 or more employees: Publish the report four years after the Directive enters into force and annually thereafter.
- Employers with between 150 and 249 employees: Publish the report four years after the Directive enters into force and every three years thereafter.
- Employers with between 100 and 149 employees: Publish the report eight years after the Directive enters into force and every three years thereafter.
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Joint Pay Assessments
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- Employers that are subject to the reporting obligation will need to carry out a joint pay assessment where all of the following circumstances apply:
- The pay reporting demonstrates a difference in the average pay level between female and male workers of at least 5% in any category of workers.
- The employer has not justified such a difference in the average pay level on the basis of objective, gender-neutral criteria.
- The employer has not remedied such an unjustified difference in the average pay level within six months of the date of submission of the pay reporting.
- The assessment will need to include certain prescribed analysis and information, as set out in the Directive.
- The joint pay assessment will need to be made available to workers and workers’ representatives and shall be communicated to the applicable monitoring body. Employers will also need to make it available to the labour inspectorate and the equality body upon request.
- The Directive also requires that when implementing measures arising from the assessment, the employer shall be required to remedy the unjustified differences in pay within a reasonable time and in close cooperation with the workers’ representatives, and the labour inspectorate and/or the equality body may be asked to participate in the process.
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Remedies and Enforcement
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- Member states will be required to ensure that court proceedings for the enforcement of pay equity rights and obligations are available to all workers.
- Workers will have the right to claim compensation if they have sustained damage as a result of an infringement of an equal pay right or obligation. Compensation shall include full recovery of back pay and related bonuses or payments in kind, compensation for lost opportunities, non-material damage, any damage caused by other relevant factors (including intersectional discrimination), as well as interest on arrears. There will be no cap on compensation.
- Authorities or courts will also be able to issue orders to stop employers infringing equal pay rights and obligations, and issue orders for employers to take measures to ensure that those rights and obligations are applied.
- The burden of proof will be on the employer to prove that there has been no discrimination in relation to pay should a worker feel that the principle of equal pay has not been applied and takes the case to court.
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Sanctions
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- Member states must establish penalties applicable to infringements of equal pay rights and obligations. Specific penalties will apply in cases of repeat infringements.
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EARLY ADOPTERS – THE STATUS OF THE DIRECTIVE IN SWEDEN, BELGIUM, POLAND AND IRELAND
Sweden, Belgium, Poland, and Ireland have taken the first steps towards implementing the Directive. Overall, we have already learnt there is likely to be some degree of divergence between member states’ implementing legislation and the Directive itself, as well as between each of the EU member states' own requirements.
The table below provides a high-level summary of the key points:
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COUNTRY
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DATE
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KEY POINTS
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Sweden
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Proposal published 29 May 2024
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- Organisations operating in Sweden will likely already be used to complying with Sweden's comprehensive pay transparency rules, given the low headcount threshold.
- However, the Directive will still introduce new requirements in Sweden, including (1) the provision of pay information to job applicants; (2) the requirement to make objective, gender-neutral criteria used to determine pay, pay levels and pay progression easily accessible; (3) a prohibition on pay secrecy clauses in employment contracts; and (4) the content of gender pay reports made under the Directive.
- Sweden's proposal exceeds the minimum requirements set out in the Directive in some areas. For example, the exemption that may potentially apply to organisations with fewer than 50 workers to make their objective, gender-neutral criteria used to determine pay, pay levels, and pay progression easily accessible is not currently included in Sweden's proposal.
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Belgium
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Signed into law on 12 September 2024 and effective from 1 January 2025
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- Since 1 January 2025, employers subject to the jurisdiction of the Fédération Wallonie-Bruxelles (mainly public sector employers) have had to comply with a new decree which is the first transposition of the Directive into domestic law in any EU member state jurisdiction.
- The Fédération has introduced provisions which go beyond the minimum requirements in the Directive, including obligations to (1) make the starting salary or salary range for a job opening available as soon as it is announced and represent this in an accessible format for people with disabilities; (2) use job titles that are “non-discriminatory”; and (3) as part of the Directive's gender pay reporting obligations, include an assessment of how periods of family-related leaves of absence have affected remuneration.
- The decree does not apply to all Belgian employers. However, it is potentially indicative of how the Directive will be transposed in Belgium more widely.
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Poland
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Published 5 December 2024
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- Certain members of Parliament have proposed draft legislation transposing elements of the Directive.
- The draft bill is generally aligned with the Directive. However, it does not contain any gender pay gap reporting obligations.
- We expect this to be dealt with when the government itself tables an official proposal of its own.
- An official government draft is currently in progress.
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Ireland
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Published 15 January 2025
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- The government has published the General Scheme of the Equality (Miscellaneous Provisions) Bill 2024.
- The bill contains two proposed amendments to the Employment Equality Act 1998.
- Firstly, the bill proposes that organisations must not publish or display an advertisement which relates to employment that does not include the remuneration rate or its range for the post concerned.
- This amendment technically goes beyond what is provided for in the Directive because it requires employers to provide the information in the job advertisement. The Directive only states that applicants have the right to receive this information from the prospective employer, although it does suggest that the information could be provided via a job advert and in practice, this is how organisations would have likely complied with this obligation in any event.
- Secondly, employers must not request from job applicants information about the applicant's current or former rates. This transposes the corresponding obligation from Article 5 of the Directive.
- The Directive's other requirements will need to be addressed in amendments to the bill or in further legislation.
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CONSEQUENCES OF THE DIRECTIVE FOR EMPLOYERS
The Directive’s consequences are significant. It introduces a wide range of pay transparency measures, including, but not limited to, gender pay reporting obligations, extensive enforcement mechanisms (including fines and uncapped compensation for workers who suffer damage as a result of an employer infringing the Directive), as well as obligations for employers with pay gaps of 5% or more to remedy those differences. Such obligations will be particularly significant in member states which currently have no, or few, pay transparency requirements.
In particular, the Directive is likely to create two specific challenges for employers operating in the European Union:
- Compliance costs and increased administrative burden: Many employers will have to consider whether existing systems are able to collect the necessary data that the Directive requires and potentially adapt existing pay databases. Employers may also need to offer certain training to staff, for example on preparing gender pay reports and responding to requests for information.
- Litigation: Employers should note that there have been several high-profile equal pay cases in Belgium, France, and the United Kingdom, in which female claimants were successful only because they had the necessary information on the average pay levels of their male colleagues. Increased transparency will likely increase the risk of pay equity litigation and employers should ensure they are ready and prepared to defend such claims.
WHAT EMPLOYERS SHOULD BE DOING NOW TO PREPARE
Organisations operating in the European Union need to start preparing in earnest, particularly with respect to conducting a trial run of their reporting obligations to address any pay gaps should they fall in-scope of the gender pay reporting obligations under the Directive. Only one annual payroll cycle remains prior to the Directive being in force.
Other key actions employers should consider taking now include the following:
- Reviewing the requirements of the Directive so that relevant team members are well informed of the requirements and can advise the business more generally
- Establishing common internal understanding of the concepts of "equal work" and "work of equal value," and considering how to organise workers into comparable value groups (not just typical hierarchical structures based on salary levels/reporting lines)
- Reviewing internal pay policies, job evaluation systems, job descriptions, and job adverts to check that they are gender neutral and based on objective criteria
- Reviewing template employment contracts to remove any pay secrecy type clauses
- Developing policies to govern how they will respond to employees exercising their pay transparency rights
- Verifying whether their payroll systems and job descriptions are sufficiently granular to allow responsible personnel to more easily comply with pay transparency obligations