Preparing for the implementation of the Pay Transparency Directive

In recent years, the European Union has been consistently striving to improve conditions for employees in the labor market. Among these initiatives is the Pay Transparency Directive, which aims to reduce the wage gap between men and women through enhanced transparency in compensation practices. Starting from mid-2026, companies will be required to report data related to gender pay gap and must also be able to transparently inform their employees and candidates about salary levels for specific positions. Overall, the directive brings a number of topics and challenges that need to be addressed as soon as possible.

What obligations does the Directive entail?

The Directive imposes four basic obligations on companies:

Transparency and access to information during the employment relationship and before its commencement

Under the Directive, employees will have the right to information regarding their individual levels of remuneration and the average pay levels divided by gender for categories of workers performing the same job or work of equal value.

The Directive also requires candidates to be informed of the starting level of pay for the job or a range of the pay. This information will have to be provided to the candidate without their needing to request it, “for example, in the published vacancy notice, before the job interview or through other means”.

Pay gap reporting

Employers will also have a reporting obligation under the Directive, i.e. an obligation to provide the state with a range of information relating to pay and the gender pay gap. The average gender pay gap for each category of employees should not exceed 5%. If the gap exceeds this threshold, the employer will be obliged to justify and address the pay gap that is not supported by objective reasons.

Joint pay assessment

Employers are required to undertake a joint assessment of remuneration to address and rectify pay disparities in collaboration with employees under the following conditions:

• The remuneration report shows a difference in the average level of pay between women and men of at least 5% in any category of workers.
  
• The employer has not justified the difference in average pay using objective and gender-neutral criteria.
  
• The employer has not rectified the unjustified difference in average pay within six months of the submission date of the remuneration report.
  
  

During the joint assessment of remuneration, the employer should first work with employee representatives to identify pay disparities and their underlying causes. Subsequently, they should take corrective measures and implement actions to prevent such disparities from occurring in the future.

Who will be affected by the Directive and when will reporting be mandatory?

The new regulations will apply to all employers, regardless of their size. Member states are required to implement the Directive by June 2026.

According to the Directive, reporting on gender pay gaps will only be mandatory for companies with 100 or more employees (although national lawmakers may extend this obligation to smaller companies). The frequency of reporting and the deadline for submitting the first report will vary depending on the size of the company. Companies with more than 150 employees will be required to submit data on gender pay gaps in 2027, with the report covering data from 2026.

What will be impacted by the Directive?

The Directive will affect a number of HR activities and processes, including the foundational set-up of these processes. Below is a brief list of impacts to consider.

How can we help you?

The obligations under the Directive will be enforceable in 2026. However, given the impact of its requirements on various HR processes, we recommend that you start preparing for it now.

In Deloitte’s Human Capital practice, we provide personalized support and a wide range of solutions to help our clients comply with new regulations. The Deloitte Legal Employment Law Group assists employers in preparing for and complying with the new regulatory environment.