The EU Pay Transparency Directive explained: what employers need to know

TL;DR  

The topic of salary or pay transparency will soon seize to only live in our minds as a future trend or a voluntary initiative. With the EU Pay Transparency Directive coming into force already in June of 2026, transparency around pay will become a legal requirement for employers across the EU and EEA.

For HR teams and employers, this directive marks a shift. Not only in reporting obligations, but in how pay is structured, communicated and justified throughout the employee lifecycle, from recruitment to progression and internal mobility. To get ahead and clear on all that is to come, this article provides a practical overview of what the directive is, why it is being introduced, and what employers should understand as they begin preparing. 

Overview 

• What the EU Pay Transparency Directive is and what it aims to achieve
• Why the directive is being introduced now
• When the directive takes effect and what the 2026 deadline means for employers
• Which employers are covered and how obligations differ by company size
• What will change in recruitment under the directive
• How employee rights around pay transparency will change
• What “work of equal value” means in practice
• What happens when a gender pay gap is identified
• How enforcement and the burden of proof will change
• How can companies and HR teams prepare now?

What is the EU Pay Transparency Directive?

The EU Pay Transparency Directive (Directive (EU) 2023/970) is designed to strengthen the principle of equal pay for equal work and work of equal value between women and men.

Its core purpose is to make pay practices more transparent and enforceable. To do this, the directive introduces new obligations for employers around pay transparency, access to information and reporting, as well as stronger enforcement mechanisms where unjustified pay gaps exist.

Rather than introducing an entirely new concept, the directive builds on existing equal-pay legislation, but adds clearer rules, stronger rights and practical tools to ensure those rules can actually be applied.

Why is the directive being introduced now?

Despite decades of equal-pay legislation, the gender pay gap in the EU has remained largely unchanged. On average, women still earn around 12% less than men.

One of the main reasons has been lack of transparency. When pay systems are opaque, it becomes difficult for employees to understand how pay is set, challenge differences, or prove discrimination. Existing laws have therefore often been difficult to enforce in practice.

The directive addresses this gap by introducing transparency obligations, reporting requirements, and a shift in the burden of proof, giving employees clearer rights, and employers clearer expectations.

When does the directive take effect?

EU and EEA countries must implement the directive into national law by 7 June 2026.

While national implementation will vary slightly between countries, the overall direction and core requirements are already clear. For employers, this means preparation should start well before the deadline — especially where pay structures, job architecture or documentation are not fully developed today.

Preparation timelines will differ by organisation size and complexity, but for many employers this will be a multi-month process rather than a last-minute adjustment.

Which employers are affected?

All employers with workers in an EU or EEA country are affected by the directive to some extent, regardless of where the company is headquartered.

That said, the most resource-intensive requirement, mandatory gender pay gap reporting, only applies above certain size thresholds. Reporting obligations start with employers with 150 employees or more and later expand to include those with 100+ employees.

Smaller employers are not exempt from the directive. They must still comply with requirements around recruitment transparency and employee access to pay information.

What will change in recruitment?

The directive introduces several important changes to how employers recruit.

Candidates must be informed about the starting salary or salary range for a role, either directly in the job ad or before the first interview. In addition, employers are no longer allowed to ask candidates about their salary history.

These changes are intended to prevent past inequalities from influencing future pay decisions and to ensure that recruitment decisions are based on the role itself and objective criteria.

Job ads and pay-setting criteria must also be gender-neutral.

How do employee rights change?  

Once employed, employees gain stronger rights to understand how pay works within the organisation.

Employers must make pay-setting and pay progression criteria accessible and ensure that they are objective and gender neutral. Employees also have the right to request information about their own pay level, as well as average pay levels for employees of the opposite sex doing the same work or work of equal value.

This information is provided at group level, not as individual salaries, and must be broken down by gender where applicable.

What does “work of equal value” mean?  

Work of equal value is not defined by job titles, but rather by what a role requires. Comparisons are based on gender neutral criteria such as skills, effort, responsibility and working conditions. This makes clear job architecture and structured job evaluation essential. Without them, fair comparison, and compliance for that matter, becomes difficult.

What happens if a gender pay gap is identified?

If reporting shows a gender pay gap above 5% within a category of workers performing the same work or work of equal value, and that gap cannot be objectively justified, the employer must carry out a joint pay assessment together with employee representatives.

This assessment examines the causes of the gap and results in concrete measures to address and reduce it. The directive focuses first on correction and prevention, rather than automatic sanctions.

How does enforcement change?  

One of the most significant changes introduced by the directive is the shift in the burden of proof. Where there are indicators of pay discrimination, it is the employer, not the employee, who must demonstrate that pay differences are justified by objective, gender-neutral reasons.

Member States are also required to introduce penalties that are effective, proportionate and dissuasive. These may include compensation, fines, structural changes or, in some cases, exclusion from public tenders.

How can employers and HR teams prepare?

While the legal deadline is June 2026, many, if not all, organisations may benefit from starting earlier.

Preparation typically involves:

• reviewing and cleaning up pay data
• building or refining job architecture and evaluation frameworks
• defining clear, gender-neutral pay and progression criteria
• preparing managers for more structured pay conversations
• planning internal and external communication around pay

In practice, this work is significantly easier with systems that support structured roles, comparable data and documentation over time. The biggest delays tend to come from missing data or unclear role structures. If you are interested in seeing how our platform may be able to help you once the directive comes into play,