EU Pay Transparency Directive: complete legislation guide and FAQs

The EU Pay Transparency Directive will be implemented across Europe by 7 June 2026, making pay transparency the norm in order to shine a light on the causes of pay equity and push employers to close the gender pay gap.

For many companies, major changes will be necessary to align with the new legislation, including:

• Compliance with stricter gender pay gap reporting
• Transparency on salaries and progression pathways for employees
• Transparency on the salary band for all new roles advertised.

We know this is a big cause for concern for People Teams – suddenly there’s a whole new set of regulations to be the company expert on, and pay transparency plans need to turn into action much more quickly than originally thought.

That’s why we’ve put together this guide to cover all the FAQs on the EU Pay Transparency Directive, and give you a summary of what the legislation actually includes.

Guide last updated on 19th September 2024.

Firstly, let's tackle all the most frequently asked questions about the new EU Pay Transparency Directive.

What is the EU Pay Transparency Directive?

The EU Pay Transparency Directive is a new piece of legislation introduced by the European Council to increase transparency about pay for employees throughout the EU. 

It represents a significant change in employment law on pay transparency and pay equity.

The use of the term ‘directive’ means that this set of rules are fairly top level and represent a consistent goal or framework which EU countries must achieve – but it’s up to individual countries to determine and implement their own laws to reach those goals.

That’s as opposed to a ‘regulation’ set by the EU which would mean that the rules are binding legislation and must be rolled out exactly as stated across the impacted member states.

We’re therefore likely to see differences in how the 27 EU member states choose to implement the new rules. So far, only Sweden has made any announcement about transposing the EU Pay Transparency Directive into local law, with their draft proposal on changes to existing Swedish equal pay laws (see FAQ below).

Where can I read the full text of the EU Pay Transparency Directive?

To read the EU Pay Transparency Directive in full, go to the EUR-Lex website, where all EU legal publications are housed.

Why the focus on pay transparency in the EU Pay Transparency Directive?

The central purpose of the EU Pay Transparency Directive is to close the gender pay gap in the EU, ensuring that men and women receive equal pay for equal work.

Research has shown strong evidence that pay transparency is currently lacking and that introducing pay transparency laws is a major factor in closing the gender pay gap. 

This is because without transparency about pay, it’s impossible for employers and employees to be aware when differences in salary are occurring that could be a result of discrimination – especially because a lot of the time it comes as a result of unconscious bias. Without awareness about pay discrimination, it’s also impossible to challenge and address those differences.

And there’s still a long way to go to close the gender pay gap in Europe, which is why the EU Pay Transparency Directive is such an important piece of legislation.

In fact, research from Ravio's pay equity report shows that women are still paid 25% less than men across the entire European tech industry when we don’t consider any external factors (the unadjusted gender pay gap). Even when we adjust this data to control for workers in the same job function, job level, and country, women are still paid 2.5% less than men.

What is pay transparency?

Pay transparency refers to companies openly and honestly sharing their compensation approach with both current and prospective employees.

The core aim is to improve pay equity by making it possible for employees to identify when they may be a victim of pay discrimination due to gender. Pay transparency also has additional positive benefits on employee engagement because of the increased understanding of pay practices and fairness.

Different companies will take different actions to improve pay transparency, but some of the key elements include:

• Including the salary range for a new role within the job description or advert
• Openly and clearly communicating key compensation practices to employees, such as the company’s compensation philosophy, job levels, salary band structure, compensation review process, and so on.
• Disclosing employee salaries – most companies will only disclose the salary band for each job role and level, but some companies are going further to fully disclose all salaries, such as Buffer.

Why is pay transparency important?

Pay transparency has a vital role to play in reducing pay discrimination and closing the gender pay gap.

Research shows that there is a strong link between a lack of transparency about pay practices and a large gender pay gap. 

This is because without transparency about pay, employers and employees aren’t always aware when differences in salary are occurring that could be arising as a result of discrimination – especially because a lot of the time it comes as a result of unconscious bias. Without awareness about pay discrimination it’s impossible to challenge and address those differences.

Because increased transparency about pay brings the causes of pay discrimination to light, it results in an improved assessment of differences in pay between genders – and a more accurate adjusted gender pay gap calculation (the adjusted pay gap being a calculation that takes into account factors like job level or location which contribute to pay differences). 

Pay transparency can also be a great way to improve employee engagement and increase retention. Increasing employee understanding of how compensation works in the company builds their trust in the company and reduces feelings of unfairness in pay.

What is the difference between the adjusted gender pay gap and the unadjusted gender pay gap? 

There are two ways to calculate the gender pay gap when we assess pay equity, which are broken down below. 

• Unadjusted pay gap: The unadjusted pay gap refers to the raw difference in median earnings between men and women, without accounting for any factors such as job level, job function, or the country they perform their work in. It provides a straightforward comparison but does not reflect differences in job roles or other relevant factors.
• Adjusted pay gap: The adjusted pay gap takes into account factors that contribute to pay differences between men and women, including job function, job level, and country. ‘Adjusting’ the raw data to account for these helps us paint a like-for-like comparison, which helps to answer the question of whether men and women are receiving equal pay for equal work. Because there are so many factors which impact pay discrimination towards women, the adjusted gender pay gap can be a more valuable metric to help companies identify where pay discrepancies are coming from.

Who does the EU Pay Transparency Directive apply to?

The EU Pay Transparency Directive applies to all public and private sector employers in the European Union.

There will be a staggered rollout, with large companies impacted first:

• Employers with 150 or more employees will need to submit gender pay gap reporting in June 2027, reporting on the calendar year of 2026
• Employers with less than 150 employees will need to submit gender pay gap reporting in June 2031, reporting on the calendar year of 2030.

The gender pay gap reporting requirements also vary depending on company size, as follows:

• Companies with more than 250 employees will be required to report annually
• Companies with 100-249 employees will be required to report every three years
• Companies with less than 100 employees will not be required to report (though individual EU member states could choose to change this during implementation).

When will the EU Pay Transparency Directive be in force?

The EU Pay Transparency Directive is already in force and has been since 6 June 2023 – meaning it has been official EU legislation since that date.

However, individual EU member states have three years to implement the legislation within their own national laws, by 7 June 2026. It’s possible some will transpose the Directive into local law more quickly than this – but so far the only country to make any announcement is Sweden (see below FAQ).

There will be a staggered rollout of gender pay gap reporting requirements, with the first deadlines as follows:

• Employers with 150 or more employees will need to submit gender pay gap reporting in June 2027, reporting on the calendar year of 2026
• Employers with less than 150 employees will need to submit gender pay gap reporting in June 2031, reporting on the calendar year of 2030.

Does the EU Pay Transparency Directive apply to UK companies?

The UK is no longer an EU member state following Brexit, and so is not directly impacted by the EU Pay Transparency Directive.

However, if a company is registered in the UK (or anywhere else non-EU) but has more than 100 employees based in EU member states, they will need to comply with the legislation and reporting requirements for that location.

The EU Pay Transparency Directive rulings also go above and beyond existing pay transparency and gender pay gap reporting legislation in the UK, and so UK employers may find that they need to align with the rulings anyway to remain competitive as the wider talent market trends towards pay transparency.

On 21 May 2024 the UK government paused its pay transparency pilot for job applicants. This was a pilot looking at how to enforce salary ranges for all new job positions and banning employers from asking candidates about salary history – both important rulings within the EU Pay Transparency Directive. At first glance this seems to suggest that the UK may fall behind the EU on pay transparency laws. However, the language of the announcement suggests that they may simply be waiting to see how the roll out of the EU Pay Transparency Directive goes first:

Given this, we should expect to see changes to UK pay transparency laws during or after the roll out of the EU Pay Transparency Directive in 2026 and beyond.

Does the EU Pay Transparency Directive apply to contractors or freelancers?

No, the EU Pay Transparency Directive does not apply to contractors or freelancers.

The wording used is that the Directive “applies to all workers who have an employment contract or employment relationship as defined by law” which excludes contractors.

How does the EU Pay Transparency Directive differ to existing pay transparency legislation across Europe?

The EU Pay Transparency Directive introduces much stricter rules on pay transparency practices and gender pay gap reporting to all EU member states. 

The exact impact will differ from country to country depending on their current pay transparency legislation – and we won’t know the full impacts until each EU member state announces how they intend to transpose the Directive into local law.

France, for instance, already mandates gender pay gap reporting for all employers with 50+ employees and makes the results of this public via their Gender Equality Index. Germany, on the other hand, has less rigorous pay transparency laws currently with only employers with 500+ employees required to report on equal pay.

What is Sweden’s proposal for transposing the EU Pay Transparency Directive into Swedish employment law?

In July 2024 Sweden became the first EU member state to make an announcement relating to the transposition of the EU Pay Transparency Directive into national law.

The Swedish government published a proposal for adjusting and building on existing pay transparency and equal pay laws, namely the 2009 Discrimination Act (Diskrimineringslagen). The proposal is now out for review by governmental bodies and Swedish companies, with this initial consultation closing on 4 October 2024.

The Discrimination Act focused on taking measures against workplace harassment and promoting equal pay, but it currently falls short of what is required under the EU Pay Transparency Directive, and the new proposal seeks to fix that.

From this first proposal, it seems that Sweden is looking to go slightly above and beyond the rulings of the Directive with strong new pay transparency and equal pay laws. This is likely to have an impact on how other countries will now interpret and implement the Directive. However, it is only at proposal change, so the final implementation may be different. 

The key proposed changes are:

• Gender pay gap reporting. Under the 2009 Discrimination Act Swedish employers must already analyse pay practices and salary discrimination on an annual basis, and document this in writing. The proposal strengthens this in line with the Directive, introducing mandatory annual gender pay gap reporting for employers with 100+ employees, including explanations and action plans for companies with a pay gap of 5% or more. The Equality Ombudsman will publish overall pay gap information but not the pay gaps specific to groups of employees performing equal work.
• Pay progression and parental leave. The annual reporting must include a comparison of men’s and women’s pay progression following parental leave, as well as a comparison with employees who perform equal work but have not taken parental leave at all. This is an important inclusion because women still primarily shoulder the burden childbearing and childcare and (as our 2024 Ravio Pay Equity Report highlights) this is a significant factor in the gender pay gap. This is also the key area where Sweden plans to go above and beyond, because this is not included in the EU Pay Transparency Directive.

• Fines and damages. The proposal introduces new sanctions for employers who fail to align with the legislation on pay transparency. Employers who fail to provide information to the Equality Ombudsman will be fined up to 50,000 euros. 
• Pay transparency before employment. Employers are mandated to disclose the salary range for new roles before interview and are banned from asking about a candidate’s salary history, as per the Directive. This is a brand new addition to the existing Discrimination Act.
• Pay transparency for current employees. Employers are mandated to disclose information about the approach to compensation and pay transparency to ensure employees understand the new legislation and their rights. Employees also have the right to request information about pay for their own job level, including the average pay level for colleagues performing equal work to them, broken down by gender. Again, this is a brand new addition to the existing Discrimination Act.

It’s no surprise that Sweden is leading the pack, given that the Nordics have long been seen to lead the way in equal pay laws – though research also shows that there are still significant gender equality issues in the Nordic workforce.

The findings in our 2024 Pay Equity Report reflect this too: whilst Sweden is one of the countries with a lower gender pay gap in Europe, it’s still significant, and there are very few women occupying senior positions in Swedish companies.

What changes are required for employers under the EU Pay Transparency Directive?

Whilst it’s too early to know how each EU member state will implement the new legislation, there are four main areas of ruling covered by the EU Pay Transparency Directive which result in changes for employers:

1. Stricter gender pay gap reporting. Companies with over 100 employees will be required to submit gender pay gap reports. Any company with a gap of over 5% will be required to conduct a joint pay assessment alongside employee representatives to further analyse the gender pay gap and put an action plan in place to close it.
2. Employee rights to pay information. Employees will be entitled to request information about the company’s compensation approach, particularly: job levels, salary bands, career progression, pay progression. Employees will also be entitled to request information about the pay of colleagues who perform equal work or work of equal value to them. 
3. The burden of proof shifts to the employer. The employer will need to prove that pay discrimination has not taken place in the case of complaint – whereas historically the employee would have to prove that pay discrimination has taken place. 
4. Increased access to pay information for job applicants. Employers will be required to disclose the salary range for all new roles to candidates before interviews. Employers will be banned from asking candidates about their salary history. 

For a comprehensive overview of what’s included in the EU Pay Transparency Directive, head to Part 2 of this article (after the FAQs).

What needs to be included in gender pay gap reporting under the EU Pay Transparency Directive?

The gender pay gap reporting must include:

• Mean and median gender pay gap for base salary
• Proportion of men and women receiving variable pay
• Mean and median gender pay gap for variable pay
• Proportion of men and women in quartile pay bands i.e. lower pay, lower middle, middle upper, upper.

What is a joint pay assessment in the EU Pay Transparency Directive?

Article 10 of the EU Pay Transparency Directive rules that any employer which identifies a gender pay gap of over 5% in any category included in the reporting requirements and:

• cannot justify that gender pay gap through objective, gender neutral explanations
• does not rectify the gap in average pay within six months of submitting the report

… must then conduct a joint pay assessment.

The joint pay assessment is further analysis of the gender pay gap data, including identifying the root causes of gender pay differences and measures to address them. This assessment must be conducted in cooperation with employee representatives, and must be made available to all employees once complete.

Is salary confidential by law in the EU?

The EU Pay Transparency Directive will make it illegal for employers in the European Union to include confidentiality clauses (also known as pay secrecy clauses) in employee contracts. 

This means it is illegal to try and stop employees from discussing their salary – employees have a right to discuss pay with their colleagues in order to identify any potential pay discrimination issues.

How should employers be preparing for the EU Pay Transparency Directive?

The EU Pay Transparency will be fully in place in 2026 (with first reporting in 2027) which will come around fast. It’s therefore important for employers to start preparing now – assessing what changes will need to be made within the company to comply with the legislation, and making a plan to implement those changes.

To help make the transition nice and smooth, we’ve put together a guide with all the key steps employers need to take to prepare.

What are the key changes the EU Pay Transparency Directive will mean for employers?

There are four main areas of ruling covered by the EU Pay Transparency Directive which result in changes for employers:

1. Stricter gender pay gap reporting. Companies with over 100 employees will be required to submit reports on their gender pay gap, and any company with a gender pay gap of over 5% will be required to conduct a joint pay assessment in cooperation with employee representatives to further analyse the gender pay gap and take action to reduce it. Read more about gender pay gap reporting under the EU Pay Transparency Directive.
2. Increased access to pay information for employees. Employees will be entitled to request information on pay levels and the criteria for career and pay progression. Read more about the rulings on worker rights to pay information within the EU Pay Transparency Directive.
3. The burden of proof shifts to the employer. In any case regarding pay discrimination, the employer will need to prove that pay discrimination has not taken place – whereas historically the employee would have to prove that pay discrimination has taken place. Read more about enforcing ruling and potential penalties within the EU Pay Transparency Directive.
4. Increased access to pay information for job applicants. Employers will be required to include the salary range for all job positions to candidates before interviews. Employers will be banned from asking candidates about their salary history. Read more about the rulings for job applicants within the EU Pay Transparency Directive.

For a more comprehensive overview of what’s included in the EU Pay Transparency Directive, head to Part 2 (after the FAQs).

The FAQs above cover the basics, but to be the company expert on the EU Pay Transparency Directive you need to get stuck into the text of the Directive itself. 

Unfortunately, as you might expect, it’s a long, dense document full of legal language, which makes it tricky to read and digest. 

To help you out we’ve read through the full document ourselves and in this section you’ll find a full summary of the text includes – chapter by chapter, article by article.

Chapter 1 of the EU Pay Transparency Directive: purpose, scope, key concepts

Chapter 1 covers all the context for the conditions under which the EU Pay Transparency Directive applies:

• Article 1 explains the purpose of the Directive is to ‘strengthen the application of the principle of equal pay between men and women… through pay transparency.’
• Article 2 sets the scope of the Directive as applying to all employers across public and private sectors, and to all workers with an employment relationship.
• Article 3 defines key concepts used within the Directive, importantly including defining that ‘pay’ refers both to base salary and other cash or non-cash compensation received from an employer for work completed.
• Article 4 establishes the need for EU member states to put in place tools or methodologies for objectively assessing the relative value of work performed within a company in order to be able to determine what ‘equal work or work of equal value’ means – as this is core to the Directive, which aims to ensure that men and women receive equal pay for equal work or work of equal value.

Chapter 2 of the EU Pay Transparency Directive: pay transparency rules

Chapter 2 contains the rules on pay transparency for employers – of the whole Directive, this is the chapter that’s really worth reading in detail. 

The articles covered are:

• Article 5 covers pay transparency prior to employment, with two key rulings that applicants must receive the salary range of a new job position before interview and employers must not ask about an applicant’s salary history during the hiring process.
• Article 6 covers pay and progression transparency for existing employees, ruling that employers must make gender neutral criteria for pay levels and career progression ‘easily accessible’ to employees.
• Article 7 covers employee rights to pay information, ruling that employees have the right to receive information on pay levels for employees doing equal work or work of equal value to them – and that employers must make employees aware of this right annually. It also rules that employees cannot be prevented from discussing salaries.
• Article 8 rules that employers must make any information shared relating to articles 5, 6, 7 accessible for employees with disabilities.
• Article 9 explains the gender pay gap reporting requirements introduced by the Directive, including how often reporting must be conducted and in what format (a ‘user-friendly way on its website or otherwise publicly available). It also highlights that employees have the right to request further information on explanations for gender pay gaps identified.
• Article 10 rules that any employer with a gender pay gap over 5% must also conduct a ‘joint pay assessment’ with employee representatives including further analysis on the gender pay gaps identified and measures to address differences in pay across men and women. The joint pay assessment must also be made available to all employees.
• Article 11 rules that EU member states must provide ‘technical assistance and training’ to all employers with less than 250 employees to help them comply with reporting requirements.
• Article 12 covers data protection for the reporting, which must be in line with GDPR.
• Article 13 establishes that EU member states should ensure ‘social dialogue’ as they roll out the Directive in national law. Social dialogue is a key concept in EU law which simply means that ‘social partners’ i.e. employers and workers organisations must be consulted.

Chapter 3 of the EU Pay Transparency Directive: enforcement and penalties

Chapter 3 establishes how EU member states should enforce the rulings within the EU Pay Transparency Directive.

There’s a lot of articles in this Chapter and the nuance will be better understood once individual countries implement the legislation in their national law, so we won’t dive into every single detail until this is in place – but let’s take a look at some of the key inclusions:

• Legal cases against pay discrimination. Official court procedures will be available to employees to enforce their right to equal pay (Article 14) and employees who have been discriminated against will have a legal right to compensation which must include ‘full recovery of back pay and related bonuses or payments in kind, compensation for lost opportunities and moral prejudice’ (Article 16).
• Burden of proof shifts to the employer. The ‘burden of proof’ in pay discrimination cases shifts from employee to employer i.e. the employer will have to prove that pay discrimination has not taken place for a case to be dropped (Article 18).
• Penalties. EU member states must implement ‘effective, proportionate and dissuasive’ penalties for companies who do not comply with the legislation on pay transparency (Article 23). What these penalties are is open to interpretation, but we’d expect substantial financial penalties to be on the table.

Chapter 4 of the EU Pay Transparency Directive: horizontal provisions

Chapter 4 of the EU Pay Transparency Directive covers horizontal provisions. 

This refers to the ‘horizontal direct effect’ in EU law, which means that citizens of EU member states can rely on EU law against other citizens within a national court – as opposed to an EU court (this is vertical direct effect). 

So, in essence, this final chapter covers all the rules that make sure that EU member states can effectively transpose the Directive into national law.

Like with chapter 3, therefore, much of the text applies only at a country-level and so the implications won’t be clear until we see individual EU member states start to make changes, but here are some of the important highlights:

• EU member states can choose to introduce legislation which goes above and beyond the Directive in favour of workers – but cannot use it to reduce the level of worker protection in any area (Article 27)
• EU member states must establish a monitoring body responsible for tasks such as raising awareness about pay transparency and the right to equal pay and publishing insights on the data gathered through gender pay gap reporting (Article 29)
• EU member states must bring the rulings into force in national law by 7 June 2026 (Article 34).