The EU Pay Transparency Directive: How companies can prepare for new rules on equal pay

The EU Pay Transparency Directive (Directive (EU) 2023/970) entered into force on 7 June 2023 and must be transposed by all Member States by 7 June 2026. The Directive aims to close the gender pay gap throughout the EU by introducing detailed transparency and reporting requirements, as well as stronger enforcement mechanisms.

A. Key Objectives and Scope

The Directive aims to eliminate gender-based pay discrimination by requiring greater transparency in remuneration structures and strengthening employee rights to access pay information. It applies to all employers in both the public and private sectors and covers all individuals in an employment relationship under national law, including part-time, fixed-term, temporary agency, and platform workers. The Directive also strengthens the rights to job applicants during the recruitment process.

B. Core Transparency Measures

Pay transparency before employment. Employers will need to inform job applicants of the initial pay or pay range for a position prior to interviews or employment offers. Job titles and job advertisements must be gender-neutral, and during the application process employers may no longer ask candidates about their current or past remuneration.

Transparency of pay structures. Employers must make available to employees the criteria used to determine pay levels and pay progression. These criteria must be objective, gender-neutral, and accessible.

Individual right to information. Employees will have the right to request information about their individual pay level and the average pay levels, broken down by sex, for categories of workers performing the same or equivalent work. Employers must provide this information at the latest within two months of a request and may not prevent employees from sharing their pay information for the purpose of enforcing equal pay rights.

C. Reporting and Joint Pay Assessments

Employers with 100 or more employees will be required to publish data on gender pay gaps:

• Employers with 250 or more employees: annual reporting from 2027.
• Employers with 150–249 employees: every three years from 2027.
• Employers with 100–149 employees: every three years from 2031.

Reports must include, amongst others, data on overall and median pay gaps, variable remuneration, the proportion of women and men in each pay quartile, as well as the gender pay gap within each category of workers. A category of workers includes individuals performing the same work or work of equal value, whereas the value of work is determined based on skills, effort, responsibility and working conditions, and, if appropriate, other job-specific factors.

Where reporting reveals an unjustified gender pay gap of 5% or more within any category of workers that is not remedied within six months, employers must conduct a joint pay assessment with employee representatives to identify causes and implement corrective measures.

D. Enforcement and Sanctions

Member States must ensure effective remedies for workers, including full compensation for discrimination-related losses and damages. The burden of proof will shift to employers in cases where pay systems lack transparency or required reporting has not been carried out. National authorities will be empowered to impose effective, proportionate, and dissuasive penalties — including fines and, potentially, exclusion from public procurement procedures.

E. Preparing for Implementation

Although Austria and several other Member States have not yet transposed the Directive, companies can already take proactive steps to prepare. Employers should:

1. Develop or review internal remuneration systems that ensure equal pay for equal work or work of equal value.
2. Integrate transparency obligations into recruitment and HR processes, ensuring compliance with restrictions on pay history questions and gender-neutral job advertising.
3. Assess data readiness for future pay gap reporting obligations and establish internal mechanisms for data collection and validation.
4. Conduct an internal trial review to identify potential pay gaps of 5% or more and take corrective action early to avoid future compliance risks.

F. Outlook

In Austria, employers are already subject to certain transparency requirements. Companies that permanently employ at least 150 employees must prepare an income report every two years. The report must show (i) the numbers of women and men in each classification group under the applicable collective bargaining agreement or company-internal salary scheme (if applicable), (ii) the numbers by group years if available, and (iii) the average or median remuneration of women and men in those groups. The report must be anonymised and submitted to employee representation bodies or, in absence thereof, made available to employees. Reporting and transparency requirements under the Directive will be significantly more granular than the ones currently in force in Austria.

The Directive signals a paradigm shift in pay transparency and equality. With the transposition deadline approaching in June 2026, early preparation will be essential for companies to meet these new transparency obligations.

Author: Florina Thenmayr