EU Pay Transparency Directive: A Readiness Checklist for Employers

Introduction

Pay discrimination has been illegal in the EU for some time. However, the recently adopted EU Pay Transparency Directive has been introduced with the primary aim of making it easier to discover and eliminate cases of pay discrimination. The directive achieves this by adding significant internal and external information sharing requirements. Furthermore, the EU Pay Transparency Directive, which will come into force in June 2026, will make it substantially easier for workers to make claims by shifting the burden of proof to employers.

The directive will apply to all companies operating within the EU, regardless of size, although the specific obligations will vary depending on the size of the company and the country of operation. Larger organisations will face more extensive reporting requirements, while smaller companies will still need to ensure compliance with the core transparency obligations. You can read the full text of the Directive here.

To help clarify these requirements, we have organised the key provisions of the directive into broad categories:

• Pay Practices: While pay discrimination was already prohibited, the new directive imposes additional requirements to ensure that companies actively prevent any discriminatory practices.

• Internal Information Sharing: The directive grants workers additional rights to request detailed information about their pay, ensuring greater transparency within organisations.

• External Reporting: Many EU jurisdictions already required gender pay gap reporting, but the new directive demands more granular and comprehensive reporting across all member states.

• Obligations When Potential Pay Inequity Is Identified: The burden of proof now shifts to employers, with the directive outlining detailed procedures and timelines for addressing any identified pay inequities.

It’s important to note that there is no “grace period” for compliance with many of these provisions. Therefore, it is essential for companies to prepare in advance to ensure they meet all requirements. The following checklist is designed to help your organisation assess its readiness.

Pay practices

1. Establish the capability to measure pay (in)equity.

   1. Define categories of workers that perform similar work or work of equal value.

   2. Ensure that categories are based on objective criteria including skill, effort, responsibility, and working conditions.

   3. Link compensation data to worker categories as well as data regarding gender.

2. Measure any existing inequity in pay.

   1. Perform pay gap analysis for each category of workers and for the company as a whole.

   2. Identify categories of workers where the pay gap exceeds 5%.

3. Remediate any unjustified pay gaps that were identified.

   1. Identify root causes of any pay gaps.

   2. Establish a pay structure and procedures that ensure fairness in all (present and future) pay levels.

   3. Document objective criteria that set workers’ pay, pay levels and pay progression.

Internal information sharing

1. Internal information sharing

   1. Create the capability of responding to workers’ information requests.

   2. Establish the capability to identify the category of worker each individual belongs to.

   3. Create the capability to inform individual workers, in writing, of their pay level and 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.

   4. Put a system in place to respond to (a potentially large number of) worker information requests.

   5. Put a system in place to notify workers of their rights and how to exercise them.

2. Ensure pay policies are easy to find for employees.

   1. Make it easy for workers to find the objective criteria that set workers’ pay, pay levels and pay progression.

3. Update recruitment policies 

   1. Train employees to follow compliant recruitment practices.

   2. Ensure salary ranges are shared with applicants prior to a job interview.

   3. Ensure employees involved in hiring do not ask about the previous salary of applicants.

   4. Ensure that job vacancy notices and job titles are gender-neutral.

4. Update employee agreements to ensure that contracts do not prohibit employees from sharing information about their own pay.

External reporting

1. Compute the gender pay gap broken down in several ways.

   1. Determine the reporting requirements for your country and company size. [See Article 9 in the Directive]

   2. Establish a process to compute pay gaps in alignment with local requirements.

   3. Establish a process to compute pay gaps by category of workers that perform similar work or work of equal value.

2. Report gender pay gap statistics to national authority.

   1. Determine the appropriate local authority to report to, the deadlines, and submission format.

3. Make reports available to employees and employee representatives.

Mitigate risks in case a claim is filed

1. Ensure the capability to prove that pay was set based on objective non-discriminatory criteria.

   1. Create a training program for managers to ensure pay is set in a compliant way.

   2. Create a process to ensure the reasoning for pay decisions is documented.

   3. Ensure consistent review of pay decisions to ensure they are compliant.

2. Address inequity before claims are filed

   1. Ensure employees are able to share concerns about pay without adverse consequences.

   2. Create an action plan to address employee concerns quickly.

   3. Where un-justified pay gaps are found, ensure these are remedied within 6 months.

Note: This Readiness Checklist is a preliminary tool designed to help organisations assess preparedness for the requirements of the EU Pay Transparency Directive. It is not an exhaustive list of compliance requirements as national laws are still being drafted as of the publication date of this article. National laws of EU member states may impose more stringent or detailed requirements or penalties than those outlined in the EU Directive.

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